by: ALI SHAHID & TAMANNA PADHI Arab News:
The beauty and personal care industry was among the first to adapt to the shifting consumer behaviours amid lockdowns.
Beyond the initial supply chain limitations and closure of brick-and-mortar stores, BPC brands worldwide had to create an emotionally charged offline shopping experience within the confines of a web browser.
Brands in the Global Cooperation Council region won consumers’ hearts and wallets. Increased awareness of products has opened up their appetite.
According to a recent poll, Saudi and Emirati women are the highest spenders on makeup and skin care products worldwide, spending approximately between $700 and $900 annually. In addition to the increased spending per capita in the region, the sector is still in the growth stage, with the BPC market size in Saudi Arabia expected to grow steadily at a rate of 6.4 percent till 2026 and reach more than $7.5 billion.
While many underlying forces are driving the increased spending in the Kingdom, a key reason is the growing spending power of Saudi women. Currently, one-third of the nation’s women are active participants in the workforce, compared to just one-fifth in 2017. This rise has come with a higher spending ability and a direct stimulus to the BPC industry. In addition, the change in consumer trends is expected to continue adding to the region’s increasing share of consumer wallets.
For businesses in this segment, the growth in spending power protects them from the impacts of inflation. After adjusting for inflation, BPC products in the Kingdom are expected to show a 5-8 percent growth in the coming five years compared to other consumption categories like food and beverage.
Trends in the BPC industry
While many aspects have historically driven product choices, value for money and brand remain the top two dimensions in their decision to pick a brand, according to consumer research. A recent e-commerce study found that 60 percent of women report that brand is the critical consideration when buying a product. In addition, about one in every three women prefers to purchase premium products.
Eco-friendly products are a popular niche, but 63.5 percent of the buyers claim that they are willing to spend money in this segment only when they believe that eco-friendliness premium is reasonable. However, consumers and BPC brands must make big decisions with rising inflation. Consumers are spoilt for choice. There is a product for every skin type, tone, style and price point. With this, it will all boil down to relationships and value propositions. Brands must raise the bar and fine-tune their proposals for the local market.
While multinational brands have tried and failed, this is proving to be much more feasible for local brands who truly understand the pulse of their market. In fact, some have even achieved breakout success and reached global audiences.
Finding the sweet spot
New market entrants will find it tough to make ripples in the overcrowded, highly-competitive premium and mass segments. However, it is not impossible. The critical attribute they must have is an ear to the ground.
Moreover, consumer trends vary by category. For instance, the premium segment holds 23 percent of the skincare market but just 5 percent of the hair care market. So, consumers are looking for exciting value propositions that serve their unique interests and needs. Most new BPC brands that have shown strong resonance with customers offer affordable pricing, higher ingredient quality, strong brand positioning focusing on inclusion, direct-to-consumer distribution, heightened consumer engagement and quality packaging.
New entrants in similar markets have achieved significant success based on their intense relatability with the customers and having stories that are uniquely their own. In the coming years, we expect many more similar story-led brands with great features to take the market by storm in the region.
The key to winning in the market is to hit the sweet spot of appealing to the masses with a prestigious or premium product. Such brands are beginning to gain substantial market share. This segment, dubbed “masstige,” is making waves worldwide through strategic partnerships, high-quality products and influencer marketing.
Adopting a channel strategy
Consumer habits have undergone a fundamental transformation, and brands are pivoting their business strategies to remain competitive.
A method that has shown incredible results worldwide is a direct-to-consumer strategy. When implemented online, D2C skips the middleman and forges a connection directly between a business and its customer.
When a D2C channel is implemented with the customer journey of the target segment in mind, it can unlock the brand’s full potential and show more resilience in the market. To succeed with D2C or e-commerce, one must replicate the story experience in online channels. For example, assistants at brick-and-mortar beauty kiosks have immense knowledge and experience and the ability to “try before you buy” enables a personalized experience that is difficult to imitate digitally.
However, beauty brands have ingeniously developed ways to do this. For example, virtual makeup tryouts from brands such as MAC and L’Oreal Cosmetics are increasingly popular, allowing customers to upload their images or use live video functions to add makeup “filters” showcasing the outcome of a particular product. D2C is a strategy that is here to stay, and while companies may have already started their journey on this path, there are many ways to unlock the potential.
In fact, pure-play digital companies can make the most of their investment by investing in the digital customer journey and product development. These companies can engage with customers actively during product development by keeping an open feedback loop.
D2C BPC brands collect large amounts of data, which they can leverage to personalize products and shopping experiences. For instance, Purplle, an online BPC retailer in India, has differentiated itself by leveraging technology and customer data to provide skin trait-based recommendations. As a result, the company has been seeing about 100% year-on-year growth.
Influencer and customer engagement through online platforms is also a key differentiator. For example, Huda Beauty leveraged preeminent micro-influencers to engage with customers and appeal to a broader audience, strengthening its inclusive image. Similar to other emerging markets such as India and China, which showed a sudden growth of local beauty players, the BPC sector in the region is also expected to be at the cusp of disruption.
Whether it is a new, existing or masstige brand armed with D2C strategies, an omnichannel approach and an open attitude to customer feedback are primed to take the industry to the next step.
• Ali Shahid is a manager at the consumer and retail practice in Kearney, Middle East, while Tamanna Padhi is a principal in the same practice.
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