Malina Ngai, group chief operating officer of A.S. Watson
Malina Ngai, group chief operating officer of A.S. Watson. Image Credit: Ahmed Ramzan/Gulf News

Dubai: A.S. Watson Group, the Hong Kong-based health and beauty retailer that owns chains such as Superdrug, is eyeing an entry into the UAE, with plans to bring in one of its brands next year.

The company is already in early talks with potential partners in the UAE, and is looking at bringing its Watsons chain of health care and beauty stores to the country.

Malina Ngai, group chief operating officer of A.S. Watson, said that a large population of young females coupled with their strong use of social media and knowledge about international beauty products make the UAE an appealing market for the company. That is also the case in Saudi Arabia, where the group aims to expand next.

2,000

pieces of face mask is sold by the firm every minute in Asia

“It’s not so much just about age; the younger population is more connected socially and very active socially, so for the beauty category, that’s very helpful …” she said. “I hope early next year we can start to be here, but we are still doing some groundwork in terms of talking to people and trying to set something up.”

Softening retail

The company’s entry would come at a time when the retail sector has been softening as a result of a slowdown in consumer spending and growth in e-commerce. Many brick and mortar retailers are also having to close down some outlets as footfall declines and shoppers head online.

A.S. Watson says, however, it can use such slowdown to its advantage.

“We do follow and are aware there is slight softening in the retail market. But there are always opportunities when the market is softer, especially for new entries,” Ngai said.

“For retail, we have to rent the space and there’s a lot of cost involved, so when the market is softer, it’s a good opportunity for us to get the better spot with more affordable rent and give us some time to build that up.”

$22b

is the revenue of the company

According to research from Alpen Capital, the UAE may well see oversupply in its retail market, with about two million square metres of additional space coming into the market between 2018 and 2023. This is against growth in retail sales of about 4 per cent in that same period.

Lipstick effect

But A.S. Watson says that the beauty industry tends to be more resilient than many others. Ngai cites data from Euromonitor, which shows that the compound annual growth in the value of beauty products purchased is around 5 per cent. The volume growth (or the number of actual products purchased), in comparison, is 3 per cent.

“One interpretation for this [difference in numbers] is that customers around the world don’t mind paying a premium for beauty if the product is innovative and fun,” she said.

In an interview with Gulf News in Dubai, Ngai said that historically, when consumer spending has slowed down, that affected personal care products, but did not hit cosmetics as hard.

“The beauty category is quite resilient. We have this joke that when times are good, people want to buy more products, and even when times are bad, people still want to buy beauty products because it makes them feel good,” she said.

Ngai is referring to the ‘lipstick effect,’ which is a theory that at times of an economic slowdown, consumers are more willing to buy cheaper luxury products. Instead of an expensive mobile, for example, they may buy a pricey lipstick for a similar feel-good effect. The theory is based on an assumption that consumers will buy luxury items even when there is a crisis — but they will opt for cheaper luxury.

In Asia alone, A.S. Watson sells 2,000 pieces of face mask every minute, Ngai said, with more and more young people buying skincare products as they learn about them from social media.

A.S. Watson is a unit under parent company CK Hutchinson, which is publicly listed in Hong Kong. It brought it revenues of $22 billion and operates 12 different retail brands across 25 markets in the world. The company is targeting a $30 billion turnover over the next five to 10 years.