After a period of more than 8 years of sanctions imposed by the UN security council and enforced by the US Congress, the recent agreement reached in 2015 between the international “Troika” and Iran on the Nuclear chapter is opening a new cycle in the eventful Iranian history post 1978 (Islamic Revolution).
Without a doubt, a wind of optimism is currently blowing on the Iranian shores making this ancient civilisation of 80M people appear like the new Eldorado for industrialised nations hungry for new markets and relays of growth.
If we were to focus in our article specifically on the Beauty Industry, a lot of questions remain open: Is this optimism justified? What is the real size of the beauty market which remains opaque with very few data exploitable? And how to enter this market without clashing against the regulatory and administrative wall?
The Iranian Woman
The first element that strikes any visitor to Tehran is the sophisticated grooming of women from all social backgrounds in the streets. The Iranian female urban consumer is a beauty “junkie”, that is fact! Make-up is loud, daring and well put on. Hair is dyed most of the times, and the blonde shades are a hit!
Far away from all pre-conceived ideas: The Iranian woman has a strong personality: she is confident, she is a seductress and she believes in beauty as a strong medium of communication with the exterior world! Despite the weight of religious codes, Iranian women have invented a very subtle blend between femininity, elegance and islamic protocol.
Surely, the above reality remains the one of the big urban centres such as Tehran, Shiraz, Isfahan and Tabriz; the provinces and the conservative stronghold of Mashad present a different dynamic. Nevertheless, the urbanisation of Iran reaching today 70% and growing, represents an inexorable trend driving emancipation, increasing westernisation and self-assertiveness.
Despite those trends, Women in Iran remain non adventurous in their beauty choices. They trust prescription: from a professional, a trusted friend or family. Branded western names with a high level of recognition offer reliability which remains a key factor in the purchase decision. Finally, Iranians are primarily results focused, before sensorial experience or well-being,
In all recent studies, Iran figures invariably as one of the most promising consumer markets. A new acronym, the N-11 has been invented to “regroup” the post-BRICs wagon of countries presenting strong potential of economic take-off, Iran leads the pack.
Iran has incredible assets: a young and highly educated population, a genuine and sizeable middle class, a huge hinterland, a diversity and wealth of natural resources, a geopolitical weight and technological poles of excellence.
As far as the Beauty industry in concerned and in the absence of reliable panels, it has always been difficult to assess the size of Iran Beauty Market. The most reliable estimation places the personal care market at $2.5 Billion which makes it the largest one of the Middle East and Central Asia zone, at par with Turkey.
One of the best ways to quantify the size of the prize is actually to get a physical sense of the market and visit it.
As an example, I have looked recently at the hair business in Iran which represents the largest Personal Care category (accounting for 25 to 30% of the total beauty market). Some key numbers that highlights the potential of this market, we estimate that more than 12M Iranian Women color their hair which would equate to a total coloration segment in value of more than 120M$. That number is based on the existing reality in which the hair salon business is still very largely under-developed, the brand offer is still restricted and the technical skills limited. Without a doubt, the potential is still very largely untapped. That very same approach can be applied to the Make-Up category which represents another major segment in the market, targeting the huge young female population with the possibility and a key recruitment lever.
In the past 5 years, the retail scene has been witnessing rapid and significant transformations. One of the most notable trend is the proliferation of Malls. Numbers vary widely in the absence of reliable panels, the most accurate estimation is around 60 malls. Being in the very early stages of the creation of a modern retail scene, the cycle of mall “mortality” remains high, the shopping experience contrasted and the retail “savoir-faire” limited. If they are gradually gaining traction, they are not the main beauty shopping destination.
Beauty in Iran is sold through traditional channels: Specialised traditional shopping centres, Bazar and Pharmacies. The first category reflects the highly entrepreneurial spirit of the Iranian, most of the time, those shopping centres are a succession (on several floors) of individually-run self standing beauty stores mono-specialised or multi-segment. The Bazar is the most anchored retail channel in the Iranian way of consuming, beyond all socio-demographics cleavages, it remains a key shopping destination for Beauty. Tehran Bazar represents a key wholesale platform irrigating a dense network of beauty resellers locally and regionally. The pharmacies network is extremely dense with a high level of capillarity, it is the most trusted channel for the skincare category mainly sold with medical prescription
The regulatory jigsaw
Iran beauty market remains very highly regulated with strong involvement of the Ministry of Health and Commerce in all the certifications, registrations and licensing. For all international brands, one of the key criteria in the selection of a local partner is his genuine capacity to navigate in the very complex and constantly changing regulatory world. Most of the credible players in the market have a dedicated team, working closely with the ministry officials: keeping an updated channel of information is key. You do however deal (in most of the cases) with a highly competent professionals population in the ministries, that aspect should not be underestimated in the dialogue between the brand and the market.
As a matter of fact, under these years of sanctions and embargo, Iran has managed to build a viable and sometimes very sophisticated local industry. The population is educated with a high level of literacy, the reflex of relying on one’s own forces have built a spirit in which science, knowledge and education are praised. Without a doubt, there are needs in all sectors starting with an urgent infrastructure uplift, it would be however a mistake to approach Iran as a conquered territory from a superior stand point. We are talking about a multi-millennial civilisation that has dominated the world for centuries. History counts!
Most of the major beauty companies have looked at Iran, so far, as a tactical market and never considered it as strategic priority. It is gradually changing but with still a lot of hesitations and baby steps,
I believe the dividend will go to the players who will approach this market with the seriousness it requires and deserves. It has to start with the basics: understanding the consumer and its needs. It has to be ran, as a stand alone project, by specialists of the market and dedicated teams. The market is in a complete transformation, the winners will be the ones who will influence as active actors the shaping of this NEW landscape.
The normalisation trend is inexorable, in this new normal, Beauty will represent one of the main consumer categories in the market as an affirmation of identity and a defiance to all preconceptions.