Generation start-up: Golden Scent sniffs out success

In the Middle East, the growth of the online beauty market may be starting from a lower level than Europe or the US, but it is accelerating.

One of the leading lights in the GCC is Golden Scent, a Saudi Arabian start-up platform. In February, the firm co-founded in 2014 by Malik Shehab, announced expansion plans after a successful December 2017 Series A funding round. In that round the company secured backing from major players including Saudi Aramco Entrepreneurship Ventures, Equitrust – the investment arm of Choueiri group – Wamda Capital and Raed Ventures – the investment arm of Almajdoui Holding. It did not disclose the value of the funding it received.

It is the founders' experience of the European market that gave them the impetus to start Golden Scent.

"When [co-founder] Ronny Froehlich and I were living in Europe in 2013, we noticed the boom of the e-commerce industry, especially in the beauty section," Mr Shehab tells The National. "Our first step was doing our research, and we found out that in GCC, women spend four to six times more on beauty than the average woman in Europe. With the added special benefits the e-commerce provides such as shopping at the comfort of your home and variety of options to choose from, we knew Golden Scent would be successful."

According to Euromonitor International, the Middle East and Africa (MEA) will be the fastest-growing region in beauty and personal care products. The MEA’s $25.4 billion market will grow by over 6 per cent a year over the next five years, outperforming global markets where the sector is expected to grow 3 per cent a year. Saudi Arabia and the UAE, which together account for a quarter of the MEA’s market, will grow by 12 per cent and 5.8 per cent, respectively. Additionally, Saudi Arabia dominates the overall sales market with a national spend of $5.3bn.

Retail e-commerce sales in the Middle East are forecast to rise significantly between 2017 and 2020, according to a report by ResearchAndMarkets.com. The primary driver for that is increased internet penetration, already surpassing 90 per cent in many countries in the region. Shoppers are also warming up to the idea of online shopping, although the tradition of brick and mortar shopping remains strong. Online retail sales are forecast in the report to  double by 2020 compared to 2017 for the Arabian Gulf countries.

It is just such predictions that have inspired Mr Shehab to grow the business. "At the moment we are expanding our product portfolio from fragrance focused to beauty products to have a wider product portfolio," he says. "We started with fragrances and until now we are focused on fragrances and this is our speciality and what we are known for and always will be.

"We did many steps to ensure our product expanding plan works, starting from studying the market, hiring the experts to shifting to a bigger warehouse."

Mr Shehab says the importance of bringing in the right experience can't be overplayed. "To be able to succeed, you need to surround yourself with experts who are specialised in their field and scale it with them and be on top of everything," he says.

"At Golden Scent we invest in our people by sending them to training and conferences to expand their knowledge and skills. Any employee of Golden Scent can register themselves to any course they believe they need to enhance their skills to do better at Golden Scent and Golden Scent bears the cost of the course," Mr Shehab says.

"In order for the company to grow the people need to grow, too."

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According to EMI Research, the GCC's retail value of fragrances is forecast to be worth $3.6bn in 2021 - $2.1bn in Saudi Arabia, and $807m in the UAE.

Understanding the local market is crucial, says Mr Shehab. "Like any business you have to keep up with the local culture and trends happening every second of the day otherwise the company will fail.

"Our marketing team does market research and social media reports on a weekly basis to keep up with what’s happening and join the party if there is any going on."

New trends are also helping to drive the market, including the fashion for natural ingredients and organic products, hairstylist and founder of the Dubai-based professional hair styling tools brand Eeideal, Haysam Eid, told The National last year. "Brands such as [France's] Corine de Farme and [Australia's] Organic Care are becoming more mainstream due to their strong distribution channels and competitive pricing. As more and more consumers become aware of the advantages of these products and witness the positive effects of going green, the popularity and acceptance of organic products continues to be positive."

Digital influencers are key, says the Emirati beauty blogger Dina Al Sharif, who has been working with brands as an influencer for nine months, just two years after launching her Instagram feed. “I’m pretty sure that brands now rely on influencers more than anything to promote a product. They are aware that when a real person talks about a product, people believe it more.”

The growing global preference for clean, green and sustainable beauty products has taken root in the MEA, with analysts TechSci Research indicating the regional market for natural and organic cosmetics could grow annually by 12 to 15 per cent over the next five years.

That would place the retail value anywhere between $4bn to $5bn by 2022, driven, according to TechSci, by increasing consumer awareness and demand for products that are not only better for their health, but better for the environment and society overall.

For Golden Scent, the future is indeed bright. As Omar Almajdouie, founder and managing partner of Raed Ventures said when announcing the firm's backing of the Saudi Arabian start-up: “The company has already broken even, achieving a double digit million dollar in revenues.

"The strong growth as well as the vision and excellence of the founders who built Golden Scent to the number one beauty online destination in the GCC, has led us to invest in this excellent opportunity."

That assessment is one with which Mr Shehab concurs. He says within five years he sees "Golden Scent as the number number e-store in the Middle East for beauty."

He will, of course, have competition. Firms in the region vying for a slice of the pie included the UAE-based Bashacare, launched a year before Golden Scent. Bashacare, founded by Jad Haidamous, is an online retailer of beauty and skincare products. The selection of brands is limited in terms of access and most brands it carries are sold in pharmacies, clinics or luxury spas.

Offering a different online beauty service is Blowout&Go, a provider of mobile blow-dry, hair styling and makeup services across Dubai and the UAE. The team of qualified hair stylists and makeup artist travel directly to the customer, whether it be a home, hotel or office, "providing the same high quality experience which you would expect in a salon but with the convenience of never having to leave your door", it says.

So given that Golden Scent will have its work cut out for it to achieve its lofty targets, but what drives Mr Shehab to pursue them?

"I didn’t start to sell the company. I started to build a company," he says. "If you work hard, do the homework and research, and keep trying, you will never fail."

And what gives him the most pleasure about the start-up he says, is, "The joy of checking the website orders in the morning and day before."