The Fine Fragrance Market

November 7, 2005

The Fine Fragrance Market It�s a jungle out there! Sales of women�s fine fragrance are sagging at traditional retailers. As a result, much of the new product activity is taking place in the men�s category.

The Fine Fragrance Market

The Fine Fragrance Market It’s a jungle out there! Sales of women’s fine fragrance are sagging at traditional retailers. As a result, much of the new product activity is taking place in the men’s category. At the same time, e-commerce is growing at a phenomenal rate, while non-traditional brick and mortar retailers such as Sephora are taking share away from department stores. At right, makeup artists put the finishing touches on a performer at the recent opening of Sephora in Rockefeller Center, New York. The event attracted more than 2000 attendees!

What in the dotcom has happened to the traditional fine fragrance market? There’s been a big switch in launch activity as more companies rely less on new women’s scents and go after the guys. Open-sell formats are all the rage in department stores as traditional retailers try to emulate the Sephora success story. At the same time, mass retailers are trying to cut through the clutter by providing personalized service and new internet startups such as jasmin.com, ibeauty.com, beautyscene.com and beautyjungle.com are changing the way women shop for scents. For example, in the first few weeks following its debut, ibeauty.com averaged 2000 orders a week with the average sale between $50 and $75, according to Wendy Buckley, vice president of advertising and marketing, ibeauty.com.

While no one can be absolutely sure where e-commerce is going, everyone agrees the market is growing. According to Omar Wasow, an internet analyst for MSNBC and WNBC TV in New York, last year e-commerce sales totalled $50.6 billion. He estimated sales will more than double to $111 billion this year and climb to $1.3 trillion by 2003.

It’s tough to estimate exactly how much fine fragrance is wafting through modems around the country, but marketers can take heart in knowing that they have a growing customer base. According to ivillage.com, a well-known web site devoted to women, in 1995 less than nine percent of people on the internet were women. This year, women make up the majority of internet users at 51%.

Giving It All Away?
These women, and men too, are purchasing all types of products and services over the internet. Book and computer equipment e-tailers may have been the first to benefit from the internet, but now consumers are finding it easier to purchase other products on-line too. The internet will have a big impact on fragrance companies as well, according to Dale N. Dewey, president of jasmin.com, the only site on the internet exclusively devoted to selling fragrances. Speaking at a recent American Society of Perfumers’ meeting, Mr. Dewey suggested the internet might drive fragrance price points to incredible lows. “The ultimate result might be freefragrance.com,” he warned. “If this sounds silly, consider freepc.com—a site that offers free PCs in exchange for consumers agreeing to have permanent advertising on their PCs.”

But the future might not be so glum for fragrance houses. Mr. Dewey also noted that the internet could ultimately give perfumers and consumers power and value through customization. “We could return to the roots of perfumery whereby fragrances were created by perfumers, often on a custom basis for clients, and sold out of their own perfumery. This seems bound to happen on the internet as well.”

Creating that one-to-one relationship could provide a big boost to an industry that is full of middle men, noted Mr. Dewey. “Imagine a scenario where you could have an unlimited raw material cost for your formulas, consumers would pay 50% less and perfumers would keep all the profits.”
The end result, according to Mr. Dewey, is that perfumers would become rich and be rewarded based on their creativity and ability to please consumers who in turn would get a higher quality product for a lot less money. “If this sounds like a great new way to do business—or too good to be true, it isn’t—that’s what the internet is all about. Just ask Barnes & Noble about selling books online and whether or not a small start-up like Amazon.com has any chance to succeed.”

Financial analysts predict that the internet could provide a big boost to the 1999 holiday selling season. “The internet will have an expanded role in confusing, bedazzling and, perhaps for a fortunate few, even delivering on its promise of being insanely great,” predicted Carl Steidtmann, chief retail economist for Pricewater- houseCoopers. He predicted 1999 internet retail sales will top $10 billion and said e-commerce this Christmas will finally establish the internet as an alternative channel of communication for store based retailers.

Overall, Mr. Steidtmann predicted holiday sales of general merchandise, apparel and furniture sales will grow 5.5%. On the downside, sales will come later in the year. “I know Christmas is still on December 25, but more and more consumers are putting off their shopping until the last minute. Some of us are putting it off until January,” noted Mr. Steidtmann. “It’s not that consumers like the frenzy of last minute buying. It’s more that they’ve been trained like Pavlov’s dog to wait until the last minute, or even until after the last minute, for a sale.”

Room for Smaller Players
Even small companies are taking advantage of the internet. Meru Fragrances, Northridge, CA, has been selling its Shamaal women’s scent at its site (www.ShamaalFragrance.com) and at imall.com for several months. Prior to launching the web site, the company relied on word of mouth to sell the floral fragrance. Sales are rising as the holiday selling season heats up, according to company president Surbala Randieria. “My fragrance business is still in its infancy but the internet has helped me reach consumers without a heavy marketing expense.”

A few nay-sayers have suggested that fine fragrance sales via the internet will never really catch on. After all, they sniff, why would a woman purchase a new fragrance if she can’t actually smell it? But all that may change if Digiscents has its way. The Oakland, CA-based interactive media company is developing technology that creates lifelike and memorable scents for broadcast via the internet. The company was founded by Joel Lloyd Bellenson and Dexster Smith earlier this year and the Digiscents team includes Dr. Avery Gilbert, a well-known olfaction researcher who serves as Digiscent’s vice president of sensory research and development.

Basically, the company is trying to generate billions of odors by blending different proportions of 100 to 200 “scent primaries.” Low-end units, called ISmell, may retail for less than $200. Smell cartridges that last for up to four months would retail for $50. According to an article in Wired, Digiscents has already commissioned a consultant to develop a perfume for Lara Croft, the heroine in the video game Tomb Raider. Ultimately, say company executives, these scent machines might be used to convince consumers to purchase flowers on-line, develop personalized fragrances for their Barbie dolls and even disinfect rooms via a fragrance’s disinfectant properties. The company can be reached through its web site at www.digiscents.com. Testing is expected to begin early next year.

A Perceived Winner
Digiscents is also toying with pheromone technology that would make all those X-rated web sites even more titillating for web surfers. But pheromone research is nothing new to the fine fragrance industry, where companies have been adding the ingredient to perfumes for years. Avon insists its new pheromone-base scent, Perceive, is a different kind of animal. That’s because it contains synthetic human pheromones; in contrast, other fragrances contain animal pheromones.

“Animal pheromones don’t effect humans,” insisted Terry Burstein, global director of fragrance development, Avon. “Perceive does have an effect. It can improve a woman’s life because she smells great and feels better.”

Women have certainly been attracted to the new fragrance. According to Mr. Burstein, Perceive should surpass Women of Earth as Avon’s most successful fragrance launch in history. Plans are already in the works to introduce a Perceive fragrance for men next spring. The mood-enhancing powers of fragrance are expected to play a major role in fragrance development in the coming years.

“People want products that are tri-action. Two-in-one shampoo and conditioner formulas were the beginning of the trend and now consumers expect more from their fragrances too,” said Mr. Burstein. “Aromatherapy set the stage, now the industry is moving into aromachology.”

Hemp, or more precisely its active ingredient THC, has long been associated with mood-altering experiences. But personal care manufacturers are harvesting the plant for its high levels of essential fatty acids. The Body Shop introduced a hemp-based line earlier this year and just last month, Hemp Works, Englewood Cliffs, NJ, introduced a line of hemp-based personal care products in Sephora.

Company founder and president David Marks called Sephora a “revolution” in the cosmetics industry. “People need to have a choice of products and should not be pushed to a particular brand,” said Mr. Marks. “If people can see hemp-based products, they’ll understand why hemp is good for them and they’ll purchase the products.”

Hemp Works is working on a hemp-based fragrance that may be introduced next spring. “Hemp is a solar plant, so it has an uplifting, positive scent,” said Mr. Marks, who admitted the fragrance will smell like marijuana, but quickly added that the fragrance would not contain any THC.

Mr. Marks is a firm believer in the power of hemp. Prior to launching his personal care line, he began offering hemp clothes via a catalog. “Ralph Lauren and Calvin Klein have been calling hemp the fabric of the future for seven years, but they haven’t done anything with it.”

Shiseido tapped into the mood-enhancing trend a couple of years ago with its launch of Relaxing fragrance. The company’s most recent rollout, Energizing, is the latest chapter on the mood-altering theme. “It’s an area that Shiseido research has focused on for years,” noted Mari Chihaya, vice president of advertising and public relations. Although the company has never been as big an advertiser as say, Estée Lauder, Shiseido is supporting Energizing with ads in seven women’s magazines and working with The Fragrance Foundation to promote the new scent. “We’re not a big advertiser, but we believe very strongly in Energizing so we’re giving it a big push in terms of advertising and media support.”

With its bevy of supermodels and its well-known brand name, Victoria’s Secret has never lacked media support. Now the company is trying to translate its success in lingerie to fine fragrance. Last month the retailer introduced Dream Angels Heavenly, and two additional fragrances are expected to debut next year under the Dream Angels banner. To support the introduction, nine million Victoria’s Secret catalogs will include a scent strip and retail stores are supporting the launch throughout the fall.

Let’s Here It for the Boys
The big buzz in the fine fragrance industry is taking place in the men’s category. New launches such as Romance for Men by Ralph Lauren Fragrances, Happy for Men by Clinique and Casual Friday by Escada have debuted this fall and are expected to be big sellers. It may not have the backing of a big designer, but Mojo is the preferred scent of shagedelic secret agent Austin Powers. The fragrance, created by Belmay, is described as a potent potion of musk, citrus, verbena, jasmine and leather with a “retro” rush of patchouli.

Industry observers insist that the men’s market is ready to take off as guys become more willing to purchase fragrance for themselves. According to NPD BeautyTrends, Port Washington, NY, nine out of ten men who wear fragrance usually select their own. This year, only 14% of men who use fragrance received most of their fragrances as gifts. By comparison, 22% received most of their fragrances as gifts last year. According to NPD, the shift in buying habits could stem from fragrance’s emergence as an everyday habit for an increasing number of men. Forty-two percent of male fragrance users now wear a scent everyday, compared to 37% in 1998. Also key to marketers is that more men are wearing fragrances to please themselves. When asked whether they would discontinue use of a favorite scent if their partner did not like it, only 34% said yes, compared to 40% last year.

Men’s fragrance sales in department stores rose 5% to $924 million last year. That growth outpaced sales of women’s fragrances which were up only slightly in 1998, according to NPD. Even better news for the industry, men’s fragrance counters in department stores are attracting younger consumers. NPD reports that 89% of males ages 15-24 who wear fragrance shop for prestige brands in department stores. Among men ages 25-49, 79% shop for their scent in department stores.

“Men are becoming increasingly important to the market and increasingly receptive to the right messages,” said Veronica Lawrence, fragrance director, NPD. “Most significant, there is a whole younger age group of males ready to be molded by the beauty industry and willing to spend on prestige brands. This is a real opportunity for marketers who position their products with these key market shifts in mind.”

According to NPD, perhaps the biggest marketing advantage is a well-known name. Sixty-five percent of men who purchase fragrance say the brand name has at least some influence on their decision to buy, an increase of six points over last year. The best selling brands tell the story. Seven of the top 10 are designer fragrances.

Will men really come to the rescue of the ailing fragrance industry? Will the internet put more fine fragrances in the hands of men and women around the globe? Will the holiday selling season receive a big boost from all those millennial celebrations? Nobody knows for sure, but at least the industry is trying different strategies to boost sales and make fragrance a part of the consumer’s everyday life.

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