After thanking sponsors, Bath & Body Works, Chanel, Victoria’s Secret, Ulta, SGD North America, GQ, and Symrise, Bloom turned the discussion over to the panelists, Michael Edwards, perfume expert and author; Lynn Franco, director of the consumer research center; Wendy Liebmann, founder, CEO and chief shopper, WSL/Strategic Retail; and Carrie Mellage, director of consumer products,Kline & Company, to decipher the conundrum.
Edwards began with a paean to the perfumers, who guide the fragrance industry, and said he owed his book’s success, Fragrances of The World, to the perfumers around the globe who inspire this industry. He detailed the classification of fragrances, noting that 1,280 fragrances are being tracked this year alone, and that the FiFi database contains more than 12,000 fragrances. In addition, he paid tribute to the late Evelyn Lauder, who was instrumental in helping Edwards list and classify fragrances in his book.
An Overview of Fragrance Introductions
In comparing the fragrance environment from 1991 to 2011, Edwards noted that new fragrance introductions numbered 76 in 1991, compared to 1,200 in 2011. Feminine fragrances in 1991 numbered 42 vs. 766 in 2011; and masculine fragrance went from 28 new launches in 1991 to 129 in 2011.
“In addition, this year we’re tracking 73 celebrity brands as opposed to 3 in 1991,” he said.
Edwards also tackled the flanker question, stating that there is a context for their success. “
Many think of flankers as a derogatory word, but it’s not, if they add something new to the equity of the original brand,” Edwards asserted.
The niche category, too, is on the rise, growing from 9 fragrances in 1991, to 219 in 2011.
“We’re talking about a pretty big market now. When Nordstrom first asked me to classify niche, we didn’t know it would have a major impact on the market,” he said. “The great brands didn’t know how to handle it in the past, but now, brands like Tom Ford and Hermes are the future of prestige,” stated Edwards.
He referred to a WSL Strategic Retail Satisfaction Index statistic, saying that 65% of the population had cut back on buying fragrance during the recession, and 44% aren’t spending more yet, but want to.
To help consumers make the right choices, Edwards advocates a simple fragrance classification system that includes floral, oriental, woody and fresh. To further assist consumers, Edwards advocated eliminating kiosks in favor of fragrance consultants who can help men and women find just the right scent.
Consumers Want to Buy
Regardless of the fragrance, not all consumers are ready to part with their money, according to Lynn Franco, director of the Consumer Research Center, The Conference Board which produces the Consumer Confidence Index.
“The current environment suppresses expectations. We haven’t gotten back to the confident consumer prior to the recession,” she said. “Expectations for future income streams remain subdued, and the optimists do not outnumber the pessimists in this regard. Consumers have suffered a reduction in household net worth, and this financial malaise is another factor that will hold back spending. Until home prices tick up, we’re going to have lackluster spending.”
In addition, many investment portfolios still remain below pre-recession levels, leading consumers determined to get their budgets in order, making a return to “spend happy” ways very doubtful.
“If you’re dipping into savings to pay for necessities that doesn’t leave much for discretionary spending,” said Franco.
She explained that consumers are not willing to take on long-term debt, and at the same time, employment and wage gains have been lackluster.
“We anticipate consumers to be in a cautious mood heading into the holiday season, and there’s a conservative mentality among consumers regarding holiday spending, so it will take some creative marketing and discounting to get the consumer into the stores.”
Franco predicted that affordable luxury items will benefit the most and bigger ticket items will not. Low confidence levels and people decreasing their savings to spend on necessities, has had an impact. “The affluent 35-54 year-olds will be the top spenders, with purchases driven primarily by iPhones and electronics. The key takeaway is a clash between the desire and the ability to spend. If something is really enticing, however, consumers will spend more,” said Franco.
The Sweet Smell of Shopping
Wendy Liebmann, founder, CEO and chief Shopper of WSL/Strategic Retail, describedthe female consumer’s frugal mindset and how the consumer navigates access to a variety of retail venues.
“The worries about the broader world aren’t going away any time soon and the new consumer has accepted the new reality,” explained Liebmann. “She’s become a very smart shopper in general, as well as for beauty and fragrance.”
Liebmann said that consumers today are paying more attention to price, willing to try more products, are using coupons, sticking to brands she can afford, and not going into stores where she will be tempted to buy.
“In addition, the online proposition has become a massive factor. Buying beauty online has become a habit; 47% use mobile in-store apps to shop with their smart phones; one out of two take pictures to remember items, and share them with friends for feedback; 50% find coupons; 55% compare prices, and generally, this consumer is taking control and moving on,” said Liebmann.
In this environment, retail has been reinvented. Big box retailers have been forced to reinvent themselves by opening smaller format stores, and creating alternatives in retail venues. For example, Walmart has created Walmart Express, a smaller shop; and Tesco, a Korean company, has gone virtual, with pop-up retail venues in Korea, offering virtual shopping in Seoul’s Seolleung Subway Station. Meanwhile, mass retailers are going upscale. Duane Reade’s Wall St. store, which features multi-level beauty and personal care areas, along with the new Sephora beauty experience in the meatpacking district in New York City have enlivened the retail experience.
Liebmann quoted The New York Times’ Critical Shopper, by Cintra Wilson, saying, “To find hope in a marketplace, one must have enough faith in the future to support newness and resist the temptation to go back to the graveyard, dig up and worship the bones of inspiration long deceased.” She concluded, saying, “This is a business about emotion. We’ve got to create something dazzling to bring the consumer in.”
Carrie Mellage, director of consumer products, Kline & Company, noted that while fragrance accounts for 9% of the total personal care market, it is a small, but important part of it.
“In 2011, fragrance exceeded the industry average for the first time in over a decade, and we’re seeing a boom in fragrance that some can’t explain,” she told the audience. “Some are saying it’s a new version of the lipstick theory, and that the consumer, who has been suffering from ‘frugal fatigue,’ is tired of cutting back and wants to spend a bit.”
According to Mellage, several reasons account for the increase in spending, including the fact that, consumers’ portfolios are not as negative as they were in the past, and that luxury consumers are spending more.
“In addition, tourists are coming to the US in droves,” said Mellage. “In 2011, 64 million international travelers will spend $152 billion in the US.”
International new launches are also bringing excitement, distinctive packaging, strong classics, and unique events, such as Firmenich’s Sensorium of fragrance experience in New York City, have added to the momentum. She also cited retailers encouraging trial purchase and new tools to guide the consumer in their purchase, as well as home shopping channels, like HSN’s success with Mary J. Blige’s fragrance. Samples, promotions, and daily deals, all drive the consumer to the counter.
“We’re cautiously optimistic at Kline for the holidays,” said Mellage, who remains confident that the US fragrance market should fully recover from the recession by 2014 to reach $6 billion in retail in the US.
“We still have a way to go, and marketers and participants must understand the new consumer and retail landscape and connect and engage with the consumers,” she concluded. “Marketers and retailers must be creative.”