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A Grim Holiday Ahead?

By Nancy Jeffries, Correspondent | November 24, 2009

Foundation panel looks at what it will take to win consumers in the years ahead.

The economic future of the industry received a sobering update on November 19, 2009, when an expert panel, presented by The Fragrance Foundation at New York’s Harvard Club, gave attendees serious pause for thought at the organization’s annual State of the Industry luncheon.


Rochelle Bloom, president of The Fragrance Foundation, got the discussion underway with upbeat news of the new Fragrance Foundation advertising campaign, One Mighty Drop, designed to revitalize the fragrance market and bring new excitement to the category. More information is available at: www.onemightydrop.com.


However, the input of the distinguished panel put the current state of the economy into perspective, as a discussion focused on unemployment statistics, cost-cutting by retailers, and a future filled with more than a few twists and turns, resonated throughout the presentation. Deirdre Bolton, anchor, Bloomberg Television, introduced the panelists saying, “Everyone wants to know if the worst is over,” noting that after the first quarter of 2010 there might be some light at the end of the tunnel. Panelists, including Susan Babinsky, senior vice president, consumer products, Kline Management Consulting & Marketing Research Group, Ken Goldstein, economist, The Conference Board, and Wendy Liebmann, founder and president, WSL Strategic Retail, addressed the query.

Babinsky noted, “The new normal is redefining relevance in the fragrance industry. The consumer is key and if a brand is not relevant in the industry, you’re facing great challenges.”
 
Presenters at State of the Industry discussion, left to right, front row, Wendy Liebmann, founder and president of WSL Strategic Retail, Deirdre Bolton, panel moderator and anchor, Bloomberg Television; back row, left to right, Susan Babinsky, senior vice president, consumer products, Kline Management Consulting & Marketing Research Group, Ken Goldstein, economist, The Conference Board, and Rochelle Bloom, president, The Fragrance Foundation.ad.
Adding that the fragrance business, at the $5 billion mark, is a big business that has been suffering through declining sales, Babinsky said, “There have been four consecutive years of negative sales growth, so that is not good news. The consumer will definitely be spending more carefully during the holiday season.”


She explained that the areas that continue to be strong are the classics, like Chanel No. 5 and Ralph Lauren, as well as special new players, like Harajuku Lovers and the Ed Hardy line, with its colorful tattoo art packaging. “


These examples attract new users to the market,” she said, adding, “Of course, value works in a down market as well.”


She cited gifts with purchase (GWP) and free shipping, gift sets, and great values at the right price points, to be vibrant in the market.


Babinsky highlighted the role of naturals in the market, citing Givaudan’s Innovative Naturals, to enrich perfumers’ palettes, as well as customization, making purchases relevant and personal, and experiential fragrances, which tell a personal story in fragrance.


“Fragrance could take better advantage of technology, like Lauder’s ‘Let’s Play Makeover’ tool, and the I-Aroma fragrance device, which enables fragrance sampling prior to purchase. Social media also allows the consumer to connect and encourages more interaction,” she said, adding that it was important to look at interesting business models in any industry that encourage proactivity.


Goldstein noted that the consumer wanted to know when the recession would start feeling like it’s over.


“Strong recovery will be slow going, possibly 24 to 36 months down the road. This recession, the worst we’ve had in more than 50 years, has resulted in a fundamentally changed world. A year from now we’ll still have an unemployment rate of 10%. That, combined with demographic change, is why you see consumer confidence so low. We’re moving to being a more saving consumer for the next 5, 10, or 15 years, and money not spent means consumption won’t grow. Relatively depressed spending, since there’s not enough money coming in, means something has to come off the drawing board,” said Goldstein.


He noted that lowered expectations need to be managed and the struggle continues to impact all sectors, including households and businesses.


Liebmann suggested that rather than advising a reset during this recession, as Jeffrey Immelt, CEO of GE had advised, she said the economic situation required a reboot.


"Sometimes you lose things. Sometimes things are saved. That’s what happens when you reboot. What will stick? What will go away? Assume it’s forever and you’ll be safer going forward,” she said.


The results of a recent WSL survey she cited revealed that 80% of women don’t want to shop for anything they don’t need and only 15% said they would go back to spending as soon as they could.


“In reality, keep need in mind as we move through this. Need changes,” said Liebmann.


She explained that 85% of survey respondents don’t want to get into debt.


“They are content spending less and have become used to spending less. When the economy gets better or you feel more comfortable spending, what will you spend on? It’s more about experiences than stuff,” Liebmann said, noting that the top five desired activities are experiential, including vacation, entertainment, clothing, salon services and eating out.


“The notion of experiences rather than stuff is a clue. Where does fragrance fit in? Most women surveyed said they were satisfied to spend less on fragrance even if they could afford to spend more,” she added. This is where the notion of value becomes integral to determining what is a real value today, in a world that has become so commercialized and commoditized.


“If fragrance is all about experience, not just liquid in a bottle, we in this room need to be delivering that experience for fragrance and everything else. Whether it’s the cosmetic floor at Bloomingdale’s or Duane Reade’s new upscale cosmetic and fragrance areas, experiences are key, from mass to specialty to prestige,” said Liebmann. “Especially for the newly-transformed shopper, we need to deliver the real value of fragrance and let consumers know that the experience of fragrance is more than just liquid in a bottle.”


Additional information about The Fragrance Foundation and the new advertising campaign may be found at: www.fragrance.org.

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