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Fragrance Is More Than Fine

The year is ending on a positive note, say experts at the State of the Industry event sponsored by The Fragrance Foundation.

By Nancy Jeffries, Contributing Editor

Published November 26, 2012
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Fragrance Is More Than Fine

Industry aficionados anticipate the annual State of The Industry economic review and forecast with both hope and trepidation. Presented each year by The Fragrance Foundation, the occasion has come to represent a festive kick-off to the holiday season, as well as a sobering discussion of the changing environment in the US fragrance market. The overwhelming evidence this year supported the prevalence and growth of the digital space, and analyzed the extent of influence exerted upon today’s global consumer, and today’s brands, as each navigates the social networks.
Elizabeth Musmanno, president of The Fragrance Foundation, welcomed attendees and speakers to the event, held at The Harvard Club, on November 15. Speakers included Andrew Morse, managing director, senior partner and board member, High Tower, an open-source, advisor-owned and multi-custodial financial services company; Carrie Mellage, director, consumer products, Kline & Company, a worldwide consulting and research firm, which includes consumer-related market research programs such as cosmetics and toiletries, salon hair care and professional skin care; Wade Gerten, chief executive officer, 8th Bridge, a social commerce company, which develops programs that reshape the online shopping experience; and Scott Galloway, clinical professor of marketing at NYU Stern and Founder of L2 Think Tank, which focuses on digital innovation.
Elizabeth Musmanno, president, The Fragrance Foundation; Scott Galloway, clinical professor of marketing at NYU Stern and founder of L2 Think Tank; Jill Belasco, chairman of the board, The Fragrance Foundation; Wade Gerten, CEO, 8th Bridge; and Andrew Morse, managing director, senior partner & board member, High Tower, at the State of the Industry luncheon. Photo: Owen Hoffman of Patrick McMullan.
The Economic Overview
Andrew Morse opened the program, noting, “For business people like you, the watch word is employment.” This, according to Morse, creates disposable income, cash and credit, and allows the wheels to turn and the economy to thrive. While Gross Domestic Product variables existing between countries exhibit major differences, “What really tells you what a nation is capable of doing is seeing how fast it’s growing,” said Morse.

He observed that consumer confidence is growing, adding that low interest rates is increasing the “Wealth Effect.” Saying, “While it’s easy to discuss doom and gloom, we’ve all seen the stop and start nature of the economy,” indicating that while there is still work to be done, all is not lost. “If I were in the consumer product business today, I’d say we are at the beginning of a broad and long expansion.”

A Comeback for Fragrance
“It’s a robust time for fragrance,” observed Carrie Mellage, Kline & Company, who cited the success of Justin Bieber’s Someday fragrance and Taylor Swift’s Enchanted, as examples. According to Mellage, fragrance will continue its comeback throughout the all-important holiday selling season, despite the heavy toll that Hurricane Sandy had on the East Coast.
“This will impact holiday spending, especially in our immediate area, as money is going to be used to buy generators and necessities,” said Mellage. “This has also put a reset into the state of mind in the market.”

In 2012 fragrance growth exceeded the industry average for only second time in more than a decade—sales rose 6% in 2011, and are projected to increase 4-5% in 2012.

“We’re in a good position to finish out the year quite strong,” she said. In a survey of industry professionals, Mellage noted that 77% respondents expected that the holiday season would be about the same or better than last year—even in the absence of a blockbuster.

“It remains to be seen what the big launch will be,” said Mellage, “However, Lady Gaga and Coco Noir are strong contenders.”

In addition, Mellage cited the impact of fragrance packaging translating to success, and showed examples of Lady Gaga’s Fame, with its black packaging and black juice, as well as Marc Jacobs’ distinctive Dot packaging, and the Chloé Bianca Solid Perfume Necklace, one of the Coty Prestige holiday launches, also promising to be strong. Mellage also noted the impact of marketing campaigns, such as Chanel’s Brad Pitt spots and the Lady Gaga promotions, which will likely up the ante for fragrance purchases this holiday.
“We’re forecasting sales to increase approximately 5% for holiday and believe innovative launches will remain vital to the heart of the market. The economy and the job market have a direct impact on fragrance sales, so holiday will be impacted by a number of variables,” said Mellage.
Social Commerce and the Shopping Experience

Wade Gerten, chief executive officer, 8th Bridge, made a strong case for mobile apps and the online experience.
“We’ve launched dozens of brands, and have been figuring out how to weave ‘social’ into the shopping experience,” he said.

As a software company, Gerten has done business with Juicy Couture, Bobbi Brown, Coach, Target, and others who wish to do commerce around the social space.
“There are so many social entities in the social space,” he said, citing Groupon, Pinterest, Haute Look, Gilt, and others.

“The fundamentals are tied into how are you going to make money with all of this,” he said.

Equating fragrance with the Facebook phenomenon, Gerten said the two have much in common. They provide a way to feel attractive, to express feelings, and to appear sophisticated.

“At the end of the day, it’s about love, belonging, and respect, and utilizing social media and social commerce makes it easier to express your brands with a lot of reach,” he said, noting that Facebook enables consumers and brands to talk about products, has wide reach, and spreads the word easily.
By adding options beyond the ‘Like’ button, said Gerten, the possibilities can be expanded. He suggested adding choices such as “Need” and “Obsessed,” which enable the customer to really express what they think about a brand or product. Using Oscar de la Renta’s fragrance as an example, he said, “You can create a lexicon of feeling that garners exponential impressions.”

Wade Gerten, CEO, 8th Bridge and Elizabeth Musmanno, president, The Fragrance Foundation.
He contends that driving advocacy and generating a nation of tastemakers is what we are looking to brands to transmit.

“Tastemakers give others a sense of style and this kind of curation is where this phenomenon is going now,” Gerten explained, pointing out that people post dozens, hundreds, event thousands of images of themselves on Pinterest or lookbook.nu, where their outfits, fragrances, and other things they like may be identified.
“It’s another way to get expertise from the community. Sites that have that social aspect to them are more alive and bring vitality to a brand,” he said.

All of that activity yields data, and mining the data is where the money will come in, says Gerten. “Knowing consumers’ explicit interests allows a brand to know the consumer and what they want. This is a valuable piece of information that fuels the social commerce growth engine,” he said.

How Brands Drive Social Media

According to Scott Galloway, clinical professor of marketing, NYU Stern and founder of L2 Think Tank, “We try to help a brand where they are strong or weak, based on their digital performance. We look at how well brands do in driving social media, and in driving them to third party retailers.”

In 2000-2010 e-commerce grew 17.9%, and consumers have taken to relying on e-commerce for their research as well.

“We found the number of people who skipped the test drive, when shopping for a car, more than doubled since 2007,” said Galloway, noting that consumers are researching their purchases online and then buying.

“The levers of influence are dramatically changing, as consumers are researching the products they buy online,” said Galloway, adding that, “Estée Lauder Cos. says that people are more likely to convert to purchase at a Macy’s counter, when they have begun their research online.”

“We have a consumer base that is largely comprised of introverts. They want you to get out of the way,” said Galloway. While the people may wish to purchase luxury prestige products, they want the middle echelon out of the picture, and as Galloway contends, “The top reasons for the online shopper to buy today is to avoid the sales associate. They want to go to the product as seamlessly as possible,” he said. Galloway also noted that devices were spurring access. “One fifth of all traffic is from mobile devices to digital platforms, and iPad purchases are two times what they are on a PC. The tablet and prestige go hand-in-hand, and in fact, iPads have over-indexed among baby boomer males,” he said.
Clearly, digital fluency has become de rigueur. Galloway made the case for the Digital IQ, concluding that brands with greater digital fluency, who leverage their Facebook community, tweet about products, and engage in brand building in the digital space, are ahead of the game, particularly when their attention is on the process rather than solely monetizing the experience.

“Digital is a bright light that exposes flaws in the business. If licensees, for example, continue to under index in digital, they will leak shareholder value to owned brands that have more consistently invested in digital. The good news is it’s not hard to get dramatically better at digital at this point in time,” said Galloway.

Additional information about The Fragrance Foundation’s programs and presentations may be found at: www.fragrance.org.

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