Have sameness and a lack of innovation impacted the fragrance market? Has malaise at retail hurt scent sales? In today’s fast-paced environment, do time constraints influence quality? These and other topics prompted lively debate as The Fragrance Foundation presented its inaugural Executive Roundtable Discussion last month in New York City. Titled The Fall and The Rise of The Fragrance Industry, the presentation, led by Elisabeth Musmanno, president of The Fragrance Foundation, featured three distinguished panelists who weighed in on the state of the fragrance market.

While the fragrance business has changed over the years, according to statistics, it has not really grown. Musmanno noted that in 2004, the fragrance market was valued at $2.9 billion, and lo and behold, in 2014, the fragrance market was valued at $2.9 billion. Asking the panelists why they think the business has not grown in ten years produced a range of responses.
 
Frederic Jacques, vice president, fine fragrance, North America, Takasago, opined that quality might be a reason, as well as different channels and different price points.
 
“There are big distinctions between mass and prestige. The stretch between the selling prices has gone too far, especially when you’re not talking about prestige or mass,” he explained. “There is a huge confusion in the middle. However, when you look at NPD’s numbers, it shows that the consumer does find her way to what is good.”
 
Robin Burns-McNeill, chairman and co-founder, Batallure Beauty noted the existence of fragrance sales that are not reported, citing Victoria’s Secret fragrances as one example. She also noted the confusion customers have in distinguishing between an eau de parfum and a cologne.
 
“Many consumers don’t know. It’s all fragrance to them,” said Burns-McNeill. “In prestige there is also a sameness, a lack of innovation.”
 
Musmanno noted that a product like the new Christian Louboutin nail polish, shaped like a stiletto and priced at $50, is an example of a beauty innovation that has resonated with consumers.
 
“Yes,” said Burns-McNeill, “there’s so much GWP out there, you don’t see what’s distinctive.”
 
Michael Gould, former chairman and CEO, Bloomingdale’s, pointed out that fragrance position at retail is another key factor.
 
“This is all too technical for me,” he said, “but I sure as heck know that the far right corner of the store is where the elephants go to pass away,” he said, alluding to the placement of some fragrance counters in retail. Gould also noted a dramatic reduction in space at Bloomingdale’s over the last six years.
 
“If you look at square footage today, it’s probably half of what it was. In Macy’s, fragrance is located in dramatically less space as well. I think fragrance got looked at as a commodity.”
 
Gould reminisced about the good old days.
 
“Robin Burns was a prisoner of Calvin Klein. I was a prisoner of Giorgio of Beverly Hills. What was important to me was they both had a lot of animation. Then it was about getting a scent out. It was about an abundance of scent strips and sampling. It was the Instagram of its times, without Instagram,” said Gould. “This is not Harry and David. There is no fragrance of the month club. Don’t blow it all on the launch. It’s a long ball game. You want repeat purchase,” said Gould.
 
“It’s dangerous to look just at a number. What is the space given to fragrance? Where is it located? Fragrance was a vehicle to lift the store. This is what the store needs again today,” said Gould.
 
Musmanno acknowledged that there is a general malaise in retail today, that department stores aren’t healthy. But Gould insisted not all brands are suffering.
 
“If you look at Estée Lauder and Chanel, you see they’re up. Some business is good. I don’t think it’s about doom and gloom. The challenge is what are we doing on a long-term basis? What are we doing after the launch? Where’s the automatic bounce back.” According to Gould, there’s not a lack of traffic in the stores, there’s a lack of conversion, which may be due to retailers’ inability to create excitement in stores.
 
Jacques noted that while the first purchase is important, repeat purchase is what drives profit. “We have to give consumers a reason to buy a fragrance again. I don’t know if we give equal effort to get consumers to come back. I feel sometimes we are in a state of denial. We’re still having the same discussion we had three years ago,” he explained.
 
Like the other panelists, Burns-McNeill is a veteran of the fragrance wars. She recalled how Giorgio Beverly Hills was priced right, presented correctly and connected with consumers.
 
“The scent strips were effective for Giorgio, they built demand. It was aspirational. Consumers wanted to have the Rodeo Drive connection,” she said.
 
Another case study of how to get it right can be found in Opium.
 
“When I was at Bloomingdale’s, Opium launched in France. Six months later it was in the US, and the demand was so great we had to hide testers in the drawer. The fragrances that were successful were aspirational.”
 
She recalled that the Opium and Calvin Klein teams developed impactful creative and knew how to keep building. Unfortunately, hundreds of fragrances are developed each year and then the brands sit back, which is not sustainable, Burns-McNeill explained.
 
Gould said that the reason for fragrance purchase was 70% juice, 20% the bottle, and 10%, for the package; however, he added, exceptions to the rule certainly exist, and that it is sometimes difficult to know how much is hype and how much is based on actual numbers.
 
“The issue isn’t about traffic, it’s about conversion,” Gould insisted. “It’s about changing a transaction into a relationship. I think great retailers together make a business better.”
 
Jacques agreed that the product must be sold correctly, but he pointed out that these days, there’s less time to work on conversion.
 
“We all agree that there are many partners that have to do things differently, but you don’t have three years to build your brand and connect it. I still think there’s a way to do it better, but there’s no way to do it like we did it 20 years ago.”
 

Consumer Behavior As Predictor of Purchase

 
Burns-McNeill emphasized the importance of understanding consumer behavior and adapting to it. She noted that today, consumer behavior centers around social media, mobile, and you have to understand the media options to create awareness outside of the distribution.
 
“You have to be imaginative in how you use those levers,” she explained. “If Instagram is important to the consumer, you have to know how to use it.”
 
Burns-McNeill noted that when big public companies are allocating money, they usually allocate to a winner, identify potential growth, and put a lot behind it.
 
“This is what we did with Beautiful,” she recalled. “With Youth Dew, we sampled it and offered GWP. You need to be creative with how you allocate resources. It’s about democracy and stores can benefit by optimizing their winners. Retailers should also optimize their potential winners.”
 
But according to Gould it’s about creating excitement in the store. With the biggest challenge being moving beyond a transaction to creating a relationship.
 
“Twenty years ago we used fragrance as a vehicle to move the whole store.” Gould added that online fragrance business comprises 6% of total sales, and that “brick and mortar is not going away. People want a connection and that’s why they go to the stores, to get an emotional and social connection. That’s what fragrance once gave and I think can give it again. It’s not simple.”
 
As Musmanno noted, with sites like Buzzfeed attracting 150 million viewers, it is essential to reach the new consumers who are consuming goods today. Connecting with millennials is key.
 
“You have to know what media they’re following. They go to Huffington Post, they go to Instagram, they go to Buzzfeed,” said Burns-McNeill. “This is where buzz and demand start happening and you have to create an effective awareness, so if that is the consumer you’re going after, you’d better take the time to develop a strategic plan to understand their behavior and reach them where they are. You have to be very agile. You have to have fast feet,” said Burns-McNeill.
 
She noted that the consumer may have learned about a fragrance, smelled it, and wanted to buy it, so you have to make sure the place they buy it is an enjoyable experience.
 
“It’s about 360-degree marketing,” she said.
 
Musmanno noted that indies are taking up a bit more white space these days as consumers look for something unique.
 
“I may be living in the past, but if you can’t have something, you might want it more,” suggested Gould, noting that fragrance has become ubiquitous. “If you look at the distribution, it’s at Duty Free at all the airports. While department stores may not offer the environment that Millennials want, there is still significant buying power out there.”
 
According to Burns, in order to create demand one must communicate effectively.
 
“The creative association with most fragrances is with models. But look at every fragrance and ad you see and they’re not doing enough to create interest,” said Burns-McNeill.
 
Jacques said, “With fragrance, niche exists only because perfumers do it practically for free and it opens a white space for perfumers who want to express themselves. With them, it’s not packaging, it’s the juice, although some of the packaging is very nice. With the niche brands, the consumer wants the experience.”
 
“To me the juice is the food. If a restaurant has a nice plate and good service, if the food isn’t good, I don’t go back,” said Jacques.
 
Resources today are different and launches can’t be done the same way. Proliferation, it was agreed, has made fragrance less special. However, noted Gould, “As different as Chanel is, they stand for something. What is special about a fragrance? Even those great companies in Paris face challenges.”
 
“Chanel is a great example of something to benchmark as a model, always infusing newness even in vintage things, like the Marilyn Monroe advertisement, which makes Chanel No. 5 new again,” said Burns-McNeill. “Quality ingredients also distinguish a fragrance. You can tell the difference,” she said.
    
Musmanno agreed that the industry suffers from sameness and, perhaps, too much market research that too-often reaches the same conclusions.
 
“The Robin Burns who launched Calvin Klein in the past would surely come up with something new today.” Burns-McNeill said, “There’s a very large graveyard of fragrances that didn’t know how to create the buzz. Today, the dialogue may be the same, but the vehicles are different. Great brand positioning is key. Why are so few people doing it?”
 
According to Jacques, the industry works too much in silos these days. He explained that the product must be consistent with the story, the advertising and the brand. The formula is designed to include risk management and the biggest risk is the failure to be relevant. It’s something you can’t always find in research and ratios.
 
“It’s a problem of relevance. It’s too easy to talk about flankers and celebrity fragrances because everyone does the same thing, the same way. Maybe we need to tweak the formula,” Jacques suggested. “As a fragrance house, I feel almost like the backseat driver. Something is not right and we need to understand why honestly.”
 
He also called for innovative bottles and outer packaging. It all must come together in order to give the consumer a reason to buy a second time.”
 
Still, all the presenters agreed that opportunities still exist within the fragrance industry. Innovative thinking is required to create those fragrance that will make a lasting impression and provide the emotion and connection that keeps people excited.
 
“Conversion happens because the consumer is inspired,” said Burns-McNeill.