Online Exclusive: Fragrance Faces Tough Challenges

Economic experts speaking at The Fragrance Foundation’s annual State of the Industry luncheon provided a sobering look at what the fragrance industry—and the country, in general—can expect heading into the New Year and beyond.

Written by Jamie Matusow, Editor

It’s a good thing we had finished our delicious meal prior to the panel discussion that brought together 200 members of the fragrance industry at The Fragrance Foundation’s annual State of the Industry luncheon held in November at New York City’s Harvard Club, or we surely would have lost our appetites.

From left, Rochelle Bloom, Ken Goldstein Susan Babinsky, Candace Corlett, Peter Siris

The first speaker, Peter Siris, managing director of Guerilla Capital Management, warned us of the dreary forecast that was forthcoming, right from the start, saying, “You might want to go get a drink or go to the bathroom, because I’m probably going to depress a lot of people.”

Siris painted a grim picture of the U.S. economy—and the global outlook. He ended by caustically remarking: “The worst is over. I predict a recovery within the next 35 years.” He said, “The world economy we’ve known is finished. The wealthy will do well, but the lower- and middle-class are toast.” Siris did point out a positive prospect though, in saying that there are great opportunities for the industry in China, particularly through product endorsements by celebrities. “We know how to get consumers to buy what they don’t want,” he reminded. “There’s a huge opportunity to take this to the rest of the world.”

Susan Babinsky, senior vice president, consumer products, Kline Management Consulting & Market Research Group, changed the tone of the afternoon slightly, referring to positive data that shows that the fragrance business has been picking up of late, though not returning to its former level.

“The specialty sector and online sales show the greatest improvement,” she noted. The big question: “Will specialty eclipse department stores?” Babinsky also pointed out the power of packaging, saying, “Coty leads with packaging, such as that for Marc Jacobs scents Lola and Bang.” She also referred to innovative packaging such as Beyonce Heat perfume rings and Justin Bieber dog tags and wristbands. “Packaging is an important way to differentiate,” she said.

Candace Corlett, president of WSL Strategic Retail, a retail strategy firm, focused her portion of the presentation on the future of shopping. “If you think the recession is over,” she said, “it’s not, so stop worrying about it.” She predicted that a recovery could take “three or more years,” rather than the ominous 35. She said that consumers are returning slowly to shopping, adding that “the crisis is over, but the lessons are not,” referring to changed habits such as searching for bargains, switching brands, buying online—and always first asking: Is it worth it? “You must create an emotional connection to get them back,” she advised the crowd. She also told the brand representatives: “Suppliers are the ones with the ideas; listen when they offer something new.”

It seemed as if Ken Goldstein, an economist at The Conference Board, was going to end on a positive note when he prefaced his remarks with the statement, “I don’t think it’s going to take 35 years.” He predicted that we could see a slight thaw by the end of spring. However, he said, “Everyone agrees that the old world is gone and the new one is here to stay. He painted a gloomy picture of global strength in terms of a declining U.S. position, and a troubled economy. “For most of your customers,” he said, “seventy-five percent of the money they’re spending is for necessities.” For those in the audience anticipating an uptick due to holiday sales, they may have had their hopes dashed when Goldstein remarked, “Sure, they’ll buy. If things are fifty percent off, they’ll take advantage of it.”