Online Exclusive: Fragrance Foundation Luncheon–Holiday Looks Bright for Luxe Fragrance

Fragrance industry panelists say marketers and retailers need to be more creative.
Written by Jamie Matusow, Editor

At the start and finish of The Fragrance Foundation’s annual State of the Industry luncheon, held at New

Rochelle Bloom at The Fragrance Foundation’s annual State of the Industry luncheon.

York City’s Harvard Club on November 17, the organization’s president, Rochelle Bloom, asked the crowd of almost 200 industry executives present to raise their hands for a count on whether they thought the luxury fragrance business would see a prosperous 2011 holiday season. Even after a few sobering thoughts delivered by some of the afternoon’s speakers, the hands-up show at the close of the session matched the optimism of its opening.

Panelists were Michael Edwards, perfume expert and “fragrance ambassador;” Lynn Franco, director of the Consumer Research Center, The Conference Board; Wendy Liebmann, founder, CEO and chief shopper of WSL/Strategic Retail; and Carrie Mellage, director of consumer products for Kline & Company.

In general, it was a lot more of an upbeat forecast than was presented last year. The luncheon also corresponded with a favorable report on prestige fragrance released the day before by The NPD Group (see beautypackaging.com for more info).

Edwards started out by telling the crowd that there were about 1,200 launches of new fragrances during the year, the vast majority in the feminine range. However, he said that there had been a sharp increase in niche brands, which he called “the seed for future prestige.”

He also reported an increase this year in limited editions and flankers, but warned, “Flankers need to add something new for success; otherwise they dilute the original.”

Floral? Woody? Oriental? Fresh? Edwards said classifications have become overly confusing and may in fact be making it more difficult for consumers to decide what they want. He urged the industry to come up with easy fragrance finders to aid consumers in this regard.

Franco gave the most sobering report of the day, predicting that not much will change over the next year when it comes to consumer spending habits. She also warned: “Consumers are in a cautious mood heading into the holidays.” The affluent and those in the 35-54 year old age group will be the top spenders, she believes. She added: “In the clash between desire and ability to spend, quality can be the reason to spend.”

Dazzle the Consumer

Of utmost importance, said Liebmann, is to understand the female consumer and the “shopper mindset

Panelists with Bloom: [L-R] Edwards, Franco, Liebmann, and Mellage.

resilience.” She said the shopper has accepted the recession and has learned how to cope with it. She has become smarter,” said Liebmann, and has the tools to deal with the new economy. She is willing to try products that cost less, stick to brands and stores that she can afford, and use her smart phone when it’s efficient.

She spoke about how beauty retail has been “reinvented in the past 12 months. For instance, she said “Big box retailers have had to reinvent themselves with smaller stores so they can get into neighborhoods.” Another change: Beauty now goes everywhere—to home stores, food stores and even shoe stores.

Liebmann pointed to the innovative beauty marketing success stories of Walgreen’s on Wall Street and Sephora in the Meatpacking District as examples that will inspire consumer spending. “To find hope in the marketplace,” she said, “we must have faith in the future to support newness. Create a dazzling experience, a reason to shop so she doesn’t stay home.”

Mellage ended the panel session on a high note, revealing to the crowd that in 2011, fragrance growth exceeded the industry average for the first time in over a decade. She said that fragrance accounts for 9% of the total U.S. personal care market—and it’s the segment most tied to an emotional experience. She also said that we can expect the U.S overall beauty market to reach an all-time high.

Mellage said thanks in part go to Chinese consumers—whether in Asia, or traveling to the States. There’s no question that their passion for luxury beauty and fragrance products are boosting sales here and back at home, she said. Spending from this group during U.S. visits is expected to hit $150 billion.

Why is fragrance growing now? Mellage owes the rise to successful launches and consumers’ willingness to spend on “small luxuries.” She also pointed to “consumer fatigue,” and said they’re tired of being frugal and want to spend again.

Mellage said Kline research on fragrance and beauty indicates a situation of “cautious optimism” for the balance of 2011, with 5-7% growth this holiday season. Tips to increase sells: buy one get one free, value added pluses, flash sales and sampling.

While all these approaches will help boost sales, Kline predicts the U.S. fragrance market should fully recover from the recession by 2014. Most important said Mellage, “Everyone must understand each other; marketers and retailers need to be creative.”