Re-setting the Fragrance Business

Industry execs put their heads together to plot a successful retail course.

Written by Jamie Matusow, Editor

The fragrance industry is in dire need of change to keep pace with the times. Technology will continue to play a critical role in capturing consumers, and will lead to tremendous global opportunities. As a counterbalance to technology, emotional reactions, artisanal touches and compelling stories can provide all-important connections. New launches led last year’s most promising numbers in a while, but with all the strategies and all the social marketing, many customers opted to replenish their favorite classics rather than take a chance on a new entry.

Are sampling programs key to a more profitable future? Do consumers want to learn more about the olfactory pyramid? Or, everything aside, is it really the juice itself that rings up the final sale?

These were just some of the issues and questions raised at The Fragrance Foundation’s 2011 Trends Forecast, held March 23, when hundreds of key players in the fragrance industry gathered in an auditorium in Manhattan’s Time-Life Building to hear what steps leaders in manufacturing, retail and marketing are implementing in efforts to revitalize consumers’ connection to fragrance and tantalize them to purchase.

Panelists were Laurie Black, executive vice president, general merchandise manager, cosmetics & fragrance, Nordstrom; Frederic Jacques, vice president fine fragrance North America, Mane; Donald J. Loftus, president & CEO, P&G prestige, U.S.; and Allison Slater, vice president retail marketing, Sephora. Pamela Vaile, president Pamela Vaile Associates moderated the event, posing many provocative questions along the way.

Rochelle Bloom, president of The Fragrance Foundation, first took the podium, noting that the fragrance industry has not changed much in the past 10 years, and that “it needs to adjust to a new consumer reality, one that is no longer ruled by conspicuous consumption, but instead, by conscious consumption.”

One of the industry’s favorite market and trend analysts, Judy Galloway, followed Bloom, reporting on some of her findings. She said two groups of consumers are emerging: One is educated and affluent, while the other is less educated and less affluent. But, she cautions, “Both groups will be sophisticated, and we need to understand both ends of the spectrum.”

At The Fragrance Foundation’s spring 2011 Trends Forum panelists (L-R): Laurie Black, executive vice president, general merchandise manager, cosmetics & fragrance, Nordstrom; Allison Slater, vice president retail marketing, Sephora; Donald J. Loftus, president & CEO, P&G prestige, U.S.; Judy Galloway, managing partner, G-group Market Research; Frederic Jacques, vice president fine fragrance North America, Mane; Rochelle Bloom, president of The Fragrance Foundation; and Pamela Vaile, president Pamela Vaile Associates

Galloway said brands and products should build communities, and highlight emotional needs and artisanal processes to balance the coolness of technology. “Fragrance needs to be developed as part of a personal style,” advised Galloway. Another must: Salespeople’s roles must change from product pushers to product advisers. “If brands don’t make these types of changes,” she warned, “they won’t exist for long.”

Pamela Vaile keyed the discussion with some promising stats from 2010, determined by The NPD Group. “2010 signaled a comeback for fragrance,” she said, but added that the actual number of fragrance units sold had declined. “There were actually 10 million fewer fragrances sold than in 2007,” she said.

Vaile said new launches such as Bleu de Chanel for men and Gucci Guilty for women led last year’s growth. She also pointed out a few standouts that achieved “significant sales” on HSN and QVC such as Mary J. Blige’s My Life and Kate Walsh’s Boyfriend (one of Vaile’s accounts). Both exemplify the power of a story in selling fragrance on TV and online—vehicles previously labeled unlikely, because the consumer would not purchase a fragrance without first smelling it. Vaile noted, “Consumers may not remember a smell, but they’ll recall a compelling story.”

Research Is Key
Laurie Black of Nordstrom relayed details of extensive customer research and how the upscale retailer had shaped its strategies according to results. Nordstrom execs were “shocked,” she said, to learn that the No. 1 reason their female customer buys a fragrance is to replenish. No. 2 is because she received a sample that she liked. No. 3, she doesn’t like to be around a fragrance model. Black says, based on these findings, Nordstrom restructured its sampling process. “If the customer is handed a strip and she likes it, she’s immediately handed a sample. She wants to wear it around her significant other before purchasing the full size,” said Black.

Don Loftus said that vendors need to understand what the retailers value and how they can work together. “If replenishing is the top effort,” he said, “we have to look at it as an opportunity to rebuild the classics rather than constantly pumping out new launches.” (Ed note: I don’t think any pun was intended.)

He also suggested the possibility of re-ordering the department store beauty floor to make it easier for the consumer to navigate by setting up floors by groupings rather than by rankings. For instance, merchandise by couturier rather than positioning it next to celebrity brands.

However, when it came to the idea of grouping by florals, etc., Loftus said that consumers don’t have an understanding of the various categories.

Allison Slater said there’s “a big focus on fragrance at Sephora right now, with new initiatives,” several of which involve small sizes to gain interest. She said they’re always looking at client data and revising marketing techniques accordingly. Sampling plays a large role at the beauty retailer, with samplers that are also available for purchase, such as a Sephora favorites kit that includes 10 vials of both new and classic scents. Rollerballs, too, she says, have proved to be effective fragrance packages at the register and elsewhere in the store. “It makes the consumer think more of fragrance as an accessory they should carry in their handbag,” she said.

Art of Fragrance
The art of fragrance was the subject of much discussion. Frederic Jacques of Mane talked about the craftsmanship involved in creating a scent and agreed with what Galloway had mentioned about artistry being important to consumers. However, he said, “Perfumers are not story tellers; the majority of story telling must come from the brand.” He also commented that the exclusivity of prestige has been brought to mass, which has diluted the concept. “The prestige model needs to be changed,” he said.

While Jacques said that the story of artistry of the fragrance and the rareness of the ingredients gets lost on its way to consumers, Nordstom’s Black commented on the Nordstrom shopper, saying, “Notes in fragrance are not important to her. It’s all about the smell of the juice.”

But Sephora’s Slater said that “Sephora clients are very discerning and do want to hear a story about the brand—if not the ingredients.”

On celebrity fragrance, Vaile noted that names continue to bring instant awareness and in some cases, instant success. “In a sea of fragrance,” she said, “celebrity is vital and real, and continues to drive business.”

Jacques added, “There are some [celebrity fragrances] that are really valuable and relevant, and others that are not. Each has to bring something.”

Lady Gaga’s 2012 fragrance launch was predicted to be “an earthquake.”

It was a two-hour session filled with hope, great ideas, sound research and vitality. As Vaile noted, “We’re an industry of competitors and colleagues at the same time, which is unique, but we’re all inspired by our love and passion for the industry.”