By  on October 22, 2009

The fragrance industry is holding its breath and hoping for the best as it heads into the holiday season — even as it grapples with one of the most challenging markets to date.

“We’re going into the holiday season down 10 to 11 percent, where last year heading into holiday the fragrance industry was down just 2 percent,” The NPD Group’s vice president and global beauty industry analyst Karen Grant told Jenny B. Fine, editor of WWD Beauty Biz, during a panel discussion hosted by Cosmetic Executive Women Tuesday evening. “There’s been some formulaic approaches to the business; there has been some sameness that has created some challenges. And while we’re seeing ways that the category can work and be differentiated, it is increasingly challenging to create successes today.”

In addition to a fragrance market oversaturated with anywhere from 100 to 200 new launches each year all trying to gain traction, a new business model has also emerged, according to Grant. “The challenge is what we’re seeing at the point of sale,” said Grant. “As much as 50 percent of sales are coming through gift sets, so it’s not the juice itself that is driving the sale.”

Yet while the market presents new challenges, it is not impossible to create successes, said Catherine Walsh, senior vice president of American Fragrances for Coty Prestige, who pointed to the strength of recent launches like Gwen Stefani’s Harajuku Lovers. “It was developed around the cuteness and novelty of the doll,” she said. “The retailers were incredibly excited because we were able to bring such theater into the store with the dolls, and we were able to gain undisputed visibility.”

Walsh also highlighted bright spots in the global market, singling out Germany, Australia and China, the latter of which is predicting fragrance sales gains of anywhere from 2 to 10 percent by the end of the year. “What we are seeing in the U.S. is not what we are seeing anywhere else,” said Walsh, who noted it was no coincidence that three of the top five global fragrance brands, including Chanel, Dior and Armani, also have cosmetics lines. “There is a synergy between the two and it is working. Fragrance helps beauty and beauty helps fragrance.”

Brands that are exceeding expectations, according to panelist Ann Gottlieb, president of Ann Gottlieb Associates, are ones that put a smile on your face, like Marc Jacobs’ Lola. “It’s a holistic mix where everything works together,” said Gottlieb. “The ads set you up for something that is really terrific and the bottle is a work of art. It’s inspiring, and it makes you smile. I think we have forgotten the business that we are in and we aren’t offering fragrances that are as magnificent as they used to be.”

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