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NEW YORK — Smells like another tough season for fragrance.
Despite a plethora of newness, the total prestige fragrance market is expected by many major retailers and manufacturers to be flat at best in the second half, and more likely down slightly.
This story first appeared in the July 25, 2003 issue of WWD. Subscribe Today.
Without the newness, the picture would be significantly grimmer: Business with existing fragrances is said to be down in the high-double digits, said several major retailers.
Many factors are contributing to the sluggish fragrance business — in addition to a tough economy and faint foot traffic in department stores, several retailers said that the reluctance of manufacturers to advertise and support existing brands is also a problem. In-store competition from non-beauty items, such as sharply discounted apparel, poses another worry.
But at least one leading retailer at Federated Department Stores says the fall plan is powerful enough to move the needle into the plus column. Thia Breen, senior vice president of cosmetics at Federated Merchandising, sees newness as a key component that powers sales of core brands. She expects the strongest fall performances among women’s entries to come from Estée Lauder’s Beyond Paradise, Ralph Lauren Blue, Jennifer Lopez Still and Burberry Brit. Among men’s, she singled out Kenneth Cole Black, Aramis Life and Liz Claiborne Spark for Him.
Meanwhile, Breen acknowledged that she is working on plans to fortify the existing women’s fragrance business and pointed out that last year’s rash of flanker launches—Clinique’s Happy Heart, Estée Lauder’s Pleasures Intense and Calvin Klein’s Purple Orchard — boosted the core brands. Every masterbrand that had a flanker enjoyed growth at Mother’s Day, Breen said. She dryly remarked, however, that “it’s not a secret that the fragrance business is somewhat challenging.”
Challenging indeed. “We’ve seen two seasons of negative performance, and the promotional activity during the last holiday season was colossal,” noted Patrick Bousquet-Chavanne, a group president for the Estée Lauder Cos., who also serves as chairman of the Fragrance Foundation. “Aggressive pricing of non-beauty categories was a great cause of the decline. Promotion in the non-beauty arena is likely to remain high, but I don’t know that it will be quite as intense this year as it was last year.”
What that equates to, he believes, is likely a flat season, taking into account all newness. “At absolute best, we could end up plus 5 percent by yearend, considering how challenging the business was during the last holiday season,” noted Bousquet-Chavanne. “But that’s at best. There’s still a tremendous market-share battle when you’re talking about that rate of growth, and newness will take a share, as always.”
The result, noted Bousquet-Chavanne, is that major houses are being forced to examine the support behind core brands, not just the new ones. “To succeed, brands are going to need to stay on message. It’s the brands that have unique, well-crafted positions that will survive.”
That’s welcome news to several major retailers. “If you don’t support your core brands, you weaken the brand’s overall business, no matter what newness you bring to the counter,” noted one retailer, who declined to be named.
“The economy is going to be one of the most important factors that will affect the U.S. prestige fragrance market,” said Natalie Seidman, director of NPD Beauty. “Fragrance sales have had a strong relationship with economic performance over the past few years. Economists are expecting to see the beginnings of a turnaround in the second half of ’03 and whether that happens will affect fragrance sales growth. Some large launches are being planned for the fall that are expected to help drive fragrance sales growth in prestige.”
New brands cited by retailers and Seidman as likely to lead the pack this fall: Lancaster’s Still Jennifer Lopez; Armani’s Sensei; Clinique’s Simply; Estée Lauder’s Beyond Paradise; Ralph Lauren Blue; Burberry Brit, and Very Irresistible Givenchy on the women’s side, and Aramis’ Life, Kenneth Cole’s Black, Liz Claiborne’s Spark for Him, Dior’s Higher Energy and French Connection’s FCUK for Men on the men’s side. In general, many observed, there is more competition on the women’s side this fall.
While it has certainly provided excitement at counter, the constant influx of newness has trained consumers to be fickle, said several major retailers who declined to be named. As a result, the atmosphere is less likely to produce a classic like Chanel No.5 or Shalimar, because the consumer is always looking for the newest item.
Still, not everyone’s completely against the newness, arguing that the competitive nature of today’s tough economy has actually forced manufacturers to sharpen their marketing plans and the juices themselves.
“We’re delighted with the influx of newness for fall,” said Dave Steiner, divisional merchandise manager for cosmetics for Marshall Field’s. “Our vendor partners have developed a lineup of innovation that looks to be the strongest we’ve seen in many seasons. It is impossible to list our favorites because so many new brands have great reasons for being. Because of this, even though our current fragrance trend is slightly below last year, we will plan mid-single-digit increases in the category for fall.”
In terms of controlling the clutter at counter, Steiner said, “We will launch every project that we think will be successful. In order to do so, there has been rigorous editing of underperforming brands. As recent data has shown, we believe the ‘true classics’ will once again increase in penetration to our total and newness will increase as well. This forces existing brands that have not shown the potential to be timeless to be reduced in presence.”
“Last year we were scared,” said Leslie Winick, vice president and divisional merchandise manager for fragrances at Macy’s East. “This year, we had a decent Mother’s Day, a very good Father’s Day, and my understanding from years before is that [those holidays] set the tone for Christmas.” With that in mind, Winick believes Christmas has the potential to be “excellent — setting aside other extenuating circumstances. We believe the economy is going to start to turn around.”
Macy’s East’s fragrance business could be up in the low-to-mid-single digits for the fall season, according to estimates.
“For the third quarter — I would see us continuing our current trend, which happens to be very good,” said Winick. “We’ve seen increased spending and stores are seeing more traffic right now.” She was optimistic this trend could extend into the fourth quarter, although at this point “it’s difficult to determine” for certain.
“We are planned aggressively because of all the newness,” Winick noted. Looking at the launch slate, she ticked off a number of promising names, including Estée Lauder’s Beyond Paradise. “The big hitters on the women’s side should be Ralph Lauren Blue and Jennifer Lopez Still.” Other “significant hitters” on the women’s side, she added, include: Burberry Brit, Givenchy’s Very Irresistible, Armani Sensi, Liz Claiborne Spark, Dolce & Gabbana Sicily, FCUK, Rampage and Alfred Sung Paradise.
Showing potential on the men’s side, she noted, are Aramis Life, Kenneth Cole Black, Azzaro Visit, Dior Higher Energy, Zegna and the masculine halves of the Liz Claiborne Spark, FCUK, and Alfred Sung Paradise masterbrands.
Winick believes positive trends among existing brands will continue. The retailer’s existing fragrance business is reportedly two percentage points higher than it was at the beginning of spring.
“Customers always go back to the basic brands during the gift-giving time-frame,” said Winick, adding that promotions and additional advertising will be used to bolster the existing business.
As far as handling a raft of launches, Winick indicated that prioritizing is the key. “Some launches will have a more major visual presence in store. Throughout the third quarter, we have one to two launches a week.” She added that the store plans to take advantage of masterbrand opportunities to launch a women’s and a men’s concurrently. Launches that “don’t really suit us” can get turned away, according to Winick, “usually a smaller volume brand.”
“We’ve seen positive momentum, a resurgence in our business over the last 60 to 90 days,” said Jon Pollack, executive vice president and general merchandise manager of Belk’s, “and I see it continuing into the third quarter. The fall launch season is loaded and we’re excited about what it’s going to mean for the total fragrance category. I’m cautiously optimistic we’re getting toward some sustainable growth.”
“Ladies fragrances have the opportunity [for] mid-to-upper-single-digit increases,” noted Pollack, “which would be a dramatic improvement over the past two to three years.” Though Pollack acknowledged there aren’t as many launches on the men’s side, “what there is, is quality. Men’s growth won’t be as explosive as women’s but [there will be] modest growth — probably in the low single-digit increases for fall.”
“You’ve got three huge launches for fall,” Pollack said, naming a trio comprised of Ralph Lauren Blue, Simply from Clinique and Estée Lauder Beyond Paradise. “Ralph Lauren Blue looks like a very hot property — it will help us basically relaunch Polo Blue. We’ll take advantage of that major masterbrand opportunity.” Also, “I think the new Clinique fragrance, Simply, is going to be tremendous.” Additionally, “Beyond Paradise by Estée Lauder is a bold new property for them, a different positioning — they are going for a new customer and we’re hopeful that they will succeed.”
Others Pollack is “excited about” are Armani Sensi, Aramis Life, “And we’re eagerly anticipating the second Jennifer Lopez fragrance this fall.” He also cited Givenchy’s Very Irresistible, which he called “a return to the roots of what they do well — a great fragrance and lively imagery.
“These all have the opportunity to be terrific properties,” Pollack noted. And “anytime you have this much quality newness,” said Pollack, “it lifts the entire category because it brings a lot of traffic to the department and to the existing fragrance category.”
But, with only so much room on the retail floor, Pollack acknowledged that selectivity is a must when it comes to controlling a flood of newness. “There are only so many launch time-frames in a fall season,” Pollack remarked, and “we’ve filled them all.” Currently, Belk’s has a “good cadence” of launches beginning in early August and moving all the way through to the end of October, according to Pollack. “Everyone will get a shot to launch correctly — we make sure each launch gets [a] chance to get a clean, uncluttered message across to the consumers. Everyone gets their moment in time.”
When asked if he’s had to turn away any fragrances, Pollack said, “There’s more than we could ever get to.” As a result, Pollack has lined up the properties that he believes will “give us the best chance. We take our shots and go for it.
When it comes to existing brands, the idea is “not to trade off business but layer on business,” said Pollack. “We have ongoing marketing strategies with our major brands. It’s something we absolutely make part of our overall game plan. Two good examples would be our Estée Lauder [partnership] and [the] designer fragrances at L’Oréal — we continue to have strong programs from both.” These include not only new launch strategies but also “from a marketing standpoint, continued support of the existing business with advertising, promotions and special events to maintain volume and ranking.”
“We believe we have all the right elements for success,” said Kate Oldham, divisional merchandise manager of fragrances and cosmetics accessories for Saks Fifth Avenue. She described a three-pronged approach of newness, a focus on lifestyle brands such as Penhaligon’s and Jo Malone, and an emphasis on continued growth with major vendors. “The focus on our lifestyle brands will add excitement and newness and offer customers something they haven’t seen everywhere.”
Oldham noted that while Penhaligon’s, whose distribution is expanding within the Saks chain, “is a major, major push,” the retailer is launching the L’Artisan Parfumer line into 15 doors, which is “new for us.” She added that Saks is “also bringing in Bond No. 9,” a brand marketed by Creed.
“We’re excited about all of our launches but there are also some great exclusives,” she said, citing new fragrances from Narciso Rodriguez, Salvatore Ferragamo and Dunhill. She also expressed optimism about the limited distribution Ralph Lauren Purple Label. “And we continue to focus on our existing brands,” she added, pointing to Cartier, Hermès, Thierry Mugler’s Angel, Chanel and the Dior classics. “We had a really good May, June and July with existing brands and we’re looking forward to that continuing.”
In an attempt to bolster new and existing brands alike, Saks is planning a special promotional week for the fragrance department prior to the Christmas holiday. “We’re going to be putting together a major fragrance week for the store,” said Oldham, who added that it will be “very visual and [will] refocus energy onto the fragrance area.” The emphasis will be on “getting vendors to do events in-store and [to] support the fragrance area with newness and animation.
Looking at the big picture for fall, Oldham observed that each fragrance “will bring a separate piece to the table. We looked at them selectively and chose brands that are synergistic with Saks.” Specifically, she referred back to Narciso Rodriguez — “the beautiful designer brand, beautiful fragrance and timeless bottle.”
“We’ll launch eight new fragrances this season, which we’ve selected carefully,” said Pat Saxby, vice president and divisional merchandise manager of cosmetics and fragrance at Bergdorf Goodman. Among these scents, she noted, are entries like Estée Lauder’s Beyond Paradise, Burberry Brit, Stella McCartney and Acqua di Parma Assoluta. “These will be the biggest successes.”
Detailing the launch strategy, Saxby noted, “Each new fragrance will be featured individually for one or two weeks and will be a part of Bergdorf Goodman’s marketing effort. We will be able to manage this quite well [and] we’ll turn away fragrances if we feel the product or launch strategy is not a match with Bergdorf Goodman and our customers.”
The retailer is reportedly planning its fall fragrance business up single digits year over year.
Bergdorf’s is “currently experiencing a very strong business with [fragrances from] Jo Malone, Chanel, Creed, Fresh, Floris, L’Artisan Parfumer, Sylvie Chantecaille and Clive Christian,” said Saxby.
She emphasized the importance of maintaining a focus on existing scents. “We’ve always believed in supporting our classic fragrance business. We feature them through focused marketing, strategic visuals and point-of-sale strategies. We have very carefully selected assortments and a focused strategy for the classics — Chanel, Quelques Fleurs and Joy — things that people will buy year in and year out.”
“The fragrance business was a bit of a challenge during the first half of 2003,” said Alanna McGowan, buyer, men’s and women’s fragrances, for Barneys New York. “At Barneys, we saw more of a change in purchases rather than a lack of sales. Women continued to buy their favorite fragrance, however, they tended to switch to an eau de parfum when they may have bought a parfum in the past, thus saving money without foregoing the luxury.
“We are very excited about fall 2003 — we expect fragrance to be a strong part of our cosmetics business,” added McGowan. “Eclat d’ Arpege from Lanvin is absolutely beautiful. We are also looking forward to the focus on the classics within the houses of Chanel, Jean Patou and Yves St Laurent. We continue to see wonderful results from Editions de Parfum, Frédéric Malle, Acqua di Parma and L’Artisan Parfumeur. Other niche brands that continue to stand out include Parfums de Rosine and Les Parfums Keiko Mecheri. Within designer fragrances, Costume National and Comme de Garçons are performing very well. We will be participating in several of the launches for fall 2004 including Sicily by Dolce & Gabbana, Omnia by Bulgari and Eclat d’ Arpege by Lanvin.”
“We’re launching Diane Von Furstenberg’s color collection and in that collection is her first fragrance launch called D,” said Laura Saio, merchandise manager of beauty and fragrance at Henri Bendel. “I think for us its going to be a winner because it not only smells amazing, but we’re doing a lot of promotional support.” Other fragrances expected to perform well are Child, Apothia If, Kai and Comptoir Sud Pacifique fragrances.
The store expects to see a single-digit increase in the category for fall. “We’re planning a slight increase over last year and the new introductions will help us get there, as well as all the in-store events,” noted Saio and added that Diane Von Furstenberg “will be so big for us because we are launching it and will be the only ones in New York to have it.”
Robin Coe-Hutshing, owner and creative director of the Studio at Fred Segal noted that brands expected to perform well for fall include Santa Maria Novella, L’Artisan and Comptoir Sud Pacifique. Coe-Hutshing said she expects Hermès’ new fragrance will continue to perform well, as well as L’Artisan’s Navagar.
She also noted that the fragrance business makes up a large percentage of the store’s business and it becomes more important especially in the fourth quarter. “We really flush out our assortments in the fragrance world that way much more so for the fourth quarter than we do for the rest of year,” said Coe-Hutshing, noting that she will bring in the soaps, body creams, candles and ancillary items that go with the store’s most popular fragrances. “It picks up this time of year when people are really coming in and doing luxury as presentations for gifts. So for us, we make a very big commitment to fragrance, year-round but especially in fourth quarter. It can be up to 30 percent of our business.” She expects sales for fragrance and fragrance-related items to be in the double digits.