NEW YORK — The mass market acquired more prestige this holiday season.
This story first appeared in the January 10, 2003 issue of WWD. Subscribe Today.
“Designer fragrances outperformed mass fragrances and bath dramatically,” said a merchant at one of the nation’s top drugstore chains, who asked not to be identified.
Another high-powered buyer, who also asked to remain unnamed, remarked: “We had a great fragrance business this Christmas. We did well with designer fragrances.” The buyer added that Coty sales numbers pulled the chain’s overall sell-through down some 7 percent, resulting in a sell-through approaching 75 percent. With brands like Jovan and Stetson, Coty has been the longtime fragrance leader in the U.S. mass market and entered the season with the knowledge it would be facing a new level of competition.
Even powerhouse Wal-Mart prominently cited prestige fragrances in its oblique comment on the holiday. “We found top designer-name fragrances were popular with Wal-Mart customers this season, as were the mass fragrances found in our stores,” said Melissa Berryhill, a Wal-Mart spokeswoman.
Walgreens, Eckerd, Ulta and Duane Reade confirmed that upscale scents dominated gift sales. Still, even with the sales pop from designer brands, retailers said total fragrance sales were flat for the year. Walgreens, however, continued to expand its share of the fragrance business, a company source said. The chain did well with several prestige names, including Elizabeth Arden and Liz Claiborne.
Prestige fragrances have long been in the background of the mass fragrance market. But over the past two years, there has been a resurgence in prestige sales at mass doors, as a number of third-party distributors created new open-sell programs for the traditional department store brands. Wrapping bottles in clamshell packaging that is either hung on a peg wall or stood up on shelves has enabled mass merchants to take the pricier brands out from behind locked glass.
This holiday season, these distributors offered retailers a wider variety of gift set options and were hard at work selling in their programs. Perks included prestige fragrances packaged with tissue paper and a gift bag. And several retailers took on designer holiday gift sets for the first time.
Carrie Cox, cosmetics category manager at Mays Drugs, a 40-store chain in Oklahoma City, reported a 60 percent sell-through on its collection of sets. “We brought in some gift sets through Elizabeth Arden,” said Cox. “We advertised the sets that we bought — just to make it visible that we have the product available.” Retailers are being offered a 100 percent guaranteed sale on the sets, “so there is no risk,” she noted. “Looking at these numbers, we probably will buy in on them again.”
An executive at one of the distributors, who also asked not to be named, commented that retailer sell-throughs on its prestige gift sets were “mostly in the high 80s.”
“When you have a weak department store business and a weak economy, that encourages a broader-based distribution,” said the fragrance distributor. “It is a very dynamic, changing environment for prestige fragrances in terms of the volumes and what products are available. When you look at Wal-Mart, Target or Walgreens, you will see top-ranked fragrance brands available.”
Mass retailers, the distributor added, “did do much better and continue to see market share growth.”
Costco, which operates more than 350 wholesale clubs and is one of the first to openly display prestige scents, had boxes full of clamshell-packaged fragrances once only available in department stores this season.
BJ’s Wholesale Club only offers prestige fragrances in its 150 stores. “At wholesale clubs, we try to distinguish ourselves from mass in an area like fragrance because our customer is spending $40 a year to be a member. We have to offer them a better brand, providing we can offer it at a discount,” said Angela DiDonna, fragrance buyer for BJ’s.
While the overall fragrance business has been a challenge, noted DiDonna, “it is a very good business for BJ’s. We have expanded our everyday fragrance business and did do some extra holiday business this year. We brought on more gift sets than last year.” Leading sellers included Calvin Klein, Nautica and Ralph Lauren brands. “We were offered JLo’s Glow, but turned it down,” she noted. “We are followers, not trendsetters and do better with traditional and classic scents.”
American Sales, a division of Ahold, based in Lancaster, N.Y., which operates some 1,600 supermarkets, also took the opportunity to offer shoppers mini prestige scents, as well as Coty gift sets this year. “I think we did pretty well,” commented Kristen Heinz, a buyer.
There were other operators who fared well, too. “Our fragrances are solidly in the mid-single digits,” said Lyn Kirby, president of the 112-store Ulta specialty retailer based in Romeoville, Ill. Like many retailers, Ulta had a gangbusters start at Thanksgiving that slowed somewhat. However, the introduction of new scents such as JLo’s Glow and Chanel’s Chance helped boost sales. Also, the men’s category grew twice as fast as women, proving that Ulta is building sales of women buying for men. Aqua di Gio and Polo Blue were big men’s winners. Classics had a strong revival at Ulta, with brands such as Chanel No.5 and Ralph Lauren’s Romance showing sales spikes.
Valerie Cheyney, cosmetics buyer for Happy Harry’s in Newark, Del., a 60-store chain, said its sales of open stock were stronger than gift sets. “We did very well with open stock on Coty, but its gift sets did not do well.” She faulted the packaging, which did not look seasonal. Overall, the chain’s beauty sales were up 3 percent for the year.
Although fragrance provided a bright spot, most retailers lamented that Christmas was “not pretty.” Added one source: “Thank God for the 23rd and 24th….Prior to that, we had been down, down, down.”
Mark Griffin, president of the 24-store Lewis Drugs in Sioux Falls, echoed that: “We had many shoppers coming in last minute and we had nice displays to show them what we had.”
Numbers released by Bath & Body Works on Thursday showed that the 1,600-store chain’s sales were flat in December and down 2 percent for the year. The chain had hoped to sell nine million gift sets this season.
When the final sales and gift certificates are counted, mass-market retailers expect total store gains of only 2 to 3 percent over a weak 2001. However, many suppliers had shipped conservatively, meaning that sell-throughs should be cleaner and price reductions cut down. “We shipped for sell-through,” said Celeste Ward, who heads up sales efforts for Barrington Sales, which handles New Dana.
John Galantic, president of Coty Beauty, said that based on the retail reports received, “we are reasonably satisfied [with our results],” taking into account the increased presence of prestige and an influx of sets imported from Asia. Coty brands, he said, saw a “slight increase in sell-through,” although shipments had been more conservative this past holiday season.
Highlights included improved sell-through on Stetson, which was driven by a new ad campaign and prominent retail displays. “We had a strong regular-goods business during the Christmas time frame and that is influenced by the fact we have so many well-established brands,” said Galantic.
“Consumers clearly understand the value of our brands and they may not understand the value of the in-and-out gift sets. Our classics, like Stetson, Preferred Stock and Jovan, performed quite well.” Based on current data, Coty’s Adidas gift sets were the “best-selling sets in the industry,” noted Galantic. The new Healing Garden spa line also had a solid performance. He added that Coty brands did particularly well in Wal-Mart, Target and Fred Meyer stores.
Tony Wesley, chief financial officer of New Dana, said that sales appear to be “equivalent with last year.” And like Coty, based on the heft of the new competition, “that was within the range of our expectations.”
Sales, he said, “came in the last four days.” With the crush of prestige fragrances in mass doors, New Dana has been developing new distribution in dollar stores. For holiday, it created special $6.99 two-item sets just for those outlets, noted Wesley.
A consumer return to classics also helped mass-market retailers gain fragrance sales. For the past few years, some designer scents have gathered dust on mass shelves as consumers flocked to department stores for new scents or opted for bath gift sets. Since many mass-market retailers get the scents on a secondary basis, they don’t always have the latest entries. With classics gaining attention, mass marketers had the same brands consumers wanted at better prices.
With the sales bubble bursting on bath, retailers were able to offset those declines with gains in color blockbusters. “Markwins kits continue to be a stunning success,” said one discounter. “Their new implement sets were great, also.”
Markwins has been a huge success story over the past five years, duplicating in mass what it has done with The Color Workshop in prestige. Other color cosmetics kits getting applause from retailers were International Beauty Products’ Profound and Elizabeth Arden.
The James Bond Color promotion from Revlon was strong at chains like Walgreens and Eckerd. Although the cost of entry was high to link the beauty colors with the visible film, it was probably worth it for Revlon to gain much-needed momentum.
American consumers showed they liked luxury during the holiday 2002 period — but at a price. “If it wasn’t on sale, no one was buying,” said a buyer for a discount chain. Shoppers wanted keen price tags.