Has The Diversion Pipeline Been Turned Off?

Twenty years ago, mass market retailers could get almost any premium fragrance they wanted. Some were secured through “alternative sources,” often thought to be products lost off trucks or diverted through backdoors of warehouses. In some cases, manufacturers themselves sold the goods to alleviate inventories.
Recently, retailers have discovered difficulties securing some fragrances, especially Chanel, Dior and Gucci.


There are myriad reasons for the pipeline drying up including efforts by manufacturers to find the supply and stem it, as well as the lack of sales of the higher-end scents that cut off demand. Another explanation as to why there are fewer upscale brands floating in the market is that some of the designer names are not as in demand at mass. In addition, many celebrity scents had a two-step distribution plan where they debuted at department stores, but then had a rollout at mass — often when the next installment of the celeb’s fragrance bowed.

The growth of fragrance sales at off-price retailers is also seen as a reason why discount and drugstores get fewer scents. The fragrance firms often see it as less of a step down to sell these outlets versus a mass chain.

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Some see the reduction of prestige fragrances flooding the market as an opportunity to stress fragrances better matched to the self-service environment. Alternative designer scents, which bowed in the Eighties but suffered when diversion was at its peak, are getting renewed attention. Two of the leaders are Parfums de Coeur and InStyle. Both also offer renditions of fragrances sold at Victoria’s Secret, which are popular with today’s consumers but can’t be procured at drug or discount stores. The InStyle logo is reserved for Walgreens, but the company has other brand names for other chains.

The move to stock fewer premium scents is also opening the door for perennial mass fragrance powers to flex muscle again — notably Dana which is unleashing an arsenal of new products based on its classic gems. Coty is also ramping up its offering of sets specifically for mass with value-oriented Halle Closer and Playboy options

This Christmas will be a good test to see if shoppers miss the designer scents and fill their baskets with traditional — and lower priced — mass brands.

People, Places and Things

A few words with Wendy Liebmann on her latest report on Canadian retailing. With fewer chains and little competition from online shopping, Canada represents a strong expansion opportunity for U.S. retailers according to WSL/Strategic Retail.

Liebmann: As U.S. companies struggle with sales and profit growth in a stalled global economy, and as the Internet continues to steal share of shoppers from the stores, the opportunity to expand into Canada has become very appealing. While each of the major retail categories exist, Costco is the only Club; Wal-mart faces off against a weak Zellers — at least until Target arrives in 2013 — and The Bay and Sears are the only mid-tier Department stores. The added bonus is that few Canadians shop Amazon.

What’s In Store

Rite Aid Hosts Glam Camp: Cosmetic Promotions teamed up with Rite Aid for the fifth Glam Camp. The highlight is a national model search to find the face of the back to school promotion that helps build sales at Rite Aid.

Red Carpet Manicure Expands:
The gel nail brand is unveiling Your Fortune Awaits, a limited edition shade with genuine ruby dust.