The traditional mass market fragrance business is evaporating.
This story first appeared in the September 21, 2016 issue of WWD. Subscribe Today.
While prestige retailers are enjoying a renaissance in fragrance, mass market scent sales continue to dissipate.
For this holiday, in an attempt to squeeze out greater profits, several chains said they’ve reduced footage by 20 percent. But with ongoing pressure from top executives who see fatter dollars in color cosmetics, there is fear the mass fragrance assortment could disappear entirely or just be a few displays for holidays.
For buyers, that’s a sad future for a category that once produced bountiful sales and profits.
But the facts are that there has not been a year of gains in sales of men’s and women’s mass fragrances combined in eight years, according to market data. At a time when chains should be decorating their stores for the upcoming Christmas season, mass buyers fear fragrance shelves could be bare.
The drugstore channel data best illustrates how much the market has withered. For the most recent 12-week period, ended Aug. 6 and tracked in drugstores by IRI, women’s scent sales dissipated 7.3 percent to $36.7 million. Men’s declined 5.6 percent to $36.6 million.
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Eyeballing 52-week sales in all multiunit chain stores, women’s fragrance sales totaled only $766 million for the period ended May 15, while men’s clocked in at $809 million. Two years ago, men’s fragrances (which does roll in shaving lotions) usurped women’s in mass stores, an unusual twist to a market typically dominated by female fragrance.
And to put the shrinking market into perspective, women’s fragrances topped the $1 billion mark for 2008. White Diamonds alone produced more than $100 million annually, one former retailer noted.
The drain hasn’t been abrupt, rather a constant drip, thanks to the confluence of several factors. Physically, mass fragrance displays are unwelcoming — often under lock-and-key despite many efforts to bring them out from under glass. But also, buyers lament the absence of blockbuster launches from mass market fragrance houses.
“Mass fragrance isn’t interesting to anyone anymore,” said one drugstore chain buyer who has chopped footage to the category significantly. “Celebrity fragrance is nowhere,” the buyer added, noting that in the past, star-studded brands kept the department afloat. Retailers added that brands used to pump huge dollars into launches — as much as $10 million to $15 million. Those spending budgets don’t exist anymore.
Two companies that built the mass fragrance category, Coty Inc. and Elizabeth Arden Inc., are in the middle of transitions as Coty digests its acquisition of 41 brands from Procter & Gamble Co. and Revlon Inc. completes the acquisition of Arden. Coty’s Bart Becht made it clear he sees the premium end of the market where all the fragrance action is and said the focus will be on logos such as Gucci and Marc Jacobs.
That’s a far cry from Coty’s halcyon fragrance days. Headlines from issues of WWD two decades ago chronicled how Coty launched blockbuster after blockbuster, including Stetson, Vanilla Fields (which amassed first-year sales exceeding $30 million) and Wild Musk.
Arden was the other “go-to” source for fragrance sales, buyers said. Under Revlon, fragrance could be on the launchpad, buyers said, but they fear the transaction would cut off access to brands that were paramount in the mix. “I continue to be concerned about the fragrance business in mass,” said one source. “Elizabeth Arden lost the distribution of Coach Inc., which will have an impact on the business.”
One portion of Arden’s business, which some retailers called the “cash cow,” was to supply prestige fragrances cleared for mass distribution to major chains. Sales of many of these brands, which were primarily celebrity-backed, have declined severely in the past few years.
Buyers said they’ll keep an eye on Arden’s plans, especially as the company assumes the Christina Aguilera fragrance business, adding to its stable of celebrities including Taylor Swift, Nicki Minaj, Mariah Carey and Justin Bieber. Even news of another Britney Spears fragrance doesn’t make up for the brands buyers think they will lose in the new fragrance house order. Prospects are clouded by a continuing lethargy in celebrity scents.
Buyers said there are no blockbusters planned either from mass suppliers or prestige fragrances entering into the second step of distribution, which includes chain doors.
When mass market launches were rife, retailers only filled out about 10 to 30 percent of their assortments with secondarily sourced fragrances.
But as the megalaunches dried up, celebrity and designer fragrances supplanted the lower-priced options. As one source said, as much as 40 percent of fragrance sales were prestige brands. Now, buyers said, fragrance sales are bifurcated at the high-end or budget, like the sprays. The premium brands are procured either directly or in some cases through other resources.
While retail chains search desperately to get the engine restarted, they look for solutions.
One possibility is to harness growth in the lighter, albeit lower-priced, mists that often mimic premium brands or in the emerging home fragrance category. PDC, which owns the value-priced Body Fantasies, Bod, Calgon and Bodycology, was able to put up 2 percent overall gains in the first half of the year while sales were down for Coty and Arden. Arden did have some rebound as it, too, added wispier versions of its own brands, such as Sunflowers.
In the spirit of “if you can’t beat them, join them,” Arden created body-spray versions of its venerable fragrances. These body sprays allowed mass market retailers to carry names such as Sunflowers, Nicki Minaj Minajesty and Enchanted Wonderstruck Taylor Swift for less than $10. One major discount store retailer said they were the biggest success stories of 2015.
Exclusive collections from Instyle Fragrances pace volume at CVS and Meijer with a logo called Perfect Scents. Instyle also offers an exclusive fragrance collection at Walgreens.
“Through the first half of 2016, our two brands, Perfect Scents and Instyle Fragrances, are enjoying strong double-digit increases over the same period last year,” said Rob Luby, chief executive officer of the company. Instyle Products Group recently added ActivEssence fragrance mists that promise up to 12 hours of scent from a single application. Last month, the company introduced Instyle Men’s Body Spray in six scents.
Those dollars are welcome in cash registers, but at prices of $5.99 to $10.99 versus $20 to $50, buyers said they’ll “never make up the difference.”
Another strategy suggested by Wendy Liebmann, founder of WSL Strategic Retail, is to look beyond the traditional concept of scent. “Perhaps [mass fragrance] is not dead at all. Just moved to another aisle? The home fragrance aisle,” she said.
“What we are seeing in our How America Shops data is that home fragrance is where shoppers are more engaged than they used to be. In our recent trend survey on brand and retail loyalty, called ‘Switch Swap Trade,’ home fragrance is one of the few categories since 2014 where shoppers are more loyal to one specific retailer and one specific brand.” She said Glade and other brands are propelling the interest with new delivery systems and creative marketing such as the Glade pop-up store in New York last year. The forms of home fragrance stretch beyond candles to automatic sprays, plug-in scented oils, wax melts and room sprays.
Bath scents, several discount store retail executives added, are also bringing in new users, especially Millennials. These include more fragranced body washes that suggest consumers don’t need a separate fragrance. Even hair sprays have fragrance now, retailers noted. “But that makes me wonder if they are bombarded with too many scent choices and veering to the lower-priced bath fragrances instead,” questioned one discount store merchant.
The fragrance woes come at a time when chains are shoring up beauty departments, investing in presentation and services. So far, those efforts don’t filter to scents. At Kohl’s Corp., which has a glittering new department with upgraded brands, fragrance sales have stayed the same while makeup is booming, said Jeff Askenas, vice president and divisional merchandise manager of cosmetics.
One retailer said holiday 2015 sales were so soft that her vendors edited their own space and buy-in for Christmas 2016. And while buyers said they’d love to get off the holiday promotional treadmill, they don’t have the launches to do so. Instead, they said, they are relegated to mature premium fragrances that only move on 50-percent-off deals or buy-one-get-one half-priced.
One seasoned retail executive called that scenario the “chicken and the egg.” He reasoned fragrances have been down for so many years without introductions and a lack of advertising that retailers couldn’t justify the space. But at the same time, retailers cut space, purchased less and asked for returns on discontinued goods leaving drained funds for suppliers to use for research and development.
The lethargic sales at drugstore and discount outlets can’t be linked directly to consumer apathy. Quite the opposite as seen by the resurgence of scents at specialty and department stores. “For the first time [in 2015], the fragrance category contributed more annual dollar gains than skin care,” said Karen Grant, global beauty industry analyst, The NPD Group Inc.
Brands that could fit snugly into mass doors choose other outlets, such as Sofía Vergara’s Temping at Perfumania or Paris Hilton’s latest Gold Rush marketed on HSN. Sarah Jessica Parker launched her new scent, Stash, exclusively at Ulta Beauty.
Adding salt to the wound is the influx of other retailers seasoning assortments with scents such as The Limited, which just introduced Simply Modern with an opening price of a purse spray at $17.95. “A fragrance collection was really critical, rounding out our offering…and establishing a connection with the client,” said The Limited’s ceo Diane Ellis.
Victoria’s Secret has long been a challenger for fragrances with its private label and body sprays, which are priced competitively with mass choices, chains lamented.
Industry consultant Allan Mottus pointed to the inroads off-pricers are making in fragrances. It is not uncommon to see designer scents piled high at TJ Maxx. Century 21 touts Givenchy, Burberry and Giorgio Armani on its web site.
But then there is the fresh vision of top execs such as Lauren Brindley, the group vice president and general merchandise manager, Beauty & Personal Care, at Walgreens. She envisions a beauty department that breaks down the traditional American retail channel barriers. Noting that 76 percent of the U.S. population lives within five miles of a Walgreens, she has hopes to shake up the status quo in regard to what consumers buy at drugstores, including fragrances. One idea could be more personalized fragrances, such as those based on clienteling or down the road even DNA.
She doesn’t think only pricy, niche fragrances can move in this market. “It is stylish to be frugal. There is an opportunity.”