The mass-market fragrance business is in a downward spiral, leaving retail executives exasperated about what to do next. Some of them are questioning if fragrance is a business they want to be in at all, particularly after the category’s poor performance over the holidays when gift sets’ sell-through stalled at 50 to 60 percent, compared with 80 percent in previous years.
“My boss asks that every day,” said one drugstore fragrance buyer, referring to frustration at the category from a vice president at a large national chain.
Another seasoned veteran predicted, “I could see the category eventually reduced to one shelf.”
The disappointing holiday came on top of a yearlong sales drain.
Women’s fragrance sales across all mass channels dropped 6.7 percent to $427 million for the 52-week period ended Dec. 28, according to IRI, the Chicago-based market tracking firm. Men’s scents declined 3.2 percent to $428 million during the same period — surpassing women’s sales. To make matters worse, these numbers are heaped onto more than five years of red ink.
Fragrance expert Ann Gottlieb said part of the problem is that many of the fragrances that trickle down to mass from department stores are celebrity concepts, which have quickly faded in popularity.
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“Consumers are wising up to the idea that they are buying a name rather than a viable product,” said Gottlieb, founder of the consultancy Ann Gottlieb Associates Inc.
Karen Grant, vice president and global beauty industry analyst for The NPD Group, also points the finger at celebrity fragrances. “Celebrity [fragrances were] sort of the final hurrah,” Grant said. She acknowledged that the influx of celebrity fragrances to chain stores once helped to boost business, but said now that the sector has fallen off, mass “retailers may say they need the space to generate a profit, and may decide to minimize fragrance.”
Grant noted that while prestige fragrance sales ticked up 2 percent to $3.1 billion last year, sales of celebrity scents — a small slice of overall fragrance market — nosedived 51 percent to $50.6 million. Beauty firms such as Coty Inc. and Elizabeth Arden Inc. — both with fragrance portfolios full of famous faces — are bound to feel the pinch of such a steep decline.
Retailers have responded by discounting some of the most notable new scents. For instance, Virginia Lee, senior U.S. analyst at Euromonitor International, said the Target store in Chicago had relegated Our Moment by One Direction, Justin Bieber and Katy Perry Killer Queen to the clearance shelf. Euromonitor’s preliminary data for 2014 indicates that mass fragrance sales decreased 4.8 percent, while scents sold in the premium tier gained 3.6 percent.
Several key players in mass-market fragrance are imploring retailers to look at the business through a new lens.
Mark Crames, the chief executive officer of Demeter Fragrance Library, said it is time for a change. “Consumers have moved on, but the industry hasn’t. I don’t think there is a [traditional] mass-market fragrance business,” he said. “How much [space] can you devote to something people are only coming in two times a year to buy?”
He blames “tired designer and celebrity fragrances,” price points that are too high and an unappealing sales environment. “We can’t build a business that way. Nothing is thought of as quality, and you just can’t keep piling on the same thing over and over.”
Adding to those woes, industry consultant Allan Mottus suggested both designer and celebrity fragrances have lost their cachet. “Women are wearing fewer fragrances and often only on special occasions,” he said.
The IRI data shows diminished sales across the board with traditional mass brands such as Stetson in men’s decreasing 10.6 percent and the higher-priced Davidoff Cool Water declining 5 percent. Only six men’s scents showed increases, and Adidas Sports Sensation led the pack with a sales jump of 62 percent.
In women’s, one of the standouts was Our Moment by One Direction, which made a strong debut in its U.K. home market in 2013 before launching in the American mass market in 2014. Both Britney Spears Fantasy and Wonderstuck Taylor Swift lost fans, with sales shriveling 18 percent and 27 percent, respectively. “This isn’t the Nineties when everyone was excited to see a designer fragrance at Wal-Mart,” Crames said.
Mass fragrance may look broken, but it can be fixed — or at least improved, said several industry observers.
Jim Devine, president of the Chain Drug Marketing Association, cautioned about the perils of a total exit. “Times are really different. We used to be the place for fragrance gifts sets,” recalled Devine, who has worked for several drugstore chains in the past. “We are looking for answers, but need to stay in the business.”
Already retailers are chipping away at the real estate given to scents. During the holiday, Wal-Mart reduced the number of fragrance pallets, replacing them with alternative gift ideas such as men’s toiletries. Rite Aid focused on cosmetics gift sets.
“People no longer really believe there’s value in these sets,” said one buyer.
Some vendors self-edited for cleaner sell-through rates. “We went back to a basic approach and focused on our core,” said Rob Luby, president of Instyle and Perfect Scents brands, which are designed as alternatives to higher-priced fragrances. “We limited our gift-set offerings, knowing the retail environment would be polluted with offerings from designer originals to mass brands.”
Beyond reducing inventory, the numbers suggest retailers could do well by focusing on two areas that are showing promise, namely men’s and lighter sprays. In general, men’s fragrances seem to have more allure at mass and outranked women’s in sales at mass doors for the first time in history, according to IRI sales data.
A spokeswoman for Walgreens noted the chain’s greatest holiday “lift” was in men’s sets.
Products for men also propel the body-spray category, a subsegment of fragrance, giving retailers reason for hope. Men’s body mist sales gained 49 percent over the 52-week period ended Dec. 28, ignited by products such as Axe Peace, according to IRI.
Women’s mists are gaining at a slower pace, growing at 11 percent, but appear to be gaining traction. Among the spray logos with double-digit sales increases were Body Fantasies Signature, Calgon, Bodycology, Axe Anarchy and Secret, according to IRI.
These scents are thought to appeal to pocketbooks, as well as those looking for lighter, everyday options.
To bring newness to mass, Luby at Instyle said his firm has a new time-release body fragrance in eight scents that lasts up to 12 hours. Walgreens will launch four of the scents next month.
Crames of Demeter also thinks he’s on to something with an idea to customize fragrances in mass stores. While his firm staked its claim with single-note scents, he envisions a store environment where consumers can mix scents on testers to develop their own signature fragrance. “Customization is part of everything from creating your own Levi’s to custom-ordered shoes. This will encourage the use of daily fragrance and you can even update what you have at home,” he said. “And you get multiple sales.”
In the meantime, suppliers are heartened by efforts to spruce up the mass-market sales environment. CVS Pharmacy and Target have built special open-sell fixtures with full-size testers. Duane Reade displays fragrance in an elegant, revolving glass cases. And beauty consultants are being added back into departments to help sell scents.
Walgreens, for its part, is working to build the business by allowing customers to order scents online while they are in the store, and offering a wider assortment on its site. Other retailers could follow suit.
“It’s time to take it to the next level,” Crames said.