OUTLOOK GIVES A BIT OF COMFORT
Byline: Jenny B. Fine / with contributions from Alev Aktar
NEW YORK — Over the past five years, such fragrance superstars as Estee Lauder’s Pleasures, Calvin Klein’s CK One, Ralph Lauren’s Polo Sport franchise and Tommy Hilfiger’s Tommy and Tommy Girl have parted the waters of the department store business.
Each has racked up over $100 million in global retail sales, and each will most likely join the ranks of perennial bestsellers.
But the fragrance industry still only managed to eke out minimal growth over the period, with department stores reporting low-single-digit increases, while sales of fragrances actually decreased in the mass market.
So it might be understandable if fragrance marketers and retailers have adopted a less-than-rosy outlook for the next five years.
That’s not the case, though. While neither camp is expressing outright optimism about the potential of the industry, both are hopeful that sales are starting to pick up, a trend that could continue into the millennium.
Already, sales this year seem to have taken a turn for the better. From January through July of this year, department store fragrance sales reached $1.1 billion, a 7 percent increase over the same period one year ago, according to NPD BeautyTrends.
Retailers attribute the growth to a strong group of launches with focused marketing plans and the continued support of existing brands by vendors.
Those two factors, most said, will be integral to future growth in the fragrance industry.
“I’m always hoping for growth to occur, but we have to look hard for it,” said Jane Scott, vice president of fragrances and cosmetics at Bloomingdale’s. “There is always room for originality, and it is through originality that we see growth. But if you don’t continue to support existing business, there won’t be increases in the market.
“Growth will come from being able to balance originality and sustenance,” she added.
Scott cited the success of CK One, which quickly racked up sales of over $100 million by tapping into a new consumer base for most traditional department stores — Generation X.
“[Calvin Klein] struck a chord in the marketplace that nobody had tapped before. It spurred the whole marketplace,” Scott said. “We saw a whole category of fragrance grow alongside that product.
“If you are not original, you end up trading product for product, and as retailer’s, we don’t see that as growth, we see it as replacement business,” she continued. “My challenge is to look for and support originality.”
“Business will be challenging unless everybody thinks outside of the box,” agreed Barbara Zinn Moore, senior vice president of cosmetics and fragrances at Macy’s East. She noted, though, that it’s also up to retailers to rethink the way scents are merchandised.
“We need more interesting selling environments for fragrances,” she said. “We’re past the days of the round case line and back island. We need more entertainment value and more interaction, so that it’s fun to buy fragrances.
“We need to make it more like the megastores,” she continued, citing the retail success of stores such as Nike Town, the Warner Bros. Studio Store and the Disney store.
Among her ideas for an improved fragrance department: “customer-friendly counters” that are round rather than S-shaped, livelier in-store visuals and better-trained salespeople.
“We still have a way to go in attracting younger consumers, and making the department exciting is part of it,” Moore noted.
Vendors, too, are looking for ways to balance newness with existing business, while infusing their products with originality.
Estee Lauder intends to grow its fragrance business through continued funding of existing growth-oriented brands such as Pleasures, as well as new fragrance brand launches, according to Peter Lichtenthal, vice president of fragrance marketing for Estee Lauder USA and Canada.
As an example, he cited the recent launch of Pleasures for Men, Lauder’s first attempt at a masterbranding strategy, as well as its biggest entry into the men’s fragrance category to date.
“We’re continually looking at all avenues,” he said. “We entered the men’s market with Pleasures for Men, we entered the line extension market with White Linen Breeze.”
While Lichtenthal declined to disclose the rate Lauder’s fragrance business is targeted to grow at, he did say, “We’re not going to lag.”
As for Aramis, a division of Lauder, vice president of sales Pamela Baxter said that the company is looking to triple its business in the next five years.
Currently, fragrance comprises the majority of sales, but Baxter said that breakdown is projected to change as the company adds makeup and skin care and other product categories to its roster.
The growth will come from a packed launch schedule for both the Aramis and Tommy Hilfiger brands, including a new Hilfiger men’s fragrance next spring, to be followed by a women’s entry in the fall. If all goes according to plan, the company will also introduce a line of home fragrances in spring 1998.
And that’s not all. Next spring, the company is opening 10 in-store shops in key U.S. department stores, which will sell Hilfiger fragrances and cosmetics and will also serve as a laboratory to test new products.
Baxter said that one of Hilfiger’s hottest categories is men’s toiletries. The Tommy ancillary range currently represents 22 percent of the line’s business, or about double the industry average, she noted.
Meanwhile, Chanel is planning a consistent single-digit growth over the next three years for its women’s fragrance brands, according to Jean Hoehn Zimmerman, senior vice president of sales and marketing.
In the men’s arena, the company is projecting double-digit growth, which it plans to achieve by strengthening ad support and capitalizing on the success of its men’s Technique Pour Homme treatment line.
Chanel also hopes to outpace the market in the women’s fragrance category. Zimmerman said eye-catching promotions, such as the limited-edition Andy Warhol packaging for Chanel No. 5, helped boost an already strong classic brand.
Retailers said that kind of brand support is becoming more crucial than ever as competition in the marketplace heats up.
In fact, the ability of manufacturers to provide strong support — in terms of advertising and promotional dollars — will play a crucial role in how much the industry grows, said Jon Pollock, general merchandise manager of Belk’s.
“Over the next five years, a lot will depend on the relative strength of the companies doing business in the fragrance arena,” he said. “It will be a survival of the fittest. We are becoming much more focused in terms of who we’re going to support and how much money we’re going to spend.
“I look at how strong a product is and how strong the financial team and backing of the company is,” he continued. “They have to have staying power and marketing expertise for us to support it. In short, we have to have full confidence in the management team and strength of the company.”
Retailers are also beginning to take a second look at their fragrance assortment, banishing brands that aren’t maintaining a sales pace consistent with the market.
“One of the challenges we have is sensibly editing our assortment as all of this newness occurs,” said Howard Koch, divisional merchandise manager at the Birmingham, Ala.-based Parisian. “Sensible editing is a conversation I think everyone will have over the next five years.”
“The pot isn’t going to get a whole lot bigger any faster, and we will continue to look at our assortment and keep it tight,” agreed Pollock. “If we get too spread out, we can’t mean anything to our customer.”
However, newness seems to have an eternal place in the fragrance pantheon.
“Will the number of launches lessen? I keep thinking that will happen, and it never seems to,” said Bloomingdale’s Scott. “I hope not. I hope there is always originality and creativity out there.”