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  1. #1

    Default WSJ: Why the Perfume Business is Starting to Stink

    http://online.wsj.com/article/SB1198...googlenews_wsj

    PARIS -- After years of gorging on celebrity scents and fashion-house fragrances, consumers are turning up their noses at designer perfumes.

    "The offer is so enormous, you get lost going into a perfume shop," says Daniela Andrier, a perfume-maker at Swiss fragrance company Givaudan SA. "It's like eating off a plate with too much food and you lose your appetite."

    Over the past few years, exclusive fashion brands such as Prada, Gucci and Hermès have been churning out new fragrances as a way to ensnare consumers who can't afford their $5,000 bags, but will splurge on a $100 bottle of "eau de toilette." Celebrities such as Jennifer Lopez and Celine Dion have also unveiled eponymous fragrance lines.

    More than 200 new so-called prestige perfumes -- those sold in department stores and cosmetics shops, rather than lower-end drugstores or supermarkets -- were unveiled in the U.S. alone in 2006, according to the last available figures from market research firm NPD Group.

    Yet despite the entries, sales of these high-end perfumes, which make up 60% of the overall fragrance market, have been slowing. Total revenue rose 3% to $18 billion globally in 2006, according to research firm Euromonitor, and is expected to grow even less in 2007. By comparison, the overall luxury goods sector has grown by about 12% this year.
    The article goes on to talk about the problems with promoting new fragrances and why M7 is no longer availible in the US.

  2. #2

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Wait... does that mean we're going to have to buy up what's left of M7, and sell it on eBay for higher prices!?

  3. #3

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Not surprising since a saturation point has been reached in the market. The average consumer will buy what's hot and trendy, so celebs try to cash in on that market. Personally, I think at least 50% of the designer frags are blatant rip-off's of each other. I mean how many designers can make a 'fresh' or 'sport' scent before it tends to blend (bland) together. I have a drawer full of 'fresh' and 'sport' scents that I got as gifts. The only one who wears them is my son. His fragrance currently is Kenneth Cole.
    Green Dragon

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  4. #4

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    I agree with the article that mainstream perfumery is being saturated with so many new introductions that it is impossible to assimilate these into the market. People are getting turned off by the frequent fickle introductions by every designer and pop star around. The middle ground of perfume and fragrance market is getting watered down in mediocrity and mimicry so as to become irrelevant. Positioning of a brand is critical to its survival and avoiding the common middle ground is important for gaining access to the areas that are growing in the fragrance business.

    On the other hand, the upper end of the niche market has exploded in growth. The demand for Creed, Lutens, Malle, and other upper end fragrances is growing fast. The fragrances that are more exclisive, more expensive, and that have much more artistry to them are growing in demand much faster than the rest of the market. Fast growth is happening in other high end markets for jewelry, watches, yachts, fashions, and second homes, etc. The rich, as a market segment has grown many times over in the past ten years and they are spending their money - but not in the department stores at the mall!

  5. #5

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    They are also targeting the wrong market with those celeb scents, parents do not want their teenagers wearing things with the likes of Paris WTF Hilton's name on it and hardly anyone else wants them. These big companies are paying stores to stack their shelves with this stuff and we are walking out.

  6. #6

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    All the junk will end up in the discount and outlet stores. And since it is all synthetic, its shelf life will be at least a decade. Can you imagine in 2010 people will be looking at the bottle thinking, isn't J-Lo a a gelatin dessert?

  7. #7

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    It's not so much being flooded with cheap junks that I mind.
    I know enough not to buy these, my money will stay safe in my wallet, and that'll be that.
    What does make me upset (as it does for many other BNers, I think) is that recent releases that are actually decent, such as M7, get swept away with rest of the garbage and become discontinued.

  8. #8

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Quote Originally Posted by heythatslife View Post
    It's not so much being flooded with cheap junks that I mind.
    I know enough not to buy these, my money will stay safe in my wallet, and that'll be that.
    What does make me upset (as it does for many other BNers, I think) is that recent releases that are actually decent, such as M7, get swept away with rest of the garbage and become discontinued.
    Exactly. They discontinue Nemo, Yohji, Coriolan, D&G By, Rush and many other frags just two-three years after release, and keep in production Paris Hilton, Celine Dion and the likes. These will disappear in a while, I am sure, but hey seem to distract consumers from designer brands which decide to discontinue good stuff.

  9. #9

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    The problem with the cosmetics megacorps that run the designer perfume business is that they look down upon customers and think in quarterly earnings only. Business decisions are made according to efficiency algorithms, not by people who care either about perfume or customers.

    There's absolutely no attempt at maintaining quality and helping your customers develop a sense of quality, which, in the long run, will make them willing to pay commensurate prices. Instead they dump loads of hyped-up crap onto consumers, trusting they will keep gobbling it up as long as the PR machine churns out enticing images.

    I think Shiseido provides a wonderful counterexample of how to build a prestigious image based on actual quality with Serge Lutens. It took money and patience, but the concept worked.
    Last edited by the_good_life; 26th December 2007 at 08:20 PM.
    My Wardrobe
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  10. #10

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    The problem with the cosmetics megacorps that run the designer perfume business is that they look down upon customers and think in quarterly earnings only. Business decisions are made according to efficiency algorithms, not by people who care either about perfume or customers.
    It is not so much even "looking down on customers" as looking to customers only as a means to an end - the quarterly earnings report.

    And, the high quality niche stuff has sales so small that it does not cover the fixed overhead of a megacorp.
    All these moments will be lost in time, like tears in rain.

  11. #11

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    The vast majority of new releases are just boring. To keep sales really booming I think the
    fragrance releases need to be fewer and better.

    I've gotten to the point that I don't even bother to smell most new releases anymore. That may
    be kind of dumb, since there always exceptions to the rule out there, but I already have so many,
    and the ones I do like are fantastic. Why settle for less than fantastic?
    Last edited by trumpet_guy; 27th December 2007 at 12:00 AM.

  12. #12

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Perhaps Homer Simpson should get a new job at IFF, in their toxicity testing lab.

  13. #13

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    The frag industry today reminds me of Hollywood. It is all about the "opening weekend". Score as much money as you can upon release, and just be ready with the newest, latest and greatest as the sales fall off (quickly) from the previous "hit".
    Yet I know people who go to the movies once a week....most people I know buy one bottle of fragrance every couple of years....less if they get something as a gift to tide them over. present company excluded of course!

  14. #14

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    The Wall Street Journal is now owned by Rupert Murdoch — is anyone familiar with his and the neo-cons hatred of things French? Freedom Fries? Next thing they'll be telling us that there's mad-goose disease in the French Pâté de foie gras?

    .

  15. #15

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Quote Originally Posted by fredricktoo View Post
    The Wall Street Journal is now owned by Rupert Murdoch — is anyone familiar with his and the neo-cons hatred of things French? Freedom Fries? Next thing they'll be telling us that there's mad-goose disease in the French Pâté de foie gras?
    The WSJ has always been very conservative/free-market/capitalist, even before "Uncle Rupert" took over.

    But let's lay off the politics (which we shouldn't be talking about anyway) and get back to smellies... anyway, the article does have a very valid point.
    Last edited by MFfan310; 27th December 2007 at 02:51 AM.
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  16. #16

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Quote Originally Posted by MFfan310 View Post
    The WSJ has always been very conservative/free-market/capitalist, even before "Uncle Rupert" took over.

    But let's lay off the politics (which we shouldn't be talking about anyway) and get back to smellies... anyway, the article does have a very valid point.
    are you a moderator here? an administrator? or do you wish you were?

    I don't need you to correct me. I certainly don't ever remember myself correcting you. For your information the editorial pages were the only thing considered far right wing. The writers on the Wall Street Journal mostly quit when they heard your Uncle Rupert was going to run things. The articles point is true if you believe everything you read. Show me a corroborating article in a trade paper.

    I'm saying that the article is coming from one of the most biased rags now on Earth and you want to avoid politics? The very name of the post is a political football. Let's quote the trade papers instead of planting this nonsense.
    Last edited by fredricktoo; 27th December 2007 at 04:03 AM.

  17. #17

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Well, some bright marketologists brought from yoghurt, cell-phones, cookies and bags markets could realise that the perfume market is not totally the same as their previous. And their `new-newer-newest` chase would not give them a good results.
    Hope they learn their lessons.
    And wish they will return to yoghurt.

    I vote for fragrance being as piece of art, not a flashy one-day fashionable cell-phone with Swarovski...
    Vetiver The Great!!!

  18. #18

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    What does it say about the fragrance market nowadays when the number one selling fragrance line in the world is Axe Body Spray - sales of over $150 million per year. Axe success is a testament to the wisdom of creating a unique market position for a fragrance line as Axe did when they sold it as body spray through tolietries mass market outlets and not as fragrance through the saturated department store fragrance market areas. Unilever repositioned Axe by originating an all new market and hence became the market leader in fragrance sales by creating an all new market delivery method for their fragrance. So the very upper end of the fragrance market (niche frags) and the very lower end of fragrance market(Axe and Tag etc) are doing very well. The designer middle path fragrance market through department stores is dying a slow death with over saturation of products and losing market share to the upper and lower end of the market.

  19. #19

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    I agree. We've seen the same thing in my profession (or, rather, on its periphery) in the antiques profession. The over-abundance of antiques malls a few years back caused a similar thing to happen -- that is, the mainline malls and shops went under, while the high end shops/malls and (on the opposite end of the spectrum) the pure flea market malls/junk shops survived, while the mainline malls and shops suffered and/or were extinguished. Over-saturation affects every kind of business/profession/market.

    The plethora of banal and remarkably similar mainline fragrances has caused the middle of the market to suffer pretty badly. It had it coming.
    Last edited by tvlampboy; 28th December 2007 at 02:22 PM.

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  20. #20

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Quote Originally Posted by Buzzlepuff View Post
    What does it say about the fragrance market nowadays when the number one selling fragrance line in the world is Axe Body Spray - sales of over $150 million per year.
    that you could sell just about anything on MTV? or Nascar.

    and

    Department store sales are drying up because of the web. How many web fragrance stores were there in' 95? None. And the department stores and malls brought it on themselves. In '95 (when the browser business really took off, Netscape, IE) you couldn't find parking at the mall at any time. Now I won't bother with a mall, I shop from my desk. And if I was shopping for antiques it would be no different. The air freight company's are so good at what they do now that I can buy whatever I want and my same UPS driver makes pickups at the drop of a hat. The computers, GPS, and dedicated networks that they have built gives me acknowledgement 5 minutes later that I have taken delivery and signed for a package. there are thousands of reasons someone who is working from home can get anything he wants without dealing with SA's making $6.00 an hour and I love it.
    Last edited by fredricktoo; 28th December 2007 at 03:52 PM.

  21. #21

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Quote Originally Posted by fredricktoo View Post
    that you could sell just about anything on MTV? or Nascar
    Sounds like the 'Simpsons' and Crusty brand body no-smell body spray ( now with Pork additives for a longer lasting experience).
    Green Dragon

    Aliquando et insanire iucundum est.

  22. #22

    Default Re: WSJ: Why the Perfume Business is Starting to Stink

    Quote Originally Posted by dcampen View Post
    It is not so much even "looking down on customers" as looking to customers only as a means to an end - the quarterly earnings report.

    And, the high quality niche stuff has sales so small that it does not cover the fixed overhead of a megacorp.
    If not for profits then what are customers for? The desire for a buck is what drives the entire fragrance industry from the lowliest "Bamberry Weekend" in a dollar store, to the bottle of SDV at Maison Guerlain.

    The issue with niche fragrances is one of scale, in absolute terms the the total profits involved are too small to be of interest to major corps even if the gross margins are very high. Compare the absolute level of profits from one years sale of AdG vs one years sales of Creed.

    However, if LVMH or Richemont etc think they can grow the business, they are all too happy to step in. E.g LVMH's work with Acqua di Parma (Notice all the flankers and new lines).
    --------------------------------------
    Quote Originally Posted by the_good_life View Post
    The problem with the cosmetics megacorps that run the designer perfume business is that they look down upon customers and think in quarterly earnings only. Business decisions are made according to efficiency algorithms, not by people who care either about perfume or customers.

    There's absolutely no attempt at maintaining quality and helping your customers develop a sense of quality, which, in the long run, will make them willing to pay commensurate prices. Instead they dump loads of hyped-up crap onto consumers, trusting they will keep gobbling it up as long as the PR machine churns out enticing images.

    I think Shiseido provides a wonderful counterexample of how to build a prestigious image based on actual quality with Serge Lutens. It took money and patience, but the concept worked.
    The social responsibility of business is to increase its profits, on behalf of its owners. That desire for more money is exactly why Serge Lutens and the Shiseido corporation exist.

    Companies operate in the manner which is maximise their profits. The fragrance industry is an example of "monopolistic competition" (e.g only one company supplies each fragrance, but the fragrances compete amongst each other). What makes it even more interesting is the totally variable costs of fragrance production. After the initial R&D work is done, you have almost no fixed costs. So it makes sense to gamble on the next Chanel No 5.

    The other thing that makes fragrance sales so hard, is that most people buy so little. One bottle lasts 1-3years, which is no way to run a business. So it makes sense to do anything to get people to buy more fragrances, and novelty is a big attraction. Especially when large amounts of fragrances are purchased as gifts for other people.

    "Give him something new, that he doesn't already have."


    But without that desire for profits, we wouldn't have so many fragrances to choose from. Be it Acqua di Gio or Chergui.
    Last edited by Nitromusk; 29th December 2007 at 05:41 AM. Reason: Automerged Doublepost

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