Buying a Britney Spears perfume gift set this Christmas? Didn't think so.
That's a problem for the mass fragrance market. Midprice ranges, including those branded with pop stars and actresses, are falling out of fashion in many developed markets. In contrast, luxury and personalized products are growing quickly. If they are to reinvigorate sluggish demand, midmarket producers such as Revlon and Coty will also need to find ways for affordable scents to smell a little more expensive.
The $49.4 billion global perfume market has some ground to cover. Over the past few years, the need to get Instagram-ready drove a boom in color cosmetics and more recently skin care. The trouble is, you can't smell a selfie. In the affordable segment, consumers are choosing cheaper options such as Primark's scent, which starts at $2.53.
Shoppers 35 and under want to smell like themselves, not everyone else, and that's bad news for the many celebrity products that occupy the midrange. At the luxe end of the spectrum, consumers in the U.S., Europe and Asia (including young Chinese shoppers) want aspirational and unusual options.
Coty has responded by slimming down its portfolio of lower-priced labels and focusing on its luxury lines, which include the millennial-friendly Gucci Bloom and Tiffany & Co. These helped drive a 6-percent increase in like-for-like sales in its high-end division in the latest fiscal year.
Estee Lauder is finding that customization is key to the strength of some of its luxury and artisanal brands. Anything that customers see as being "tailored to their needs, their taste, their sensitivity, is going to sell well," said Fabrice Weber, Lauder's head of high-end fragrances. The company's Jo Malone stores offer scent-combining consultations so shoppers can develop a custom product, and a Tokyo location recently had an artist positioned near checkout to sketch cityscapes on boxes to create something one-of-a-kind.
Earlier this month, L'Oreal said the first investment by its new corporate venture-capital fund is in Sillages Paris, a year-old company that lets customers select the ingredients for their blends online and choose the intensity.
And there could be more deals to come: Transactions in this space are a fraction of what they have been over the past few years in makeup and skin care. If midmarket producers are to kick-start demand, they will need to find ways to incorporate these trends, said Deborah Aitken, analyst at Bloomberg Intelligence. That's trickier at lower price points, because a scent created by a top perfumer typically costs thousands of dollars. The global firms should be able to manage. Producers and retailers have done a good job of taking premium trends -- such as contouring and Korean face masks -- into the mass market. There are already some early promising signs, such as the bottle engraving service now offered by The Perfume Shop.
If the industry does not adapt, fragrance risks being left further behind — and not just at Christmas.
