Joyous Tidings: Holiday Fragrance Sales To Cap Strong Year

Despite a tough economy, U.S. fragrance sales are up in 2011 going into the critical holiday season, outpacing the overall beauty market for the first time in over a decade. Analysts at the Fragrance Foundation’s Nov. 17 State of the Industry event speculate on why.

Industry analysts report whiffs of rejuvenation in the U.S. fragrance market, owing to exciting new launches, successful promotions, spending from foreign tourists and changing attitudes among American consumers.

By a show of hands, retailers, brands and suppliers at The Fragrance Foundation’s 2011 State of the Industry Luncheon in New York indicated they are cautiously optimistic about fragrances going into this year’s holiday season.

Numbers from market researchers seem to back them up. According to Kline & Co., growth of the U.S. fragrance market is on pace to exceed that of the overall U.S. beauty sector for the first time in over a decade – 5%-7% to $5.9 billion versus roughly 3.5% to $56 billion, respectively.

“It’s really quite rare,” said Kline’s Carrie Mellage, director of consumer products, at the Nov. 17 Fragrance Foundation event. In light of the positive momentum, “we’re positive about the holiday outlook,” she added.

Speculation varies as to why fragrances are on the climb in a still-struggling U.S. economy. Kline sought insight from industry insiders and received a range of theories, including:

• “This is just a newer version of the lipstick theory; people are indulging on little luxuries in contrast to the expensive vacation.”
• “People are not buying the designer handbag, so maybe fragrance is the less expensive alternative?”
• “Fragrances emotionally take people back to a time when things were better.”

Kline has its own take on fragrance’s success in 2011. Among the factors it credits with the market’s upswing is what it has termed “frugal fatigue.”

“The consumer is tired of being good and wants to spend again, even if it’s just a little bit,” Mellage explained. Moreover, “consumers still have some fear, but their stock market investments aren’t quite as bad as two years ago. The luxury consumer feels a little better about going out and spending.”

According to NPD Group, total sales of prestige fragrances in U.S. department stores are up 10% to $1.7 billion for the first 10 months of 2011, compared with the same period last year. The increase is the first the category has witnessed in three years, according to the firm.

A Lift From Launches?

In a recent interview with “The Rose Sheet,” outgoing Fragrance Foundation President Rochelle Bloom identified market oversaturation – “too many fragrances being launched” – as a problem inhibiting market growth (Also see "Fragrance Foundation Prez Bloom Reflects On Career, Challenges Left To Successor" - HBW Insight, 21 Nov, 2011.).

This year has seen no fewer fragrance launches than last year – roughly 1,200 – based on data captured by online database FragrancesOfTheWorld.info. Founder Michael Edwards also presented at the event.

However, there have been some standouts in 2011, including Justin BieberSomeday, which the pop star created with Give Back Brands and launched in June (Also see "New Products In Brief" - HBW Insight, 30 May, 2011.). Taylor Swift Wonderstruck also rolled out this year from Elizabeth Arden, and Parlux has been reaping the benefits of heavy promotion behind new Rihanna Reb’l Fleur (Also see "Parlux Ad Blitz Behind Rihanna To Pay Off As Scent Unrolls Globally" - HBW Insight, 15 Aug, 2011.).

Bieber’s Someday is the best-selling women’s fragrance in department stores so far this year, according to NPD. The scent is second overall in the prestige category, behind Gucci Guilty Homme, which is tracking to be the top seller of 2011, the market research firm says. The men’s scent features lavender, lemon, orange flower, cedarwood and patchouli notes. Men’s scents are having a good year in general, currently up 12% in sales over the same period last year, NPD notes.

Marc Jacobs’ Daisy Eau So Fresh, Jimmy Choo and Estee LauderSensuous Nude round out the top five prestige fragrances year-to-date, the firm says.

With nearly a quarter of all annual prestige fragrance sales coming in the last two months of the year, it’s a “potentially exhilarating holiday period” ahead, says Karen Grant, NPD senior global industry analyst, in a Nov. 16 release.

“All indications point to a great year for fragrance: the consumer is showing increased interest and affinity, the lineup of scents is compelling and the momentum heading into holiday is quite fragrant,” she concludes.

Edwards noted that the niche fragrance category is rapidly expanding, with the number of annual launches rocketing over the past decade from just 9 in 1999 to 219 in 2011. The total number of niche fragrances on the market has nearly quadrupled in the last 10 years, according to FragrancesOfTheWorld.info.

“In many ways, I see niche as the future seed ground for prestige,” said Edwards at the Fragrance Foundation meeting, citing Jo Malone and Tom Ford as successful niche-turned-prestige brands.

Tourist Dollars Provide A Boost

Foreign tourism also has given the U.S. fragrance market a needed boost in 2011, Kline says. While Hong Kong and Moscow have their share of luxury offerings at home, consumers from the regions, along with mainland China, Brazil and Australia, are coming in droves to the U.S. to take advantage of the relatively weak U.S. dollar and lower prices for luxury goods.

According to the U.S. Department of Commerce, a record 64 million international tourists will spend $152 billion during their stays in the states in 2011, up 13% over last year.

Visiting label-conscious consumers have become “a big part of what’s driving the boom in department store cosmetic sales,” said Mellage.

Retailers Work To Keep Shoppers In-Store

Mellage noted that shopping tours in New York and Sniffapalooza events are fostering scent appreciation and driving sales, while promotional activities from retailers and brands – such as the Sensorium exhibit launched in October by Firmenich and Sephora – are generating fresh interest as well (Also see "In Brief" - HBW Insight, 24 Oct, 2011.).

Interestingly, although the emotional experience fragrance makers want consumers to have with their products is difficult to duplicate online, a growing number of fragrance shoppers are purchasing fragrances from the Internet, according to WSL Strategic Retail.

In a survey of consumers who have purchased fragrance in 2011, 34% said they bought from an online vendor, up four points compared with the year before. Notably, of those who bought at least one fragrance online, half picked up two to three scents through that channel throughout the year, according to WSL founder Wendy Liebmann.

Some choose to buy virtually because they don’t have stores nearby, others enjoy shopping on their lunch hour and still others wish to avoid beauty counters at stores they feel are unaffordable, according to Liebmann. She noted that four in 10 consumers avoid going to stores to browse as an avoidance measure so as not to be tempted to purchase.

In an effort to draw foot traffic into stores, retailers are running special events like Nordstrom’s Sample Saturdays, where shoppers receive free samples at the fragrance counter.

Macy’s is running a sale with an in-store fragrance component for Black Friday. The retailer is releasing a new, exclusive $65 Justin Bieber Someday fragrance set at midnight on Thanksgiving Day. A commercial for the event has fans shrieking at the prospect.

While scooping up the scent in-store, many Bieber fans (and their mothers) will likely have their smart phones at ready. Nearly half of the women WSL polled use smart phones in stores to take photos, find coupons and sales, read product reviews, locate out-of-stock items and compare prices.

According to a survey from The Conference Board, 7% of survey respondents plan to spend more on gifts this holiday season than last year, and 53% predict to spend the same amount.

Mellage acknowledged that in terms of the economy and the fragrance market resurgence, “we’re not out of the woods yet.” Despite the burst in year-over-year growth, fragrance – unlike the overall beauty market – has not surpassed pre-recession levels.