Unlocking at mass could bring smell of success
Mass-market fragrance is an interesting category that undoubtedly has faced a bit of an uphill battle, due in part to fragrances being locked behind a counter and a lack of awareness on the part of the consumer as to what fragrances actually are sold at mass. However, efforts to juice up fragrance at mass continue to gain momentum.
One could surmise that now is the prime time for mass-market retailers to step up and aggressively tackle the fragrance segment. This is for two reasons: Mass-market retailers are benefiting as cash-strapped shoppers trim back spending at high-end specialty shops and department stores, and initiatives are in the works that could transform the entire mass fragrance category over the next few years.
According to market research company the NPD Group, U.S. prestige beauty—meaning products sold mainly in U.S. department stores—had a challenging first half of 2009 (January through June). This especially is true of prestige fragrance, which posted the steepest loss with sales dropping 10% compared with the first half of 2008.
New fragrance launch sales generated $57 million in the first half of 2009, but dropped 17% from the prior year, because of a decline in women’s new launch activity (-31%) when compared with the performance of 2008 launches, according to NPD. On the other hand, men’s new launch activity was up 23%.
The silver lining is that mass is ideally positioned to benefit from prestige’s heartache.
Further evidence of this is a separate NPD report released in July. This report stated that more women have shopped at specialty stores for beauty products in the past year than at traditional department stores (27% versus 15%, respectively). However, mass merchants (53%) and drug stores (41%) surpassed specialty stores as the most cited channels shopped for beauty products in the past year.
Earlier this year at the National Association of Chain Drug Stores Annual Meeting in West Palm Beach, Fla., Coty Inc. executives told Drug Stores News that there’s an $85 million opportunity to unlock fragrance at mass—literally—especially in today’s economic environment where shoppers are trading down from department stores.
Coty, whose fragrance portfolio includes McGraw by Tim McGraw for men and Halle by Halle Berry, currently holds more than a 30% share in fragrance.
Top four fragrance trends for 2010Looking back: In light of the economic conditions, fragrance experts expected to see a return to nostalgia and comfort. During the Great Depression, the big bold floral statement of Joy by Jean Patou was popular, while Chloe was a top seller during the turmoil of the ’70s—both comforting, classic florals. In the next few months, new perfumes likely will emerge, dominated by such floral notes as rose or velvet.
A brighter future: Perfumes that are coming down the pipeline for 2010 will be bold and exciting. Experts predicted that consumers will crave escape and color, and will be much more experimental. Also having a moment are sophisticated, rich scents. Be on the lookout for such warm, woody notes as amber and sandalwood.
Customized fragrance: Personalized, custom fragrance is gaining popularity, and sources predicted that shoppers will see more custom fragrance bars at department and chain stores, where they can sample single notes. Another custom trend: Perfume parties where beauty mavens can create their own formulas with three or four harmonizing blends with the help of a consultant.
Tell a story: Because fragrance sends a very personal and emotional message, storytelling is especially relevant. Shoppers seek authenticity and want to know how a fragrance is made, and about the work that went into its development. To share the story, companies are experimenting with such innovative outlets as social media, blogs, DVDs and short films.
Unlocking fragrance at mass has been a topic of discussion for some time, but finding the most efficient way to enable beauty mavens to try before they buy hasn’t been easy. Some of the key concerns have been shrinkage and maintaining a fragrance sample area in a self-serve environment like the mass market. However, it is clear that industry players are heeding the call and coming to market with some innovative solutions.
One example is from Manhattan-based retailer Duane Reade. In the recently opened Herald Square store, the new “Look Boutique” offers shoppers an inviting fragrance area that undoubtedly is a departure from the typical drug store fragrance department. The fragrance counter, which is the first thing shoppers see when they step off the escalator, has about a dozen or so of the most popular fragrances tethered to an upscale-looking counter so beauty mavens can easily sample fragrances. A beauty adviser also is on hand to assist shoppers.
SunTrust Robinson Humphrey analyst William Chappell is bullish on fragrance at mass, especially in light of Walmart’s Project Impact program, which he believes should help drive sales for the entire mass fragrance category over the next few years. “Over the past year, Walmart, Elizabeth Arden’s single largest customer, has embarked on its Project Impact program, which we believe will be a positive driver for fragrance sales for the next few years,” stated Chappell in a recent research note on Elizabeth Arden.
He noted that, under the new format, the fragrance category has 20% to 30% more shelf space and has been moved to a more prominent position at the front of the store. Elizabeth Arden has indicated that it already is seeing double-digit same-store sales improvement in the reformatted stores, and Walmart still is in the early stages of the process with 600 out of its 4,500 domestic stores likely to be converted by year’s end.
Chappell noted that the fragrance company also has worked with its retail partners to revamp the “open sell” format versus having the fragrances locked behind a counter to reduce shrinkage at retail.
“More recently, Elizabeth Arden has created a hybrid approach where fragrances can be openly displayed, but have a security tag (like DVDs or electronic equipment), which is removed at checkout,” Chappell stated in the research note. “To date, we estimate that only 25% to 30% of Walmart stores have the open-sell format, but this could double in the next year. To put this in perspective, in the past, Elizabeth Arden has seen same-store sales grow as much as 20% to 30% once a door is converted to open sell.”
While it remains to be seen just how big an impact such initiatives will have on mass-market fragrance, what is clear is that the category is in the midst of a significant overhaul, and the smell of success is stronger than ever.