28,9 billion[1] : this is the revenue, in dollars, generated by the sales of perfumes in the world in 2014. I am going to look into the specific characteristics of this highly profitable market in order to better understand the challenges the perfume brands have to cope with in their management.
• Size of
budget and frequency of purchase
It is difficult
to find hard data on these two elements even though we can assume the frequency
of perfume purchases is relatively low. Indeed, the average monthly budget
dedicated by a French household to the purchase of cosmetics products is 31€[2]. Knowing that the term “cosmetics
products” gathers skincare, hair products, make up, perfumes and toiletries, we
can agree on the fact that the size of the budget is restricted and the
purchase of a perfume keeps on being occasional.
This is a first constraint
for the brands, knowing that the consumer will only buy their product once or
twice a year and that as a result, the risk the consumer will be willing to
take in buying a new product will be very low. In order to reduce the risk,
brands distribute numerous samples for the consumer to try.
• A seasonal demand
Being an occasional purchase
with a strong gift value, the perfumes sales are highly seasonal: Christmas,
Valentine’s Day, Mother and Father’s Day are the peak of sales.
The companies, in order to increase this gift value
and to attract consumers toward their brand, often release limited editions
gift sets with toiletries escorting the perfume.
• A geographical demand
The fragrance demand is very much influenced by the culture, the
education and the combination of images and scent... to simplify, we can talk
of a demand impacted by the geographical markets. To illustrate, let take the
commercial success of Guerlain “La Petite Robe Noire”: third in terms of sales
in France, it doesn’t even appear in the top 10 in the United States. If we
stereotype the markets, Russia is going to be attracted to florals, Middle East
to orientals, USA to chyprés, Asia to fruity florals.... Asia is also an
interesting market to study because it has a little fragrance heritage and the
usage of perfume remains low.
In terms of brand management, it means that fragrances companies have to
adapt to local markets. Even though if big campaigns are going to be conducted
worldwide, specific animations and extra communications need to be adapted to
the country and its best sellers.
The
distribution
• Distribution and price
Perfumes are often distributed either in the selective retailing
channels or in supermarkets. Depending on the distribution channel, the product
sold won’t be the same: in supermarkets are sold cheap perfume by mass
distribution brands. In selective retailing channels are sold the high end
perfumes by luxury brands. It is not the same companies that operate in each
distribution channel and the management is very different as well: prices will
vary a lot (from 8 euros in supermarkets to more than 100 euros in selective)
as well as the means allocated. In most countries, we can observe an almost
monopoly of the selective perfumery obliging
the brands to adapt to the retailers requests.
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| Source : Olfactorama.fr - Perfumes linear in Sephora Champs Elysées |
The competition
• A large and dynamic competition
One of the most important characteristics of
the perfume market is the competition. The last can be fisrtly observed in the
numbers of perfume brands present on the market: in 2010, 1160 perfume brands
were carried by US department stores [1].
In addition to the number of brands, the
competition arises on the number of perfumes available for the client to
choose. In 2013, more than 1300 perfumes[3] were launched !
The perfume brands have to cope with a
diversity and a multiplicity of the perfumes on the market, making it difficult
to be noticed by the client.
• Competition
and Communication
In order to
cope with this growing competition, brands have to communicate: beyond the
scent, the image given to a perfume makes the difference. The top brands have
enormous communication budgets with advertising campaigns not only on their new
launches but also on their pillar range in order to keep a certain rank of
sales. For example, the communication budget for Dior Parfums in 2013 was of
86,3 millions of euros[4].
• A way to
differentiate : the Trade Marketing
These last
years, brands also invested a lot in the Trade Marketing. Indeed, with this out
of proportion competition, brands need to adjust their management and increase
their visibility. If communication allows a global awareness for the consumer,
the Trade Marketing concentrates on the visibility on the point of sale, in
order to attract the client and to create a customer experience that will build
a relationship between the client and the brand. One of the most amazing
examples of the creativity of the brands can be seen of the Sephora Champs
Elysées, with the podiums installed by brands every two weeks.
[1] Source : According to a research made by the NPD
group in October 2014
[2] Source : Euromonitor International
[3] Source : Michael
Edwards, Parfums du Monde, Edition 2013, Editeur Michael Edwards and Co
[4] Source : Kantar Media Study in 2013
Article posted by Marie Lou Van der Houwen
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