Luxury Goods, what is Perfume really worth?

(© Article by Lightyears, Inc.)

Near me is a "factory outlet" shopping mall where bus loads of Asian tourists flock to buy "luxury" goods from China. It's mandatory for them. They have to bring home "name brand" presents for family, business associates or whomever or they would be shamed. And, after all, these goods -- genuine, not knockoffs -- cost far less at the Woodbury Common then they would in many parts of Asia.

What gives these handbags, perfumes and other famous brand items such a cachet among these mostly middle class tourists?

How can the goods be valued?

Last fall when Saks offered expensive designer goods at 70 percent off BEFORE Christmas, it caused a panic in the luxury goods market. The design houses themselves began to wonder what their goods were REALLY worth, and whether prices had become misaligned with perceived value.

I once saw a Ferrari that had been restored for Ralph Lauren. But Lauren hadn't stuck to the original, authentic, red paint. Instead he had specified his own shade of red -- very un-authentic; very un-Ferrari; very magnificent.

It was that touch -- that ability to add something great to something that was already great -- that made Lauren so successful.

Creativity in design enhances ordinary goods and makes them extraordinary. And makes them WORTH more money.

But there is a vast difference between goods that are beautiful and special and those that are simply expensive.

Handbags and perfume can be expensive without being either beautiful or special.

Let's get real about perfume. Perfume in itself is no longer a luxury product. It hasn't been for some time. The really best scents aren't necessarily found at perfume counters. Instead we should look to body washes and kitty litter. In fact, we are so surrounded with excellently perfumed goods that we no longer judge a "fine fragrance" by its aroma as much as we do by it's brand and packaging. Perfume today is sold by the sheer weight of promotion. Every woman has to have SOME perfume but it's not a big deal. Especially in America.

Now the retail price you can get for a bottle of perfume is largely determined by the environment in which it is sold. While "environment" includes both the retail store and the fragrance's packaging, the more upscale the store, the less need there is for extravagant packaging. The store provides the all-important "environment." The packaging of course, must be SUITABLE for its environment and, if it can be given that "Ralph Lauren" touch, you're golden. But, in this upscale environment, the real test will be whether the fragrance itself measures up to expectations.

There was a time when neither the fragrance nor the packaging were all that important in luxury market. By 1939 just about every couturier had "their own" fragrances, most of which came from one or two of the major fragrance houses. The names Roure and Givaudan come to mind.

And except for a handful of very special presentations -- packaged more for publicity than for profit -- most couturier fragrances were given pretty ordinary presentations -- at least "ordinary" in comparison to the inexpensive but beautiful packaging Francois Coty was cranking out for the masses at the time of his death.

But today, how many fragrances in an overcrowded market can be said to be "beautiful" and "special" as compared, say, to a mass market BODY WASH (soap substitute)? This is the challenge.

In a recent (February 2009) article in GCI magazine, Rochelle Bloom, president of the Fragrance Foundation, was quoted as saying, "Fragrance can only compete if there is value, uniqueness or innovation that appeals to the consumers."

But is this really where it's at?

This season the fashion industry has been heading in the direction of .... clothes people can wear! What an amazing concept! Of course, it is based on the sudden need to actually SELL garments at a profit. For some designers this in itself will be an innovation.

But perfume (in the U.S. ) has never followed the goofy "originality" that we have sometimes seen go down the runway. Perfumers continue to crank out acceptable fragrances within the constraints of budget and mass market tastes.

Of course the goal in perfume marketing is to achieve PROFIT. This requires SALES. Sales can only be achieved if there are BUIYERS. To buy requires adequate MONEY.

The Fragrance Foundation recently announced the formation of Fragrance Foundation Arabia. After all, the Gulf states enjoy the world's highest per capita expenditures on perfume -- and they don't mess with the cheap stuff! Both Europe and the Gulf provide markets for fragrances that would be a tough sell in America, both because of their higher prices and because of their more pronounced aromas. It's a great cultural combination -- wealth and a real love of perfume.

Americans and Canadians (French Canadians excepted) do not tend to have a deep love of perfume. And herein lies our marketing problem.

I look at the market (in America) as being segmented into two sections. First, and overwhelmingly the largest segment, is the "mass" market which requires volume sales to thrive. This market demands novelty -- a constant churning of fragrances and packaging. Last year's fragrances are quickly forgotten, pushed aside by a wave of new fragrances. Worst of all, celebrity fragrances attempt to become BRANDS and thus compete with the brands behind then -- the perfume marketers, such as Estee Lauder or Elizabeth Arden or Coty, who PROMOTE celebrity fragrances. Now they are at the mercy of the celebrity's whims and fame when they could be putting their money behind totally owned fragrances as do Chanel and Hermes.

The other segment, the counterpoint to the mass market, is the smaller, independent fragrance marketers, many of whom would gladly join the ranks of the mass merchants if they could find a way to do it.

Perfumania boasts that it can sell "unknown" brands due to its many stores in many countries. But this, to me, is a bit like J.C. Penny saying it can sell "unknown" brands (in fact, it's house brands) in J.C. Penny stores.

If your store itself has a loyal following it becomes a lot easier to sell "your" own line of merchandise, be it jerseys or perfume.

To me, the real opportunity in perfume today lies in the "outsiders" -- the small, even tiny, marketers who have some sort of following, a strong love of beautiful perfume AND a willingness to work at it, to create a beautiful fragrance and put it out into the market. Forget "originality."

As to "originality," I don't think Picasso set out to be "original" when he started a painting or sculpture. "Originality" lies only in the minds and noses of reviewers -- not artists.

So where can you go today with perfume to make money? I believe that the key to it lies on FOCUS. A strong concept on the part of the perfumer. A brilliant match between fragrance, packaging and marketing on the part of the marketer. Getting the right fragrance to the right people, at the right price, at the right profit.

Easy? No. But if you can do it, profitable! It's not the economy. It's not the product itself and the way it's developed and sold.

For some people this is going to be a very good year.