The fragrance industry is a a strong segment of the luxury business. In the world, it represents USD 36.6 billion which is 16.8% of te total luxury market. One dynamic area of business in fragrances is the Duty Free activity. People travels more and more and the Duty Free activity increases exponentially year after year. From a very exclusive offer to the mass-market of fragrances, today’s Duty Free experience is overwhelming, aggressive, discount oriented and based on the race for new launches. Welcome to fragrance hell!
The economic crisis since 2009 dragged the Fragrance market to the darkest sides of cheapness
Since 2009 the economic crises pushed several fragrance brands to review their strategy. Launches were reviewed and each dollar invested was spent carefully. There are very low risk-takers and all the launches seem to adopt a safe mode:
- Pink and Gold for women
- Blue and grey for men
- Floral fruity for the ladies
- Aromatic woody for the boys
- Good looking stereotypes for both
In 2015, more than two thousand fragrances were launched in the international market (luxury, semi-premium and mass-market). From all these launches probably only half will still be available after 2 years and only 1 or 2 will still be around after 10 years. The race to the new launch is a common sport and the room for building a longterm success. In order to push fragrances sell-out, perfumery distributors adopt mass-marks techniques like promotional stickers, Gondola heads, shelfs markers and the best of the best: the famous gift with purchase or GWP. This technique is supposed to tempt you to buy a product and get something for free. In the fragrance market it can be towels, small fashion accessories and even a bottle of wine. There is no limit to this, so there are a few times you wonder if you bought a fragrance with a free product or a product with a free fragrance.
New, new, new… what else?
Did you ever try to go to a perfumery store and buy a new fragrance for your self? It is an interesting human experience, especially if you choose a big retailer network or department store. After the famous question: “can I help you?” You will generally answer “NO”. For the sake of the exercice, let’s say you answer something like: “yes, I would like to change and find a new fragrance for me” . The sales person or the “Beauty advisor” will always start by showing you the novelties. Why?
- Because there is a strong chance you do not know them, so it is comfortable for the beauty advisor to do so
- The Beauty advisor will surely have a sales challenge and objectives on the new launches, so she better sell the ones that can bring her money and/or gifts
- Most of new launches are quite “likable” so out of hundreds of new fragrances, you might find one that will please you.
Unfortunately what if you do not find your new fragrance among new launches? This is not a problem. The Beauty advisor will show you the best-sellers. Why?
- As best-sellers, a lot of people like these fragrances so why not you?
- These fragrances have been in the market for a while, so the Beauty advisor might know them well.
- It is perceived as positive for many people to wear the “it-fragrance” rather than the “loser-perfume”.
- In special moments like Christmas, Mother’s day or Valentinés day, the Beauty Advisor might have a sales challenge on these fragrances tjst require support during the strong periods of the year.
Destiny tricks you. You still do not have the fragrance of your dreams! Well now it is tough. Either the Beauty advisor will understand that (s)he will not get anything from you and “leave you for a moment” and never comeback. Or she will give you a fragrance sample (that generally you do not choose) in case they cannot sell you cosmetics or make-up. Imagine this situation in an Airport where generally you have a plane to catch and not much time.
Sales are difficult and we cannot blame the Beauty Advisors. The ones to blame are the brands who are not doing a good job in terms of training and product development, as well as the retailers who do nor train their Beauty advisors to make them experts.
Duty Free shop, you have 10 seconds to sell me your dream.
50 years ago, Travel fragrances or ancillaries were considered luxury goods. It was exclusive, sometime unique and generally you should be a very important customer to get one. People would travel with exclusive cases in which the grooming and beauty products were very often customized to your gear. Airports were places for hollywood stars, presidents and sportsmen. Travel was a luxury experience. Today travel retail is a tremendous business. Last year world airlines carried more than 3 billion passengers. This number is exponentially growing. By 2030 more than 5.9 billion passengers will fly around and consequently pass by a duty free shop. It is a multi-billion business in which fragrances-cosmetics-make-up represent around 33% of the total business. Last year the duty free and travel retail business crossed the line of $30billion. Asia-Pacific is the biggest region for duty-free and travel retail. It represents 34% of total business. The biggest travel retail business is at Dubai Airport. Last year It generated $1.53 billion dollars, which is 5% of the total travel retail business (source: TRA).
Fragrances and beauty care are perfect products to sell in duty free areas. Here are the main reasons:
- They have small formats: beauty products are easy to stock and require small area of stockage. Square meters cost a lot.
- Life-shelf: The validity date is over 2 years, so no rush is required (compared with food)
- Margins are terrific: Duty free shops take high margins to sell peoducts that generally are self-sellers. So it is a very profitable business.
- Easy to carry: Fragrances, cosmetics and make-up are the perfect gifts to carry while traveling. Their small format allows you to carry them while connecting to your flight or your business trip.
Brands understand the power of this business so in order to keep the business a good business, they create specials for the travel environment. it can be smaller packaging, giftsets offers and sometimes regional exclusivities. There are also brands that develop exclusive travel retail products which is a strong sales argument to convince customers to buy it.
Travel retail became a way of buying quite well adapted to the modern way of living. Traveling today became easier and more efficient than before. Nevertheless, we spend less time in airports, so each time we wish to go shopping at the duty free, you have generally less than 20 minutes to do what you want to do. So we rush sales by offering all possible arguments to fastly convert a customer into sales: Discount, special limited offers, travel exclusive and gifts with purchase. Sometimes we wonder why these luxury supermarkets cannot evolve. Probably they will not evolve until the buyer evolves as well.
José Amorim
Info sourced at duty free shop website, Travel Retail association, wikipedia, Forbes and The Economist. All content is copyrighted with no reproduction rights available. Images are for illustration purposes only.
