- The Washington Times - Wednesday, December 30, 2009

The “lipstick indicator,” a term coined in the wake of the 2001 terror attacks, has been a bellwether of amateur economic forecasting. Sure, the economy may be suffering, but an $18 lipstick is still affordable.

Now comes the “fragrance forecast.” The depression talk of 2008 has given way to a slow stock- and housing-market comeback in 2009 and renewed optimism for 2010. Consumers apparently want to smell nice for the rebound.

Beauty-industry watchers noticed large growth in sales of expensive perfumes — those priced above $100 — this year. Meanwhile, lipstick sales were down 11 percent, perhaps disproving the lipstick-indicator theory.

The NPD Group, a market research company, said earlier this year that while sales of prestige fragrances overall were down 10 percent, sales of the most expensive brands were up 10 percent from the same time last year.

Seems as if consumers looking for a little luxury are finding that a new tube of Rum Raisin gloss just isn’t cutting it, but it goes without saying that a trip to Italy or the purchase of that $2,400 Prada coat may have to be put off for another year. Could the $100 bottle of Prada fragrance be a temporary substitute? Can high-style Italian design be captured in a pretty bottle?

“The growth in premium fragrance is driven by the fact that these products are still perceived as more niche and unique to the prestige arena,” says Karen Grant, NPD’s senior global industry analyst and vice president of beauty. “The trends in premium-price beauty show women are becoming increasingly selective in where they choose to invest their limited resources.”

Meanwhile, an NPD survey in November showed that one in five consumers planned to buy fragrances as holiday gifts. The perfume industry accounts for about $25 billion to $30 billion in annual sales.

Thomas Saujet, president of International Cosmetics & Perfumes Inc. and the distributor in the United States of the high-end fragrance line Creed, says sales of his lines are “absolutely fantastic.”

“We’re up across the board,” he says. “We’ve had an incredible year.”

Creed’s line ranges from $122 to a $650 bottle of the rare Windsor fragrance. The company opened its first stand-alone shop in Manhattan earlier this year.

Mr. Saujet says he agrees that while sales of luxury goods such as couture clothing and jewelry have suffered in the past year, fragrances - even expensive ones - are “protected from the downturn.”

“A lady can come into our store and spend $200,” Mr. Saujet says. “That is luxury without spending $800.”

Similarly, Adam Eastwood, co-owner of Scentbar, a perfume store in Los Angeles, and Luckyscent.com says his sales rose this year as well.

“We’re up this year from last, and that was up 10 percent from the year before,” he says. “Even if it is expensive perfume you are buying, it is still more affordable than a $1,500 handbag.”

Mr. Eastwood says one of his most expensive bottles, a $350 Amouage Homage Attar, is selling so well it is hard to keep in stock.

He also attributes the rise in sales to consumers becoming more educated about scents in a manner similar to wine lovers. Sure, anyone can pick up a fragrance hawked by Britney Spears or Jennifer Lopez. But then they would smell like everyone else (but probably not like the celebrities themselves).

Mr. Eastwood says many consumers are moving away from mass-market products and into more custom fragrances. They are learning by visiting specialty perfume shops like his Los Angeles store to test products and learn about different scent notes, similar to the way an oenophile would visit a winery to learn about taste notes.

Pamela Danziger, founder of Unity Marketing, a luxury-goods market research firm, says she thinks it is a stretch to say that a tube of lipstick or a bottle of Chanel No. 5 can make up for not being able to buy an expensive handbag.

However, she agrees that many consumers still associate high-end fragrances with the designer names, which could be why sales are good.

“It is a way people can participate with a brand at a lower price point,” she says.

Unity Marketing’s numbers show that spending on beauty in 2009 was up 62 percent over 2008, Ms. Danziger says. She reasons that the purse strings among affluent customers - those with incomes of $100,000 or more - are loosening.

“That is a sign people are spending,” Ms. Danziger says. “They are not turning to drugstore brands. All sectors of luxury products were hit in 2008. In 2009, home products came back, but clothing and accessories have not. Affluent customers are back to spending, but there has been a shift in priorities.”

• Karen Goldberg Goff can be reached at kgoff@washingtontimes.com.

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