In the U.S. fragrance industry, it’s a tale of two diverging segments: a dynamic prestige business energized by emerging brands, and a languishing enterprise in the mass market trying to figure out how to catch up.
 
Recent sales figures underscore the growing gap – and the woes of mass-market perfumes. According to The NPD Group, prestige fragrance sales rose 4 percent to $4 billion in the 12 months ending November, the most recent month for which there is data available. In contrast, Euromonitor estimates mass fragrance sales dipped 5 percent, to nearly $1.17 billion last year.

 
Once successful strategies, including the abundance of celebrity launches and mainstream fragrance notes, weakened the performance of mass scents. “With the phenomenon of the oversaturation of celebrity fragrances that tend to fall in the overly researched fruity floral category, consumers are basically bored,” declared fine fragrance consultant Pamela Vaile. “We are losing them or they are going to the classic fragrances like D&G Light Blue and Chanel Coco Mademoiselle that continue to perform.”
 
Erika Shumate and Christine Luby, founders of Pinrose, a fragrance brand that entered Nordstrom in 2015 and employs interactive quizzes to guide shoppers to scents fitting their styles, suggested Millennial shoppers have retreated from the mass market because they pass on fragrances shoehorning them into readymade boxes. “One thing we know from our customers is they want something that’s for them. They don’t want to be Justin Bieber’s girlfriend. They want to be the best versions of themselves,” said Christine. “There is this movement toward self-expression.”

 
David Pirrotta, whose clients at his namesake beauty brand management firm have included Rodin, Odin New York and Red Flower, equated fragrance to fashion, where consumers are swapping logo-heavy pieces for toned-down goods that emphasize their sophisticated tastes over their budgets. “American consumers are falling in love with brands that were in the past only popular in Europe and other markets. They are becoming savvy. The same way they are picking their handbags and shoes, they are picking their fragrances,” said David. “They don’t want to have what everyone else has.”

 
The shift in consumer attitudes has certainly impacted one of the most significant aspects of the business: gifting. (The holiday season accounts for as much as 70 percent of a fragrance brand’s revenues.) The NPD Group’s Global Beauty Industry Analyst, Karen Grant, approximated that gift sets account for 20 percent of fragrance sales today versus 30 to 50 percent historically. She said offers allowing customers to assemble products rather than formal sets, portable rollerballs and purse sprays, and ancillary merchandise (candles and diffusers, for instance) are significant gifting alternatives. David also highlighted that limited-edition items with an aura of specialness are gifting draws.

 
For mass marketers to reverse sales dives, they have to pull off the tough task of reducing their dependence on established sales drivers and delivering distinct fragrances suiting broad tastes. “Finely crafted artisanal fragrance lines are what the consumer wants. She wants to customize, and she wants to find a rare, unique scent or she’s going to instead buy the next iPad, Fitbit or beautiful handbag,” said Pamela. “She’s not going to buy the next moderately-priced celebrity fragrance. That trend has left the station.”

Karen remarked that oud and pure essences, such as the pure essence of rose, have come to the fore as fragrances from smaller brands assume the spotlight. “This is a really strong and important trend. The consumer is very open to what was considered novelty types of scents in the past. She doesn’t always need something to be recognizable to try it,” she said. “Education from the Internet and retailers opening their assortments are giving people opportunity to experience more fragrances.”

As they experiment and experience different scents, consumers reevaluate strict gender divisions at the fragrance counter. Pamela mentioned gender-neutral fragrances are escalating in the niche category, and David asserted consumers are ignoring traditional gender strictures in their fragrance purchases. He said, “The women that we sell to, they love the muskier, dirtier scents, and the men have gravitated more to the sweet, feminine scents. Men feel much more comfortable wearing anything they love. Growing up, there wasn’t a guy in my life that would wear a floral, but the younger kids want to try things that are more risky.”

Lisa Wilson, owner of fragrance consultancy Scent & Strategy, indicated scent barriers crossed in the prestige segment will catapult change in mass. She noted oud has gone from exceptional to ubiquitous. “Some of the bigger launches are getting a little less safe than they used to be because consumers are exposed to so many more things, helped by specialty stores and niche brands. That’s how the niche movement is helping the fragrance business overall,” deduced Lisa. Pamela reasoned, “I think everyone wants to elevate the fragrance perception on the part of consumers.”

Lisa outlined three areas of strength that retailers and fragrance brands can build upon going forward: naturals, the artistry of perfumery and enhanced interaction between customers and sales associates. On naturals, Lisa argued the fragrance category is “just at the very tip of the iceberg. It has taking a little time for consumers to understand them, and the materials to be available. I think we are going to see a huge spike in the next few years.” She singled out a handful of natural fragrance brands to watch, notably Strange Invisible Perfumes, Lurk and Pour le Monde.

On her point about artistry, Lisa elaborated, “We are all hungry for an individualistic approach, self-exploration and knowing about beautiful ingredients and the perfumer.” One thing for sure in the fragrance segment: except in rare cases (i.e., Ariana Grande), celebrity stars have faded. Perfumers and brand creators, on the other hand, are on the upswing. “The celebrity fragrance phenomenon is tired and old. Retailers don’t even want to talk to us if we are talking about a celebrity fragrance at a more moderate price level,” said Pamela. “What we are seeing is that more and more brands are talking about the perfumer behind the brand.”

The retail component is perhaps the trickiest to address. Familiarizing customers with complex fragrances isn’t as easy as a spritz or two. “It’s a different kind of sell. People want to learn the stories of the fragrances, how they can layer them, and which ones complement each other. There is more of an education element,” said Karen. Specialty retailers and boutiques have led the charge on education, and mass-market chains are dipping their toes into elevating in-store expertise, but it takes a substantial effort to reinvent large operations.

Ash Huzenlaub, CEO of the fragrance brand Commodity, which rolled out to 34 Sephora doors in North America last March and is on track to be in around 400 next month, said cast members at the specialty retailer are trained by the brand to introduce customers – some 90 percent who have never heard of Commodity – to its scent cocktailing concept. The retail staff has to “explain that it’s not Chanel No. 5. They [customers] are looking at something that’s completely off the beaten path, something that they can call their own that no one else in the room is going to have,” he detailed, adding, “It is more about a personal approach than a mass approach. Focusing on the customer is really the key to making a niche brand successful today.”

Success breeds its own kind of problems. David has noticed companies knocking off budding fragrance brands’ bestsellers. Andrew Charbin, a Vice President at investment bank The Sage Group, said the growth of niche brands has netted “a notable increase of market entry and competition among such brands who will each have to sustain their uniqueness and avoid falling into a wave of commoditization.” For the foreseeable future, he believes niche will maintain its momentum, and companies may follow the deal-making footsteps of Estée Lauder, which last year acquired Le Labo and Editions de Parfums Frédéric Malle. “This space offers high growth potential, high pricing power and margins and, if done right, high loyalty and, thus, high customer lifetime value for the long term,” said Andrew.

In the short term, mass fragrances may be lagging their upscale counterparts, but Pamela is hopeful about their long-term prospects. She senses a willingness to test new ideas at mass and remains confident the segment will turn itself around. “The real beauty and fun is happening at the high-end, and we do feel challenged overall as an industry at the mass- and moderate-price levels to engage the consumer and get her back,” she said. “But I have a positive feeling about the category.”