Sales of womens' fragrance increased by 4.2 per cent in the period 2003 to 2004 to total $4.216 billion. This followed a decline of 12 per cent between 1999 and 2003, with sales peaking at $4.534 billion in 2000. This was due to a lackluster US economy eroding consumer confidence, which in turn has led to a cut back in items deemed to be 'frivolous' during such conditions.
According to Mintel, retail growth has been driven by the specialty and discount retail channels in recent years. Between 2002 and 2004, the specialty stores segment share of the market grew by 10 per cent to reach $650 million, whereas the discount and other retailers segment grew by 17 per cent to reach $400 million. Department stores still account for the 61 per cent of purchases valued at $2.6 billion - one per cent less than in 2002.
Much of this growth came at the cost of the FDM channles, where losses of 4 per cent in market share were attributed to the discount and speciality channels where internet and direct sales campaigns have been the main driving force behind sales, together with increasing pressure from volume discounters such as Wal-Mart.
Mintel says that the motives behind this market trend are the fact that consumers are increasingly hooked by value for money, rather than 'what's in it for me'. Further analysis reveals that this has caused many leading prestige fragrances to migrate into the value for money retailing category.
"As flat sales continued into the new millennium, manufacturers have stepped up new product launch activity resulting in a highly saturated marketplace competing for fewer dollars," the report says. "The declining women's fragrance market in the US hides a frenetic 'backstage' environment where manufacturers and retailers are pursuing several avenues to try to ignite sales and excitement. With the industry leaning heavily towards celebrity endorsements and the association with status, this category is expected to grow sales."
Endorsements have led to an increasing number of big stars muscling in on perfume lines, with recent launches carrying the names of Britney Spears and Jennifer Lopez proving to be market-leading fragrance lines. Indeed, the Britney Spear's perfume, Curious, became the number one selling women's fragrance during the all-important holiday season in 2004.
Five leading suppliers currently dominate the market, with Coty, Elizabeth Arden, Parfums de Coeur, Unilever and Revlon accounting for 50 per cent of total sales. Coty continues to dominate FDM retail channels, but Unilever is said to have made increasing inroads into this segment.
However, Mintel also points out that sales of fragrances by leading manufacturers are facing increasing competition from the private-label sector, with sales of private-label gift packs up 85 per cent from $11.7 million to $21.7 million between 2002 and 2004.
Although it is teenagers who are most likely to wear perfume, it is Hispanics that are said to be the biggest growth market for the future of women's fragrance sales in the US. The report says that projected sales during the period 2004-2008 should grow by 14.8 per cent for this, the fastest growing segment of the US population.
Although a number of manufacturers are starting to focus on the Hispanic market, culturally sensitive handling combined with specific product development and marketing are said to be integral to success in this segment.
Likewise the baby boomers are also said to be driving sales in the smaller but still important luxury goods markets. This means that luxury fragrance brands will be popular with retiring baby boomers, empty nesters and women in the work place.
With sales relatively flat in the fragrance market as a whole, fragrance manufacturers will be increasingly focusing on niche markets if they are going to prevent a repeat of the falling sales experienced in recent years.