All eyes on niche

It’s safe to say that the niche perfume industry had blossomed, if not boomed, over the last couple of years. Brands like Byredo, Creed and Amouage have proven to be successful competitors of the large fragrance corporations. However, the big players are also trying to tap into this lucrative part of the business, for instance the deal where Estée Lauder purchased Le Labo in 2014 and acquired Frédéric Malle in 2015. And don’t forget big fashion houses like Chanel and Dior, who added many exclusive niche fragrances to their collection. But what happens if everyone rushes into the niche market?

The smell of success

On the shelves of the Harrods perfume department you will find many exclusive fragrances, priced somewhere around £250 pounds for 50ml. Established brands like Yves Saint Laurent, Dolce & Gabbana and Ralph Lauren are present but out-shined by the large amount of niche fragrances.

Euromonitor already mentioned in 2015 that the niche industry has been experiencing a double digit-growth and predicts the same success for 2016. “Many niche fragrance ateliers keep emerging, and while their small size means that their value, growth and contribution to the fragrances industry are difficult to quantify, their growing presence is to some extent anecdotal evidence of where fragrances growth is coming from,” says Nicholas Micallef, Analyst Beauty and Personal Care at Euromonitor. He mentions that the success of niche is very much in line with the search for individuality by the consumer and the demand for high quality products.

Perfume lovers have become more critical when purchasing a perfume and according to Micallef this has everything to do with the rise of flankers. This means that mainstream labels launched too many newly created perfumes that share some attributes of an already existing perfume. “Over the past decade, a constant wave of new mainstream fragrance launches has made it more difficult for a fragrance to stand out and offer some form of relevance to consumers,” says Micallef. “Essentially it has become more challenging for consumers to distinguish between scents. This situation has been compounded by flankers, claiming to have an olfactive link to the pillar scent. With so many fragrances to choose from, consumers are not as brand loyal as they used to be,” he says.

Go big or go home

Ruth Mastenbroek

This change in consumer behaviour offered space for the niche industry to grow. Amouage, Frederic Malle, Creed, Byredo and Annick Goutal became successful players on the perfumery market and appeared in large department stores such as Harrods, Barneys New York and Galeries Lafayette. Their creativity, limited sales range and use of unique or raw materials, made them stand out from the established perfume houses.

Ruth Mastenbroek is an independent niche perfumer who launched her own brand in 2010 and she only works with the best ingredients. She previously worked for brands such as Jo Malone, Kenneth Turner and Jigsaw. Mastenbroek feels that the internet has played a big role in the success of niche. “There was no niche industry back in the late ’70’s and ’80’s when I started out. It’s only relatively recently that niche brands have achieved credibility, and awareness by the public. The internet has played a big role here, with blogs about perfumery in general and niche brands in particular generating huge interest in perfume,” she says.

This recent success of the niche market definitely opened the eyes of many mainstream brands, who also started launching more exclusive, niche fragrances. Dior for instance, came with La Collection Privé Christian Dior which is a range of authentic fragrances, created using only carefully selected, raw materials. Chanel launched their Les Exclusifs de Chanel collection that holds fifteen fragrances that were composed by Jacques Polge and sold in a limited number of stores. But launching exclusive fragrances is just one part of the strategy. Some houses try to collaborate with niche perfume brands, niche perfumers or they simply take over a niche brand. Like the deal in 2014 where Estée Lauder purchased Le Labo Fragrances and in 2015 Frédéric Malle.

Acqua di Parma

Ruth Mastenbroek wonders when the niche market will be saturated, especially with so many new brands entering the market. “This is reminding me of what happened in the beer industry a few years ago, when niche beers were taken over by bigger brands. However, I don’t know that many of those niche brands have truly moved into the big time as a result. There are still small niche beer brands coming onto the market, and I expect that will be the same for small niche perfumery brands. Niche fragrance companies have until recently not been supported by big brands, and consequently they have had limited distribution. Some brands that started out niche, like Acqua di Parma and Creed have now extended their distribution so that they can hardly be called niche any more. I wonder, if these previously niche brands become bigger, if that just creates a gap for a new niche brand to fill. When will either market be saturated?”

According to Nicholas Micallef, the boom in niche activity may not necessarily be all genuine. “Many new brands are emerging, claiming to be alternative and artisanal under the ‘niche’ pretext, yet, profit-driven and with a high level of imitation that is at worst, unregulated.” He also expects that this might sooner or later reach its saturation point.

Fewer for better scents

So even though the niche business is experiencing its heydays, at some point the market will be overcrowded. Euromonitor advices perfume brands to focus on a smaller range of scents. “Fragrances are gradually evolving into items purchased for their intrinsic value rather than as a commodity,” says Micallef. “Fragrances players will need to shift focus onto a portfolio composed of brands that can yield strong returns, rather than retaining an overall company drive for profitability via innovation on brands that are challenging to revive. Frequent launches may not be the solution, especially in a market where a fragrance struggles to stand out, lasts no longer than a season or two, and is subject to retailers’ selection process in providing adequate shelf space.”

Micallef definitely sees a future for perfume houses who purchase smaller niche brands since it means that the acquirer gains new expertise and benefits from synergies with other products in its existing brand portfolio. “This, in turn, aids the development of superior scents by working with more expert perfumers, which enables the parent company to exert more influence on the retailers’ product assortment decision process.”

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