Premiumization Driven by Inflation

Inflation has markedly influenced the pricing strategies within the prestige fragrance market. Rising production costs for raw materials, packaging, and logistics have compelled luxury brands to elevate their product prices to maintain profit margins. Maybe too fast ?

This phenomenon, known as premiumization, has accelerated, especially post-COVID in Western countries. For instance, in Switzerland, a 6% growth in the fragrance market last year was solely due to rising prices, as reported by Nielsen, with sales volume remaining stable.

This premiumization reinforces the allure of owning prestige fragrances and segments the market into designer or prestige brands (e.g., Prada, Dior, Chanel, Armani, Lancôme, Narciso Rodriguez) and true high-end products (niche fragrances such as Byredo, Frédéric Malle, Amouage, Jo Malone, Serge Lutens). Nice fragrances can be considered as an answer or a reaction both from the players of the industry and from the consumer to the massification of the fragrance business. The niche segment has become particularly dynamic, with established brands launching their exclusive collections (Dior, Chanel, Armani, YSL, Tom Ford, Bulgari, etc.) to compete with new players.

Balancing Affordability and Exclusivity

The rise in prices, however, risks alienating a portion of potential customers who find these elevated costs unattainable for “mass-tige” products (contraction of mass-market and prestige). For example, a 100ml bottle of a famous institutional fragrance (which will be soon endorsed by a famous singer and entrepreneur ) now costs close to 160 euros. This may raise a critical question for many consumers: is the high price justified and worth it?

And let’s not forget that fragrances stand out within the beauty industry as the only category where the prestige segment surpasses the mass-market segment. Designer fragrances, sold in perfumeries and department stores, serve as the entry point into the luxury world. While not everyone can afford a Chanel bag, many can aspire to own a bottle of Chanel No. 5.

Retailers’ Response: Permanent Discounting

In response to rising prices, retailers, sometimes funded by the brands themselves, have adopted a strategy of permanent discounting to attract price-sensitive customers. This approach aims to balance the premiumization trend by offering consumers high-end fragrances at more affordable prices. However, permanent discounting presents its own set of challenges. While it can drive short-term sales and help clear inventory, it may also erode brand value and perceived exclusivity. (see the brand Elizabeth Arden). Frequent discounts could lead consumers to expect lower prices consistently, undermining the premium positioning that brands strive to maintain. The real challenge is balancing offering attractive deals and preserving the luxury image.

The Influence of Social Media and Dupes

Social media platforms, particularly TikTok, have significantly contributed to the popularity of dupe fragrances—affordable alternatives that mimic the scent profiles of high-end perfumes. TikTok influencers and fragrance enthusiasts frequently share reviews and recommendations for dupes, making them highly sought after by budget-conscious consumers. The hashtag #fragrances#dupes has garnered 7.5 billion views, and Google Trends data shows that the number of searches for dupe fragrances has tripled over the past five years. One of the most sought-after dupes is for Baccarat Rouge 540 by Francis Kurkdjian.

@bambidoesbeauty Please don’t sell it out tho 😆🙃#baccaratrouge540 #baccaratrouge #maisonfranciskurkdjian #perfume #perfumetiktok #perfumetok #beautydupe #perfumedupes #perfumedupe #perfumes #dupe #beautyhacks #dupes #beautytok #fragrance #luxuryfragrance #hairmist #hairproducts #hairperfume ♬ original sound – Bambi Does Beauty

The viral nature of TikTok has democratized access to fragrance information, allowing consumers to find quality dupes at stores like Zara or Adopt in France. While dupes have always existed, they are now celebrated on social media, highlighting the value-conscious consumer’s savvy choices.Unfortunately figures of the revenues of dupes are not easy to estimate, as the classical panels don’t monitor them correctly. Most of them are sold on DTC websites or owned chains. Nevertheless, Adopt claims to be the number 1 in France in volume.

The Rise of Niche Fragrances

Amidst the trends of premiumization and discounting, niche fragrances have carved out a distinct market segment. These fragrances often emphasize unique, artisanal craftsmanship and rare ingredients, appealing to discerning consumers seeking individuality and exclusivity. Niche brands focus on storytelling and the artistry behind their scents, attracting a dedicated following of fragrance connoisseurs. This shift towards personalized and intimate fragrance experiences contrasts with the mass appeal of mainstream luxury brands.

Niche fragrances can be segmented into various sub-categories, with common criteria including a focus on ingredient quality, genderless appeal, high pricing, uniform bottle designs, exclusive distribution, and a lack of celebrity endorsements. This approach has resonated with consumers who value personal expression and bespoke experiences. (Frédéric Malle, Dyptique, Byredo, Juliette has a Gun or Killian Hennessy).

A Return to Fundamentals

In response to changing consumer expectations, there is a noticeable shift back to the fundamentals of fragrance creation—emphasizing benefits, ingredients, and quality rather than solely on image. Influencers often provide more authentic insights into fragrances, focusing on the emotions and feelings they evoke rather than their advertised image. Consumers are becoming more educated and discerning, seeking transparency in ingredient sourcing, ethical production practices, and tangible benefits such as longevity and sillage (maybe the most talked about benefit of Baccarat Rouge 540 along the feeling of «smelling wealthy».

Balancing Affordability and Aspiration

The prestige fragrance market is navigating a complex landscape shaped by inflation, consumer behavior, and digital influence. To remain relevant and appealing, fragrance brands must strike a balance between being an aspirational luxury and maintaining a degree of affordability. Premiumization and niche developments showcase the allure of high-end products, while permanent discounting and the rise of dupes highlight the demand for accessible options.

Ultimately, the future of prestige fragrances lies in delivering quality and experiences that justify their price points while preserving brand equity (best example here is Chanel with pristine brand equity). Fragrances cannot adopt the same strategies as other luxury segments like watchmaking or leather goods, where demand often exceeds supply, and speculation thrives. Unlike bags or watches, fragrances cannot be stored for speculative purposes, necessitating a unique approach to maintaining their luxury appeal. The question is : will there be a The Ordinary in the fragrance segment in the coming years : a brand which combines affordable pricing, aspirational/trendy image and a effective benefit ?

 

By understanding and strategically responding to these intricate dynamics, luxury fragrance brands can navigate the evolving market landscape. Emphasizing unique value propositions, leveraging social media, offering tiered pricing, collaborating on strategic discounting, and prioritizing transparency and authenticity will ensure they remain relevant and desirable to a broad spectrum of consumers. The future of prestige fragrances lies in delivering unparalleled quality and experiences that justify their price points and maintain the allure of luxury.