Chanel, Christian Dior, Estee Lauder enjoy a super premium positioning and also are a part of a select group that every other brand in its niche dreams to enter. DL Narayanan tells Kunal Majumder about the fuzzy positioning these high-end perfume brands fall prey to in the Indian retailscape and suggests remedial steps.
From a simple fragrance that epitomised the luxury of the kings and queens of yore, to its emergence as a complete lifestyle label, the premium perfume has defined the success story of many a perfume house. Undoubtedly, it was the id, ego or supergo that perfumers played on then. And, even today it is this simple Jungian theory that has reinvented the principles of marketing. Perfume brands not only command huge respect, they are also the power builders with the super rich forming the niche clientele.
Chanel, Christian Dior and Estee Lauder form the exclusive ‘Black’ club of the international fragrance business. Why Black? Simply because all these brands have the classy black for their branding and packaging. Moreover, market forces recognise the undisputed position these brands command. There are other labels like Biotherm, Clinique and Lancome which have dominated the premium perfume market in the last few decades through their indirect cartel. These labels together enjoy not just a super premium positioning but also are a part of the cartel that no other brand could dare to enter. They have also controlled the sales pattern in this segment of the fashion and lifestyle industry. For instance, limited edition products that are available at a very premium price for a limited period. Even entry to international cosmetic fairs like Cosmoprof (Italy) and Cannes (France) is restricted and only by invite.
Internationally, premium perfume brands are available in dutyfree shops at airports, department and lifestyle stores. The reason that attracts these brands to the dutyfree shops is the high average transaction value (ATV) of the high fliers. These are the consumers who have less time and more money. They are ready to spend the best of money to get the best of product and what better place to get their attention than the airport? Apart from liquor and cigarettes, perfumes are the best selling products at dutyfree shops and have a high sales conversion ratio. Department stores in the US have helped push the price of the product towards the higher end.
A typical department store consists of multiple levels. The entrance is dominated by fragrances which are typically called perfume arena or house. These are in turn controlled by powerful perfumes brands like Chanel, Christian Dior, Lancome, Clarins, Biothern and Estee Lauder. While these find their places at the entrance, the rest of the brands try to settle down in the peripheries of the area. This is similar to a static parabola (Check figures 1,2).
PB-Premium perfume brand; NPB-Non-premium perfume brand
The scenario in India is a complete reversal of the international format. If one goes by the international formula, very few brands can actually claim to be a complete lifestyle brand. Identity counters and full display is still taking shape in the country’s department stores. (Check figure 3).
Four out of the seven ‘Black’ perfume brands are available in the country, either through exclusive boutiques like Chanel, which has entered the country on its own and is available in premium five star hotels. It is also planning to set up shop-in-shops. The other three brands – Christian Dior, Lancome and Clarins are available through distribution channels.
In India, apart from dutyfree shops, the perfume brands are also available in department stores including Lifestyle, Shoppers’ Stop, Ebony and Piramyd; the perfume houses include Madex and La Galleria. Shoppers’ Stop is planning to come up with a concept that will include all signature brands.
Dutyfree shops and department stores are still evolving here as per international formats. We all know that 80 per cent of the turnover of department stores comes from 20 per cent of the premium product range. If high end premium brands like Chanel, Christian Dior, Lancome and Clarins demand 80 per cent of the premium retail space, it is justifiable.
In India, L’Oreal commands a premium positioning in the stores in line with high-end premium brands, even though in the international market L’Oreal does not come in the same league. It would almost be sacrilege.
What one cannot negate is that this positioning caters to the typical Indian demographic where the premium or super premium consumer is comparatively a small per cent, though growing at a healthy rate. Nonetheless here are some case examples of the Indian department store scenario as of now…
• A leading department store gives an international mid-range cosmetic brand a premium position, offering international brands of premium repute in the peripheral area.
• A CEO of another leading department store was overhead justifying this positioning as he felt the average Indian consumer has not reached the stage wherein he/ she could afford a Chanel or Christian Dior at Rs 4,000 plus or a Clarins at Rs 2,500 plus. Rather, he/she would prefer a L’Oreal at Rs 600 plus or a Lakme at Rs 300 plus.
• A CEO of a major premium fragrance brand was shocked to find the positioning of a globally acclaimed super premium brand and initially refused to place his products in the country’s department stores.
India’s proximity to Dubai also helps in attracting premium brands. Dubai is the modern capital of major fashion and lifestyle brands. The success of the perfume house format in the Middle East now lures more and more perfume companies to the subcontinent.
Middle East success format
• Paris Gallery, UAE
• Gazziz, Saudi Arabia
• Dubai Duty Free, Dubai
• Areez, UAE
• Salaam Stores
• Faces, GCC
Five mantras for successful perfume retailing
1. Instead of combining fragrances with jewellery, accessories, etc at the entrance, department stores should create a meaningful perfume arena or house layout following the international retail format or create a successful Indian one.
2. Distributors and retailers should work hand-in-hand, shoulder-to-shoulder to maintain brand identity counters as per the brand’s position.
3. Government should give sufficient legal protection to stop parallel branding.
4. Apart from department stores, new and existing retail entrepreneurs should plan large perfume retail houses.
5. All the principal brands should actively involve in beauty shows and fairs in India.
The crystal ball?
Ninety per cent of the Indian fragrance sale comes from the parallel market. Considering the potential of this particular segment, one can believe that with the entry of major players, the parallel market will weaken. This will give Indian consumers original products at international pricing.
Even as the great Indian retail tamasha has started, many questions remain unanswered.
• Will the brands take the distribution route or enter directly?
• Will it be lifestyle stores or standalones?
• Will it be department store or perfume house?
• Will it be controlled sales vs selected sales?
• How will the image building exercise be like?
• What will be the identity counter and perception like?
• What will be the brand share in the organised and unorganised market?
• Will the international brands reinvent themselves for the Indian market?
As we write this article, we are sure that a road map is being drawn for Biotherm, Estee Lauder, Bobbi Brown and many more leading brands’ entry into the league of perfume houses. Many suggestions have come up for improving the fragrance segment, including concession format. Only time can tell us who would be the Indian Sephora or the India Paris Gallery, or will traditional players like Jashanmal replicate their success here?
DL Narayanan is CEO & director, River Water Retail, a leading distributor of Hba (health, beauty and accessories) and colour cosmetic brands from the UK and Europe.