CTFA Synopsis: Reinvent Or Disappear

BOCA RATON, Fla. -- In a groundbreaking appearance at the Cosmetic, Toiletry and Fragrance Association's annual...

The retail landscape is bound to change, he said. "We are currently overstored in many airports; we will see mergers in travel retail," he said. "We will also see continued mergers of smaller perfumeries. Will LVMH sell Sephora? Good question. Will Dillard's be sold? I think Dillard's will remain independent, despite the fact that Wall Street is trying to pump up the idea of a merger. Both the Federated Group and May Co. will see pressure to go national. Consolidation is an ongoing process, and I don't see that changing." He cautioned, though, against short-term thinking: "During this tough period of business, department stores have cut inventory and service," he said. "I worry that they've put themselves at risk with their short-term thinking. Will they be ready when the economy swings around again?"

Lauder challenged the industry to innovate. "That's the key word going forward," he said. "And it will have impact on every area of our industry, from retail formats to fragrance to packaging." For instance, he'd advise the ailing Kmart to find a niche -- as its competitors Target and Wal-Mart have done. "If you're caught in the middle, you're nowhere," he said.

Lauder also gave a belated Valentine to the numerous magazine publishers listening to his speech, as he said that he believed that, going forward, magazines would capture a greater share of consumers' attention in the promotion of new products, as compared to TV. "Magazines are where it's at," he said, adding that there is plenty of room for growth. In the U.S., most older women get product endorsements from word of mouth, but consumers aged 28 to 39 rely on magazines for new product information. He also predicted that the Internet will return to influence within a number of years, noting that "24 percent of women used the Internet to buy something last year."

Industry consultant David Horner echoed the call for innovation: "The fragrance industry needs to find new ways to sell its products," he said. "Sephora taking fragrance out from behind glass and alphabetizing it was the sole innovation in the last few years." Another aspect of the industry sorely in need of overhauling is the sampling segment, Horner said. "Scented strips were the last innovation in that area," he said. "We need to find a better way to sample the consumer."
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