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December 22, 2008 11:42 AM

Beauty

Beauty No Longer a Bastion

The scene at Macy's. By joining the department store markdown melee, fragrance is taking the final step to transforming itself into a fashion item -- and that is not an entirely glamorous prospect. The brighter lights of the beauty...


The scene at Macy's.
By joining the department store markdown melee, fragrance is taking the final step to transforming itself into a fashion item -- and that is not an entirely glamorous prospect.

The brighter lights of the beauty industry have always taken pride in considering their category to be part of the fashion family. But like most families, there are members who are as similar as cats and dogs, with different nervous systems and warring agendas. Fashion is artistic, instinctual and of the moment. Beauty is product-centric, analytical and more than a bit plodding. Unlike fashion, the goal in the fragrance industry is to sell the same item, like Chanel No. 5, for eternity and a day, with the same bottle and the same juice.
Even prestige products are being sold at a discount this holiday.

This ideal has been undergoing a dramatic erosion during the last few decades. The lifespan of a fine fragrance dropped from seven years to as little as nine months in the bright-lights, hormone-soaked world of celebrity-endorsement marketing.

Through all this, the prestige beauty industry has stubbornly defended a line in the sand, barring price discounts in department stores. Led by the big three brands of Clinique, Lancÿme and Estée Lauder, fragrance and color cosmetics manufacturers did promotional backflips to entice consumers with giveaways that would not require cutting price. At Father's Day, the men's fragrance bar in a department store looks like a luggage shop, with all the bag giveaways. The average gift-with-purchase or blockbuster promotion could stock a cosmetics stand in a third-world country. This approach more or less worked until this holiday season, when the bottom dropped out of the retail world.

In a panic to off-load inventory, retailers slashed prices of formerly pricey ready-to-wear items by as much as 75 percent. Suddenly a $200 cashmere sweater was marked down below $75.

This meant fashion had arrived to play in beauty's sandbox, since the fragrance and cosmetics industry had always thought it owned the $45-to-$75 price territory. 

It didn't take long for the sultans of beautiful smells to respond in kind with price cuts of their own. Fragrance gift sets, or value sets as they are more accurately called, already were a deal; the cost of goods generally runs at least twice that of regular stock. Now we have a 20 percent price reduction on top of that in order to attract consumers -- at a time when everything from clothes to cars to computer printers are being almost given away.

Whether the beauty industry will profit from this remains to be seen. At least one fragrance executive is hoping the whole episode will be forgotten by New Year's morning, like a rowdy night on the town. For that to happen, he reasons, these gift set markdowns have to fail to move the frozen sales needle.

"If it is perceived that we tried and it didn't work, it's the last time we'll see it," he said, trying to sound hopeful.

But later he admitted, "I'm not optimistic."



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