Consumer Strategies Report October 19 2004/Trade Event

I would have never realized how involved the world of smell is unless I visited this trade show. Billions get spent to develop a smell, how to deliver that smell (i.e. sprays), manufacturing it, packaging it, and finally selling it. My only experience with the industry had been the walk through the obstacle course-like "perfume row" at Macy's in Herald Sq. in New York City, where an army of gorgeous "image makers" assault you with scents at every turn. Upon crossing this aisle-of-smell, you're nauseous from concentration of mixed mists that have attacked your olfactory.

From what I know about the Macy's business model, each vendor rents a little island on Macy's sales floor, making Macy's a veritable mall-within-a-department-store. Each vendor is then responsible for recruiting and training their own personnel (a science, since some vendors own competing brands on the salesfloor), and due to the unusual set-up, competition (and therefore, sales training) is fierce. Not only is everyone gorgeous, they're type-A, Wall Street banker, personalities. A big commission comes with the attitude. (Macy's own personnel are unionized, but also make commission [1].)

My other experience with the industry has been buying cologne, but not at Macy's, on Canal Street in New York City (our Chinatown). In virtually every street, there are at least 4 to 5 vendors of colognes and perfumes. Each one selling in a near-perfect economic model, where every customer should have the same information and all vendors are next to each other. At that point, these top brands you find at Macy's are commodities, and service doesn't mean squat. The customer can basically haggle his/her way from a $35 bottle of anything to as low as $20. Macy's couldn't beat that if they tried.

Whether or not these products are from authentic manufacturers or copy-cats isn't a problem. At least, not yet. A recent ruling in Europe in favor of L'Oreal has given the industry a precedent on which to sue manufacturers who blatantly copy scents owned by the original company. Before this verdict, ingredients of copycats were nearly 90% identical, with no fear of punishment. No longer. Will this shut down Canal Street? Probably not. But the industry will definitely re-coup much of what it loses annually on black market sales.

At the trade show was a scent development company called International Flavors & Fragrances, that has made an art of the science of smell. They set up a mini-museum of scents, showcasing aromas that are "artsy", to say the least. Not intended to be worn by consumers, it turns out some companies look for aromas that imitate things like landfills, unwashed body parts, exotic fruits and locales, and even ancient Egyptian mummies (2). Restaurateurs have known for years that scents from their kitchens draw passer-byers into their restaurants. Don't you think Starbucks realizes that the addictive aroma of coffee is a potent weapon in their "ambiance" arsenal? I've personally been fascinated with how beverage makers Pepsi and Coke come up with their flavors; now I know how.

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(c) 2004. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.

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