The Fragrance Frontier
June 30, 2023
All the luxury brands sell them. Chanel, Prada, Dolce & Gabbana, and even auto manufacturer Bentley have a fragrance marketed with the brand’s name. These fragrance bottles are, in a sense, liquid money (Actually, there is also a fragrance made to resemble that, and yes, it was on Shark Tank), with bottles of fragrances from top brands pushing well over $100 depending on size. When such prices are commanded, it becomes understandable why Verified Market Research marked the global fragrance industry at around $58.5 billion, with projections of it reaching about $5 billion shy of $100 billion by 2030. The fragrance market offers encouraging profitability potential but also a wide array of competition.
First, to get some terminology out of the way, the two most common types of fragrance should be defined. There is eau de toilette (EDT) and eau de parfum (EDP), and the lighter of the two is EDT, with concentrations ranging between 5 and 15%. In contrast, eau de parfum is marketed as a longer-lasting and more intense option, with concentrations in the 15 to 20% range. Regardless of the type that is purchased, the commanding prices for the top brands do not substantially change.
Many consumers may wonder why these fragrances cost so much, and the truth is not very encouraging unless viewed from the seller’s perspective, and that is the enormous markups that go into these products’ sales prices to consumers. Go-Business reports margins up to the 90% mark, and many of the costs are not even for the fragrance but marketing and packaging. The brands selling the products often successfully capitalize on the allure of owning a product branded with their luxury name and do so successfully.
As a result of the profitability of these fragrances, the market faces steep competition. Mordor Intelligence notes the current market leaders are brands like Burberry and Chanel, but overall there are an endless number of brands vying to carve out their own spots in the industry.
Fragrances are sold as an expression of self and an opportunity to connect with elite brands and often take the shape of eau de toilette or eau de parfum bottles. Their high prices are maintained by consumers’ willingness to pay them, contributing to the massive global market that has developed off the products. And further, the massive margins offer serious incentives to companies looking to enter the space, but the likes of Burberry and Chanel currently lead the market; however, there are also small players like the producers of “Liquid Money,” as seen on Shark Tank. With projections of the global market closing in on the $100 billion figure by the end of the decade, this frontier certainly has more left to explore.