A look at new business models in fragrance

How companies’ approaches to the fragrance market may change

Fragrance companies are no longer just worrying about product sales or market share, but also how to revamp their way of doing business before some innovative start-up comes along and upends them.

Many aspects of traditional business models are being challenged as direct-to-consumer (DTC) players like ScentBird start incubating and launching brands, or connected digital platforms put fragrance creation into the hands of a community of users.

Most of the major players have sought to set up incubators or open innovation initiatives like LVMH’s DARE, (Disrupt, Act, Risk to be an Entrepreneur), or L’Oréal’s BOLD Business Opportunities for L’Oréal Development corporate venture capital fund, to help look to the future.

Consumer-centric
A Puig spokesperson says that the industry is moving from linear, vertical and hierarchical ways of working to circular, interactive and interconnected business models. He adds that the focus is on developing consumer-centric propositions that re-enchant the consumer’s fragrance discovery and shopping experience. “The industry has shifted from a purely transactional model to building communities that empower consumers and building love-brands by exploring new ways to co-create and share fragrances and interests.”

As such, the DTC channel has become key. Puig says that through its Puig Futures hub, its aim is to accelerate innovation with DTC brands and platforms. The company recently launched a DTC platform called Queendom, selling fragrance and make-up and focused on the women’s empowerment movement.

In addition to providing access to valuable consumer data, the DTC model also enables direct communication with the consumer. “Fragrance propositions and brands that truly understand the importance of individual preferences, local niches and tribes will thrive. Brands that are able to connect and co-create with communities in an authentic way, while contributing and giving back to these communities will become love-brands,” says the Puig spokesperson.

This shift towards to niche interests in fragrance and move away from scents focused on marketing messages centered on seduction and towards products based on individuality was the reason for the creation of new company Edge Beauty. The company will launch its first fragrances with singer Cher, genderless clothing company The Phluid Project and opera singer Renée Fleming this year, and says the idea is to allow consumers to “rediscover scent through discourse, stories, people & objects.

The DTC company has set up an e-commerce platform, ScentBeauty, which it describes as a new multi-brand distribution model for selling bespoke fragrance brands, with a focus on speed-to-market to capture new consumer trends. The goal is to create a fresh corporate culture dedicated to fragrance, which is not seen solely through a brick-and-mortar lens, says Edge Beauty founder and ceo Stephen Mormoris. “ScentBeauty is a new model based on sell-through rather than sell-in,” notes chief commercial officer and founder John Burgfechtel.

In addition to getting closer to the consumer and embracing direct-to-consumer and the impact that could have on distribution strategies, there are also changes brewing in how fragrances will be made and come to market.

L’Oréal, for example, says that part of its digital transformation is focused on becoming more agile and reducing time-to-market. This has been underscored with the launch of MYT (Make Your Technology), L’Oréal’s in-house incubation platform for its EMEA (Europe, Middle East and Africa) industry and supply chain teams and partners.

For fragrance house Symrise vp digital strategy fragrance Claire Viola, digital is revolutionizing fragrance creation. The company sees Artificial Intelligence (AI) as a major disruptor that will pave the way to new creative possibilities. “We haven’t really seen a revolution in fragrance formulation since the appearance of the synthetic molecule, which opened a large pathway in the industry,” says Viola. The investment in AI is considerable, it is a big step, and for the long-term, she says. “If we are taking this route it is because we cannot imagine building a future without new technologies and without AI.”

The fragrance supply industry can learn a lot from the data-driven business models of the Big Tech companies, she adds. “We are in an industry made up of a culture of processes and products, with very established ways of working with engineers —we have 135 validations before launching a product. We have an enormous amount of data in our system […] which can give a pertinent framework and history. Big data can help translate it all. And what deep learning can translate from all that could be the successes of tomorrow,” she comments.

Aside from AI, more fragrance companies are also looking to work with technology companies or external partners to come up with new experiences in fragrances. This could be in terms of sampling or smelling scents, or in examining new types of textures and formats.

Green tomorrow
Another important direction shaping the fragrance business is sustainability. Along with more sustainable practices, eco-friendly and natural fragrance products are on the rise. This was one of the reasons for Symrise’s investment in US-based online clean fragrance company Phlur. The company is seen as an experimental laboratory providing insight into the clean category’s product development, pure-play e-commerce and data-generation, as well as into the evolution of the consumer, comments Viola. “We want to understand its workings […] to understand how to articulate the creation of a brand in this direction,” says Viola.

But in spite of these big changes ushered in by AI, digital and sustainability, at the end of the day the key point to thriving in the future will be about coming up with fragrances that create a connection with the consumer. As the Puig spokesperson points out: “People do not just buy products, they buy relationships, stories, experiences and purpose.” Working that out would probably make most companies future-proof.

 

SNAPSHOT: New fragrance models
Nota Nota—win-win
One of the goals behind personalized fragrance making device and platform Nota Nota, is to build a global network for fragrance creation and sharing, says founder Abdullah Bahabri.

Initially inspired by the 3D printing model where a product can be designed on an application and sent to a device, Nota Nota is also conceived as a community platform for sharing, recommending and advising users on fragrance creations. It therefore becomes a self-reinforcing model that helps the system to evolve. Created for home and retail use, it gives retailers insight on local trends. The company says there have been interesting applications where fragrance creations made with retailers can become permanent products as a result of positive community feedback, notes Bahabri.

 

Scentbird – The new incubator
Launched in 2014, Scentbird, a data-based fragrance sampling subscription service, was created as an alternate approach to traditional distribution and as a community platform to help fragrance lovers connect and discover new products.

The company has since expanded into other categories and has launched its first products, including its first incubated standalone fragrance collection called Confessions of a Rebel, which leverages data collected in the US. “It can be hard for larger retailers to respond to quick shifts in the marketplace, which has been the case in fragrance for some time now. Since we’re relatively young and nimble, we’re able to respond quickly and effectively to growing demand,” says Mariya Nurislamova, ceo and co-founder of Scentbird.

 

SNAPSHOT: New business models outside beauty
Fashion – The circular economy
In fashion, the circular economy business model and circular selling concepts, like garment recycling, rental subscriptions and re-commerce, have created quite a buzz and have been gaining ground among small and established brands. Circular business models can deliver value to retailers, enabling them to eliminate waste, drive positive impact across the fashion value chain and improve their competitiveness, says Accenture Strategy managing director Harry Morrison, in a report by Accenture Strategy with Fashion for Good.

Food – Digital food trends
The food industry has given rise to a host of digital innovation, from using blockchains to track ingredients to virtual restaurants or restaurants without a physical storefront. Concepts like virtual restaurants boast the advantages of lower investment and using data to tailor menus or identify the location for a physical opening.

Transparency and convenience are top-of-mind for consumers, and hence the industry, say experts, noting that food apps and delivery services have been a big area of innovation. In food delivery, companies have been testing drones, robots and self-driving cars, and food ingredient apps have changed how consumers shop. Food scanning apps like Yuka are affecting how manufacturers must approach npd, because these apps can have a notable impact on how consumers use them when food shopping. (Yuka also now includes cosmetic product evaluations.) “Such apps have become so important, it is conditioning the way the large enterprises work today,” says Symrise vp digital strategy fragrance Claire Viola.

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