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[Due to price increases] consumers are looking at smaller sizes. They “ are looking more at that as they want to try different scents and so the mix is changing in terms of sizes and there are a lot more 30ml and Outside niche or exclusive fragrances, 50ml than 100ml in certain markets. there is not really an offer that is differentiated in terms of quality or EH: There is a problem of price in a lot of countries, which is linked to purchasing power and to the fact that the consumer is promotion- price. Other sectors are doing this—in driven. Today, the percentage of volume done during a period of discount is 50 to 60%, while fve years ago it was maybe 15%. wines and spirits there is segmentation Pricing has become a sensitive issue. This is perhaps due to the fact in quality and price which is clear for that prices went up too much, and today for the consumer to be able the consumer to buy, fragrances need to be on promotion. But discounting takes away from the aura of the product. Retailers are playing a bit with the consumers, as they put up their prices and ” is a certain level of suspicion regarding the channel. Consumers say then they discount, so the consumer is a bit lost in all of this and there Guerlain ceo Laurent Boillot that they are not sure whether they are buying at the right price as they are buying in a store that is always discounting. Today, 80% of consumers will check the prices on the internet, even if they end up buying a product in store. The problem with the Retailers complain that there has been a strong internet is that you have offcial sites of brands and retailers and then increase in prices in fragrance recently, which is unfortunately you have pure players that are not authorized and get putting off consumers. How do you see this? their supply from the gray market and price the offer in any old way, LB: I cannot talk about price, as prices are fxed by the retailers. I and that adds to the confusion. can talk about the prices in our own boutiques. There has been just DL: Yes, it is shocking. Some companies have made dramatic a very moderate increase in prices, which is linked to infation of the increases. We used to increase the price by 3 to 5% every year, but ingredients in the fragrances. We also developed our exclusive lines there are companies that took their fragrances from $75 to $125— as these are well liked by our foreign clients—they come to us as this is a lot of money for people to spend. I think some brands have they can’t fnd them anywhere else. We don’t have a problem of learned their lesson in terms of pushing up prices. This has also driven attracting clients to our stores or of consumers who fnd the products smaller sizes and roller balls, as consumers cannot afford 100ml too expensive. anymore. In the US, the 100ml has always been the main seller, but JM: I would say the problem is the wide-scale discounting campaigns that is changing now because of the price point. of retailers in some markets. Now there are even discounts at the This has also resulted in discounts. In the US, mainstream time of launch, which is absurd. We are in the process of killing the department stores never marked down fragrance, but now they have industry; discounting is a big mistake, it is not the way we are going started to do this. You have the manufacturers saying ‘I can’t take to develop the industry. We are taking away the value of the prestige returns’, then the retailer is saying ‘I can’t sit on stock that hasn’t category by permanently lowering the price. It is a catastrophe in sold through, so you either take it back or I mark it down’. What certain markets. It is better for people to buy less, but to buy at a is happening in Europe is also affecting the US business. European higher price—you need to keep the prestige factor. This is why there is distributors are dumping goods as they cannot sell in their local the niche trend, as consumers don’t want to buy a cheap commodity market, and this has meant there is a food of gray-market goods product. It is a reaction to the commoditization of the industry. coming in and a huge volume of discounted merchandise. n 45