The paper “ Five-Year Strategic View of the Fragrance Industry” is a great example of a case study on marketing. The global perfume market is estimated to be $24 billion in size. It has grown annually by about 2.5% until 2006. The largest market is in the European Union. Established markets now have rather flat growth rates, but there are large new potentials in countries such as India and China. There are other important changes in trends in this industry. Improved economic conditions in large parts of the world have changed the perception of perfume as a product category.
Decades of comparatively high GDP (Gross Domestic Product) growth have created a stable base of demand. The market is expected to grow steadily until at least 2011. The economics of new product development has changed. Brand creation is no longer a restricted capability. Many expensive safety tests are no longer required-they are not allowed either, as they involve inhumane experiments on animals. Consumer preferences have moved in favor of natural ingredients, and away from laboratory chemicals. The heightened awareness of environmental issues and social consciousness reflects personal preferences related to perfumes. Purchase decisions related to perfumes have expanded.
They continue to be favorites as gifts, but individuals now routinely spend money on this product category for personal and regular use. Women, who are now financially independent, have emerged as a powerful new group of direct buyers. Though celebrities continue to hold sway over public opinion, the Internet offers new and cost-effective routes to communicate with large numbers of consumers. This medium has also emerged as an alternative to the logistics chain of traditional retail outlets. Conventional perfume advertising has been in English and other modern European languages.
The World Wide Web now changes this paradigm. Brands have to be built across continents and cultures. It may become necessary to develop local variations of umbrella brands. The market is expected to become more value-conscious. People will be aware of discount chains, and spatial differences in pricing as well. Consumers are more aware of competitive forces than before. They are likely to demand better pricing and regular deals for their purchases. Physical distribution chains are set to change. Specialized boutiques, shopping malls, discount stores, and large chains, will take large shares of the perfume market.
The roles of traditional outlets such as duty-free stores at international airports may not disappear, but their importance will reduce, at least for some categories of consumers. The net effect of these trends is that the global perfume business will evolve considerably over the next five years. The nature, scale, and locations of demand will change. Old value drivers will become irrelevant, while new ones will emerge. The competition will increase. Established and newer players must both adapt their operations through enabling strategies. The global perfume industry, five years from now, will shift substantially from its dependence on the first world to significant levels of consumption in countries such as India and China.
The Internet will substitute both mainstream media, as well as traditional retail chains, as a medium for communication with consumers, and as a system of logistics as well. Many new competitors will jostle for market share, leading to increased investments by today’ s brand leaders. Consumers will become very environmentally conscious, anti-chemicals, and will buy perfumes based on their natural values.
These are the key dimensions of change in the world perfume industry that can be expected over the next five years.