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Sales on celebrity-fronted fragrances have dropped recently, but profits on designer fragrances have been buoyed by a feeling of exclusivity and luxury. However, big box stores like Target and Walmart are now threatening to rob designer fragrances of that selling point, the Wall Street Journal reports. Fragrances from designers like Dolce & Gabbana, Calvin Klein, and Davidoff have turned up at these big box retailers through back channels referred to as gray market.
The gray market is a network of resellers that are either unofficial or are unauthorized to move the product. These unauthorized sellers often emerge out of Europe and Asia, regions where perfume makers have less of a handle on the market and are forced to turn to distributors to help them get their product into smaller perfumeries. These distributors then sell the perfumes back to Walmart and Target and make a quick profit.
Both stores assert that they obtained the perfumes through legal means, but industry sources tell WSJ otherwise and believe that brands are being diluted as a result. "If you see the fragrance you love sold at Macy's and bulk-packed in a club store, it may diminish your feeling of the prestige of the brand," Ann Gottlieb, a New York-based fragrance-industry consultant, tells WSJ.
Walmart is currently selling a 1.7 oz bottle of Dolce & Gabbana's Light Blue fragrance for only $38.52. Compare this with the similarly sized bottle of Light Blue that carries a $74 pricetag at Sephora. Given the drastic price difference, it's not hard to see why these brands are so concerned.
To combat this, companies like Proctor & Gamble, which makes Dolce & Gabbana's perfumes, and Elizabeth Arden, which makes various perfumes with celebrities and designers alike, are cutting off distributors in hopes of plugging the leak of its products. Sales took an enormous hit at first, but have since recovered. "A big part of the tightening of distribution is elevating the prestige element of the brands," Elizabeth Arden's chief executive, Scott Beattie, told investors last month, according to WSJ.