E-commerce and fragrance quandary: business potential in India
Fragrance has always interested me, even as a child. Why? Because it is a tool which can literally change your mood. E-commerce has become an interest for me because of the impact it has had on individuals, society and industry.
Purpose of this post is to primarily create interest among India’s young techies in domestic Indian perfume industry; and secondly to share, with our perfumers and business houses, how e-commerce can help expand this industry to its truest potential.
Four reasons compel me to write this post,
- E-commerce is growing strongly — we all know that
- Fast growing luxury market — the luxury market in India was worth $ 7.7B in 2013, and is expected to grow to $ 15B in 2015.
- Increasing acceptance of private labels — there is a great scope for development for private label in India as their share is only 6% currently compared to 19% and 39% in US and UK respectively.
- Perfume is among key emerging categories for online purchase — it has consistently been one of the fast growing categories for past decade. It is important to note that total perfume/fragrance market as a whole has been growing for past decade.
Here a few interesting numbers,
- ASSOCHAM 2012 report, expects Indian fragrance industry to be worth $ 5B with flavor and F&F ingredient being another $ 11B by 2015
- FFDC report notes that India has 10% share in global F&F market; we constitute 17.8% of world population
- 30% of the domestic industry comes under unorganised sector
- Sales currently are heavily skewered with 60% sales coming in from men’s category
With apparels, electronics and home decor we have witness companies starting out as purely discount stores and then pivoting business model to launch either their own products (Myntra) or collaborating with new market entrants (Xiaomi and Flipkart) or adding a custom design service (UrbanLadder, Pepperfry).
Unfortunately, for us in flavor and fragrance industry we are yet to witness a Indian firm be anything more than a discount store (Perfume2Order, Myfume) selling perfumes. Consequently, the real growth is missing.
Basic challenge that a firm needs to over come while selling perfumes is the experience. Why would one buy a perfume without being able to smell it first? Question becomes all the more critical when a customer is buying almost everything online today. How do you launch a new brand? How do you meet your sales targets? If the customer is not visiting malls and shops, as often, then how do you take experience to them?
Unlike, say, books, apparels, electronics and even cosmetics, fragrance is a product that one really needs to experience before buying. Well-worded, artfully crafted descriptions are rarely helpful to a average buyer. Product descriptions can’t tell you whether you’ll like a certain perfume, or even, for that matter, how it’s really going to smell.
While I may not be sharing “the idea” to capitalise on the opportunity in India’s domestic market or “the solution” to answer the biggest question that a buyer and a startup would face, below I am listing few companies abroad who are trying to create a niche for themselves and be “the” e-commerce perfume shop in their region.
- Commodity.com — as a Kickstart project they raised $56,000 approx to launch a curated set of smells. Company encourages customers to opt for a “try-at-home” kit with option of buying a particular smell directly or preparing your own cocktail at home.
- Scentbird.com — a subscription service, they help you identify fragrances (from different brands) best suited to your taste. Company has customers take a quiz, based on which they recommend fragrances from their battery of designer perfumes.
- Pinrose.com — here is a company betting on e-commerce to create their own brand, somewhat like Commodity. Shoppers have the option to test out three fragrances for free before they make a purchase. Unlike Commodity.com the samples come as individually packaged towelettes soaked in the perfume.
- Scentruck.com — quite similar to Scentbird.com, their model is based on customers discovering new brands and trying out more products. Interestingly, companies are betting on subscription model to maintain healthy revenue.
- Getbergamot.com — a fragrance (smell, not perfume) discovery site. From what I understand subscribers get three new scents, all stripped of their original branding and packaged in Bergamot’s glass spray vials. If the customer likes a particular fragrance, he or she can buy it through the site.
India has a very rich culture of perfumes, attar is a traditional industry. Sadly, we have lost the tradition and fallen behind in terms of understanding and technology. Attempts are being made to revive this industry. UP Govt. is close to signing a twin-city deal between Kanauj (India) and Grasse (France) to revive the domestic Indian industry. While these actions will definitely support the domestic F&F industry, it is the new-age e-commerce and young entrepreneurs who can actually revolutionise the industry and help it achieve its true potential.
With the domestic consumption growing I hope we see domestic perfume brands become stronger (like in Deodorants), ‘Make in India’ ought to be the mantra. Given our talent pool I am excited about the future.
Originally posted on LinkedIn in 2015