How the Subscription Model Revolutionized the Way We Buy Perfume
For consumers craving variety and attractive price points, signing up for a fragrance service makes a lot of scents
To hear Leila Zagwolsky tell it, she helped pioneer the online fragrance-subscription business almost as an afterthought.
In 2010, in the jaws of the Great Recession, Zagwolsky made the nervy decision to open a brick-and-mortar fragrance boutique in Santa Ana, Calif. She called the place OC Perfumes, and word gradually spread among Orange County’s affluent denizens. Zagwolsky had already notched a career as an executive for a number of fragrance brands, and her business model was based on bringing her accumulated experience to shoppers. Rather than just hiring chirpy sales associates to sell them pricey bottles at a counter, Zagwolsky gave customers the chance to purchase travel sizes of luxury niche scents—scents that she would help them select—and try them out first. After wearing the fragrance for a month, OC’s clients could return to the store to sample another one or, if they liked what they’d been wearing, purchase a full-size bottle from her.
People liked the arrangement so much that, after six years in business, Zagwolsky decided there might be a market beyond Santa Ana. “We wanted to take that concept from a local level to a digital platform,” she explains, “to take it to a national level.”
In 2016, she did. Enlisting her sister Lindsey as her business partner, Zagwolsky launched Luxury Scent Box (known today as simply LuxSB). Every month, her online firm ships 9-milliliter sampler atomizers loaded with the scent a customer has preselected by taking a detailed online survey that Zagwolsky designed herself. With a modest membership fee of $15 a month and over 500 designer and niche fragrances to choose from, LuxSB has grown at an average of 200% annually since it went online.
“Our concept,” Zagwolsky says, “is to [help you] discover your scent.”
Take a wander around Google, and you’ll quickly find quite a few upstart companies that are out to do much the same thing. In the past few years, fragrance subscription services with names like Luxury Scent Box, Perfume Surprise, Scentbird and ScentBox have exploded onto the scene. Buoyed by venture capital and adding subscribers at a steady clip, these companies have upended the tradition of heading to department stores or specialty retailers to buy large and costly bottles of perfume.
Instead, for a monthly fee of around $20, customers can receive a variety of name-brand, high-end fragrances in the mail, scaled down to travel sizes that afford a month’s worth of daily spritzing. The services allow shoppers to effectively test drive a fragrance before committing to a larger purchase—or not. Some members opt to wear an ever-changing array of new scents and never buy a full-size bottle again. (For a rundown of the services and how they work, see sidebar.)
A few years ago, these services may have been seen as little more than parasites feeding off the fat and happy host of legacy fragrance companies, but not now. “This is an important part of the fragrance landscape today,” says Linda Levy, president of the Fragrance Foundation, whose members include heavyweights like Coty, LVMH and Revlon. “In a world where people want to live with a fragrance before they make a commitment to it, it makes total sense.”
In a broad sense, fragrance subscription services are a variation of a trend that started a decade ago with on-demand content streaming. Rejecting cable providers’ all-or-nothing business model that required consumers to buy a costly bundle of hundreds of channels or simply do without, consumers instead flocked to services like Hulu and Netflix, which allowed them to make à la carte purchases for far less money. It’s a highly popular option, which is why the subscription model has spread to industries ranging from shaving razors to fishing lures. A 2018 study by McKinsey revealed that 15% of online shoppers now belong to at least one subscription service, a category that’s consistently grown by over 100% a year for half a decade and is now worth some $2.6 billion.
Like other industries that have been disrupted by subscription services, the fragrance industry is an attractive one for entrepreneurial upstarts. It is large (worth $8.4 billion in 2018, per Euromonitor), and it is growing: Worldwide, fragrance purchases were up by 5.5% last year, according to Mordor Intelligence.
Yet unlike other categories that lend themselves to ecommerce, fragrances are unique in that consumers pretty much have to try it before buying it. Historically, that required a visit to a store, and it’s the widespread dissatisfaction with that trip that’s opened the door for fragrance subscription services to proliferate.
Mariya Nurislamova, founder and CEO of Scentbird, points out that while 65% of fragrance purchases fall into the “discovery” category (customers buying a new scent for the first time), consumers don’t much like discovering them by standing in a store and misting a bunch of paper blotters with designer fragrances.
“There is olfactory fatigue,” she says. “Once you smell three to five things in a row, everything blends in and you can’t tell things apart.”
A lot of people have sales-associate fatigue and, according to Olfactif CEO Danielle Fleming, subscription services are a welcome alternative. “They can try [the fragrances] in their home,” she points out. “They’re not being pressured by anyone in sales to make quota. They’re experimenting on their own terms.”
But the biggest gripe that scent services relieve is price—the $85, $150, $300 or more that a bottle of designer fragrance can cost. “If you were to fill your gas tank with cologne, it would cost $100,000 every time,” observes Doug Stephens, founder and president of Retail Prophet. “The commitment to buy a two-ounce bottle of fragrance is extremely significant. For the same amount of money it costs me to buy one bottle, I can buy 12 different ones over one year” though a subscription service.
While department stores and perfume companies would no doubt like to preserve the good old days of healthy margins generated through counter sales, the perverse truth is that these two entities have done much to fuel the growth of fragrance-subscription platforms, if perhaps unintentionally.
Experts will tell you that the fragrance industry is already saturated, with some 900 brands churning out new scents all the time. “With over a thousand new fragrances launched each year, it was becoming increasingly difficult and expensive [for shoppers] to sample a variety of different designer fragrances,” notes Craig DuAlba, co-founder of ScentBox, a subscription service established in 2015 that gives members a choice of 850 designer scents.
Because the number of new fragrance launches is exceeding the growth of the category itself, the result is a glut of scents that are are all itching for attention. But while getting these fragrances into the hands of shoppers is imperative, the traditional channels for doing that are shrinking. Some 9,000 retail locations closed in the United States last year, according to data from Coresight Research. In February, Macy’s announced it would be shuttering 125 of its stores.
Moreover, these closures were before Covid-19 shut down the brick-and-mortar portion of the national economy. Analysts are now predicting a wave of likely bankruptcies, and retailers on the watch list include those that sell mass-market fragrance brands such as JCPenney and Rite Aid, which has over $3 billion in liabilities. Upscale retailer Neiman Marcus (whose brands include Bergdorf Goodman) was, according to Reuters, preparing a bankruptcy filing as of April 19. Even when retailers do reopen, retail experts caution that virus-wary Americans may well avoid the shopping aisles, further imperiling the fragrance industry’s traditional means of reaching consumers.
Historically, fragrance brands have also depended on scent strips inserted into fashion and beauty magazines to let consumers know about (and smell) new fragrances. But “as we all know, the circulation of magazines is down dramatically, and there’s less and less inventory for these brands to get the word out there,” Scentbird’s Nurislamova says. “Companies understand that trial is paramount, so they’re looking for another way to get the word out there. And we just happen to talk to a young, savvy, digital audience with disposable income.”
Adds Olfactif’s Fleming: “When I pitch to brands, I say: ‘This is marketing!’ We are getting your product directly into people’s hands.”
For all the novelty of these services, however, observers point to several issues that they will need to confront if they plan to stay around.
“Subscription is still in its infancy and many questions arise, such as how much profit can be made from this channel and what is the saturation point?” says Bruce Winder, co-founder and partner of the Retail Advisors Network. “The industry subscription business is crowded and is due for consolidation. Also, you will probably see some of the big fragrance brands buy some of the stronger subscription brands to try and connect with young customers through this fairly new distribution channel.”
Indeed, fragrance companies have taken a page from the subscription services’ playbook, and many are selling samples themselves. Le Labo, founded in 2006, helped establish itself with its $30 “discovery sets.” Even brands at the very top of the market, like Creed and Dior, are now selling sample kits. Maison Francis Kurkdjian offers a Fragrance Wardrobe for Him consisting of eight fragrances (175€, or about $200), and the order itself comes with two free samples.
“Beyond the ubiquitous convenience of the smaller size, these sets are an invitation to discover the world of Maison Francis Kurkdjian,” says co-founder and CEO Marc Chaya, who believes that the vials also “eventually become an entry point toward larger-size bottles.”
Others wonder if the business model of fragrance-subscription services is strong enough to endure. After all, these companies are largely providing a variation on the same service, and it’s one that’s easy to copy.
“I’m worried about the longevity of these brands. There’s a lack of differentiation.”
Executives at these companies are, of course, happy to explain what sets them apart from their competitors. Olfactif, for example, deals only with boutique brands you can’t find at department stores, and customers receive scents handpicked by Fleming. (“They’re getting the expertise from me being the curator of the brand,” she says.) LuxSB prides itself on synthesizing a member’s preferences to recommend the perfect scent. (“These results are very accurate,” Zagwolsky says.)
For its part, Scentbird leaves customers wholly in control of choosing their fragrances and is the biggest player in the segment. Yet even Nurislamova concedes, “We probably have at least 40 copycats in the world. I feel like there’s at least one per country. There are a lot of them.”
Gabor is also skeptical about brands whose products are the repackaged goods of other brands. Last year, Chanel sued Tel Aviv-based Scentwish on the grounds of intellectual-property infringement after the fragrance-subscription service unbottled Chanel’s legendary perfumes and poured them into its sampler vials, allegedly eclipsing the branding inherent in Chanel’s luxurious packaging. An Israeli court ruled in favor of ScentWish, essentially following the ethos established by the American “first-sale doctrine,” which gives the buyer of a copyrighted product the right to resell it. Even so, the case was proof that at least certain fragrance companies are less than comfortable with what firms in the sampling business are up to.
Finally, there’s the risk of burnout. There’s probably a limit to the number of new products that anybody feels like trying—scents especially. “What we’re seeing more and more as the business matures is people go through a discovery stage, [and then] they have discovery fatigue,” Nurislamova says. This is why Scentbird asks its customers to choose the scents they want to sample, as opposed to the company surprising them with the fragrance of the month chosen by a curator or by an algorithm. “I don’t really believe in [surprise boxes],” Nurislamova continues. “I have enough clutter in my house.”
But one shopper’s clutter is another’s fragrance collection, and LuxSB’s Zagwolsky points out that subscription companies like hers fill a definite need for fragrance brands by reaching that undiscovered customer—the one who’s ready to buy, tired of the existing options and ready to discover their signature scent. In a sense, such a person is the holy grail for every luxe fragrance brand.
High-end scent companies “want to reach a different demographic,” Zagwolsky says. “With subscription services, we have the customer [who’s] already interested in fragrances. We have that targeted consumer.”