China’s niche fragrance boom defies economic slowdown

As China faces an economic slowdown, marked by deflation and weaker consumer spending on luxury goods, one sector remains strikingly resilient: niche fragrances. French fine fragrance house Frédéric Malle is doubling down on this opportunity, recently renovating its flagship store in Shanghai. The move signals the house’s long-term confidence in China’s fragrance market, even as larger luxury categories like handbags and jewelry struggle. China’s economic outlook is growing cloudier, with the consumer price index growing just 0.4% year-on-year in September, its slowest rate in three months, and the producer price index dropping by 2.8%, the fastest fall in six months. This deflationary environment has prompted calls for fiscal stimulus, yet the impact on consumer spending has been uneven. While high-end items like cars and fine jewelry are losing traction, smaller luxury goods, including fragrances and beauty products, are catching the eye of more price-conscious consumers. Editions de Parfums Frédéric Malle’s Shanghai renovation comes at a critical time for the luxury fragrance sector in China. In 2023, the market hit 20.7 billion RMB ($2.9 billion), and is projected to grow to 51.5 billion RMB ($7.2 billion) by 2029. This trajectory shows that, even in challenging economic times, Chinese consumers are seeking indulgence through more accessible luxury categories like fragrances. For Frédéric Malle, this trend reflects the deep emotional connection consumers have with fragrances. “Today, we have in the world a problem with knowledge, a problem with education, problems with false information,” Malle told Jing Daily in 2023. In a market crowded with influencer reviews and fragrance subreddits, consumers are more informed yet overwhelmed by the sheer volume of information. The French perfume house’s transparent approach – crediting the perfumers behind each creation – resonates with a new generation of fragrance lovers who seek authenticity. A shifting market In China, fragrances priced over 500 RMB ($70) continue to dominate, with 55% market share. However, there’s a growing divide between high-end luxury fragrances and affordable domestic brands. The latter have carved out a space by offering strong value propositions and incorporating Chinese cultural elements. For niche brands like Frédéric Malle, this duality presents a unique opportunity to straddle both sides of the market – appealing to connoisseurs with exclusive scents while maintaining accessibility for newer consumers. China’s luxury fragrance market is still in its early stages, with a penetration rate of only 5% compared to 50% in the US and Europe. However, Chinese consumers outpace their Western counterparts in terms of spending, with average transaction values ranging between 500 RMB and 800 RMB ($70 to $110). This presents fertile ground for niche brands to expand their influence, particularly as consumers become more discerning and knowledgeable about fine fragrances. Fragrance as cultural expression One of the key drivers of fragrance consumption in China is the desire for products that reflect personal and cultural identity. Unlike Japanese consumers, who prefer light, minimal scents, fragrance enthusiasts in the Greater China region often gravitate toward stronger, more complex aromas. “China is not Japan. It’s a gross generalization,” Malle said, noting that his “Rose Tonnerre,” an earthy scent, has become a bestseller in China. Domestic fragrance brands have also capitalized on this demand, incorporating traditional Chinese elements into their products. These local brands are making headway by offering culturally resonant scents at more affordable prices. This dynamic has resulted in a polarized market where both international luxury brands and local players can thrive, provided they understand the unique preferences of Chinese consumers. As the fragrance market in China grows, the challenge for brands like Frédéric Malle will be to maintain authenticity while appealing to a rapidly expanding and increasingly tech-savvy consumer base. Platforms like Douyin and Tmall have become crucial for reaching younger audiences, while livestreaming has emerged as a vital tool for driving sales. “It’s very confusing,” said Malle, referring to the barrage of online content, though he remains optimistic that consumers will ultimately gravitate toward brands offering true value. The renovation of Malle’s Shanghai flagship is a clear indication of the brand’s commitment to the mainland China market. With consumers becoming more discerning and knowledgeable, Malle’s focus on quality, craftsmanship, and transparency sets his brand apart in a highly competitive landscape. As he confidently noted, “The good ones will stay, and the bad ones will perish.”

China’s niche fragrance boom defies economic slowdown

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Published October 15, 2024

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China’s niche fragrance boom defies economic slowdown