When I started this company back in 2006, I had one clear vision in mind – that of taking the world’s most coveted fragrances right into Australians’ doorsteps. As a neophyte in the industry, I entertain doubts as to whether it will be a hit or a miss. Still, I clung to that belief that my commitment to the perfume business will dissolve my fears and that success shall be forthcoming.
During that time, I have little knowledge about the fragrance industry. What I had in mind, though, was that for my retail business, I’d need to have a portfolio of different brands. To do that, I have to meet up with various companies and talk about setting up an account for the brands that we would like to stock up.
My first encounter with a brand manager of a luxury brand was in Sydney. The brand I was eyeing for was Kenzo Parfums. Around 8am, I arrived at their office in Botany which is a short drive from Sydney Airport. It was early so I waited inside the car for about an hour. Little did I know that Kenzo Parfums is actually one of the brands owned by a company called LVMH, the largest luxury goods conglomerate in the world.
An hour later, after the usual introduction with the reception, I was told to wait in the conference room. A few minutes later, the company’s representative with whom I had set an appointment with showed up. She was very friendly, warm, and welcoming. She introduced LVMH to me by talking about the company’s history, the brands that they own, and the company’s mission and vision. I remember asking her if other companies have multiple brands too like LVMH. She answered, “Yes”. My first thought was, “Great, now I don’t have to meet that many people to setup the perfume store, since they already have that many brands”. LVMH’s Perfumes and Cosmetics is just one of LVMH’s Division. It is composed of 10 houses, namely, Guerlain, Acqua Di Parma, Parfums Christian Dior, Givenchy Parfums, Perfumes Loewe, Benefit, Make up For Ever, Kenzo Parfums, Fresh, and Nude.
She was special but I didn't realise it by that time. Not only she can grasp the online retailing concept, she was also excited about it. The rest of brand reps that I met after her clearly shown their displeasure about online store in our first meeting. Some require 4-5 meetings and there is one brand that require 9 meetings within 6 years period. I will leave this one for another artcile.
The meeting ended in an hour as she still had another appointment that day. Unfortunately for me, I still have lots of unanswered questions and I still have to meet each person in charge of other brands, such as Guerlain, Givenchy and Dior since she is only in charge of Kenzo. Apparently they don’t deal with many independent stores since those counters selling their products in Myer and David Jones were owned by them. The staff also work for them, not for the department store.
I am not be able to disclose many interesting details from our meeting but one thing that buffled me was suddenly we don't have that many competitors anymore since many of the stores that we marked as competitors initially turned out to be own by LVMH.
I did remember asking if she deals with Perfume Connection, for which she answered in the negative. So I wondered where Perfume Connection get their products from. At that time, I haven’t the slightest idea about parallel import perfumes. After the meeting, I headed to my next appointment around CBD with two hours to kill. So I went inside an internet café to grab an early lunch. Out of curiosity I decided to do a quick research on LVMH. What I found left me dumbfounded.
After I did a quick search about LVMH, I found out some important facts, which probably an old news for those of you who are familiar with the perfume industry. But for those who were as naïve as I was when I just started my perfume business, you will find these facts interesting.
LVMH, which stands for LVMH Moët Hennessy Louis Vuitton, is a leading company in the field of retail business. Since its birth in 1987, it had since posted huge returns year after year. In 2014, it reported a total of 30. 6 billion euros in sales. Meanwhile, in the first quarter of this year, GCI Magazine reveals that the conglomerate has posted a 16% increase in profits amounting to a whopping 8.3 billion euros. The perfumes and cosmetics business alone earned for it a total of 1,094 million euros, demonstrating a 6% organic growth.
To give you a clearer picture of what LVMH is and what it stands for, here are some quick facts about it:
• LVMH is a multinational company based in Paris and was basically the product of a merger between Louis Vuitton, a giant in the fashion business and Moët Hennessy, a leading producer of champagne and cognac. It is from this merger where it derived its current name.
• LVMH is not tagged as “conglomerate” or “tycoon” for nothing. It has a huge market owing to the fact that the group has 70 divisions they call “Houses” that distribute high-end products in all five main zones of the luxury market: Fashion and Leather Goods, Watches and Jewellery, Selective Retailing, Wines and Spirits and our focus, Perfumes & Cosmetics.
• LVMH has a total of 120,000 people all around the world in its employ.
• Their vision is to inspire creativity and excellence.
According to its website, 45% of this Division’s sales come from its perfumes. Last year, the reported sales amounted to 3,916 million euros.
Many customers have this misconception that the brands they purchase has their own manufacturing firms. In reality, the big luxury brands are owned and managed by conglomerates like LVMH.
In its article entitled, “Passion Pays: The Impact of Fashion Conglomerates”, thesytleweaver.com noted that the fashion industry is a combination of brands lodged within a fashion conglomerate. There are six major multinationals in the fashion industry namely Puig, Kering, PVH, OTB, LVMH, and Richemont, and all other brands infrequently fall under one of the other classes of ownership.
These conglomerates have been acquiring brands since the late eighties and the same is true with conglomerates in the fragrance industry. They invest a big sum of money for image promotion, the reason why their chain of distribution seems to be very exclusive. If you look for a Chanel perfume for example, you will encounter their trained staff stationed at their counter. The staff will do a lot of explaining about the product and elaborate on the details of the brand. The luxury perfumes are stored in classy shelves to give them a look of sophistication. All these form price of the added cost that a consumer has to pay.
This sparked a controversy back in the 1990s. In UK, Superdrug tried to acquire stocks of 'exclusive' brands to sell in their stores at cheaper prices compared to those sold on big department stores. The fragrance houses reacted negatively, saying that selling their goods in stores such as Superdrug diminished their value since the buyers were not getting the full value of their buying experience. Is it really?
This is where parallel imports come into picture. When a business cannot get the supplies they need, they may look for them outside the normal distribution chain. They can do so in case there is an overproduction of stock or if they enter into a contract with a manufacturer or if they are introduced in a country where the tax regime is lower.
In reality, therefore, there are only a few big players in the fragrance industry. Conglomerates of luxury brand work hard to protect their image that’s why they make sure that the stores selling their products conform to their criteria. The criteria includes the layout of the store, the training of the staff and such other details. This situation gives birth to the so-called grey market where parallel imports thrive.
Graduated in late 2003 from School of Computer Science in RMIT University majoring in software engineering. Employed by Coles Group developing Coles Online until it was taken over by Wesfarmers in 2007. Co-Founder of FeelingSexy.com.au and Lead programmer since 2006.