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The Scent Of Money: The Factors Of Perfume Cost

Posted by: Shopgirl, on: Wednesday, 14 May 2014

When you need to cut down on your spending, what are the things that you usually skimp on? Clothes, food and entertainment are usually the sacrificed goods when one is looking to employ cost-saving methods. However, the one thing that rarely makes an appearance on this list is your fragrance. Why is that? While you change your clothes on a daily basis at the very least, your perfume is something that you put on every day. It goes directly on your skin, and you will feel significant different if you didn’t have it on you. So while we may cringe at forking over $30 for a shirt, we don’t even blink when we part with $100 for a bottle of perfume or cologne.

But have you ever stopped to think about why you are paying $100 for a fragrance? We have long assumed that this is the price of a good quality perfume, and this is the reason why we do not question it. But little do you know that the perfume you are wearing on your skin doesn’t actually represent $100 worth of fragrance – not even half of that, and not even half of a half.

Are you prepared to be shocked? Here are the factors that determine cost for the standard perfume. For simplification, we are going to assume the perfume is priced at $100 exact.

The fragrance itself

You can find solace in the fact that at least some of your money is going towards the actual cost of materials in your perfume, which you would assume to be the most important and more expensive component. However, the actual liquid part of your perfume usually only makes up a tiny 2% of the price that you pay.

How astounding, you cry, $2 for the handpicked roses in my exotic fragrance? There lies the issue. While we have a nice picture in our heads on the rare and luxurious materials of our fragrances (i.e. the best flowers from a wild field in France, or the fragrant leaves from an exotic jungle in South America), that’s not often the case.

Synthetic scents are what create the perfumes that we buy, and they are mass manufactured in a laboratory. About 15% of the cost of the perfume is estimated to go into the actual cost of production known as the manufacturer’s overhead, but this is a general cost that pays everything from the production process to the CEO’s salary. Another 15% constitutes the profit that the manufacturer makes.

Marketing and the pretty stuff

Why do we have a pretty yet false picture in our heads about what goes into a perfume bottle? Well, we have marketing to blame and the bottle itself. Think of all the ways that a perfume company will market a perfume to make it a desirable product – celebrity endorsers, advertisements in major magazines, TV commercials, fancy launch parties – the list goes on and none of this is cheap.

Around 8% of the cost of the perfume you are using goes solely towards these marketing costs. At this percentage, manufacturers better be sure that any marketing they spend money on creates pretty pictures in our heads that will prompt us to purchase the perfume. If it’s a big-time celebrity behind the product, you can expect $4 to go into that celebrity’s pocket when you purchase the perfume – no wonder they’re so well off!

Most of us are swayed by pretty things, so 10% of the cost of a perfume goes towards the bottle and packaging. This is because these are part of the marketing too, art forms that will get you to buy a fragrance by enticing your eyes.

Last but not least, the prosperous middleman

Perfume companies don’t usually directly sell to their customers as they’ve got too much to worry about as it is. So, sales are delegated to a retailer which makes up the most expensive component of the cost of perfume – a whopping 46% - which includes the commission made by the person that sold you the perfume and the profit and overhead of the retailer.

In conclusion

With all of the factors that play into the cost of a perfume that are not involved with production, it’s a wonder that we still purchase perfume. However, we have to admit that the rush that we get when we buy a fragrance and the feeling of completeness when we wear it are priceless.

Of course the above article only valid for mainstream designers perfume, without mentioning brand I think you know what I am referring to. Niche perfume designers who claimed to use a lot higher percentage of natural ingredients and lower marketing cost most likely will have totally different costing.

I hope you find this article informative and I am very interested to know your opinion. Please submit your comment below.

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 Excellent post. Funnily enough, someone posted elsewhere criticizing this breakdown as not being business oriented. They also claimed it didn't address any fixed costs, insurance, electricity, etc. Quite hilarious when anyone with any level of business education notices you put overhead into the cost allocation at $0.15 per dollar of revenue along with variable elements of juice, bottle, packaging, and also expand on SG&A with endorsement & marketing.