The State of Fragrance In 2023

2023 is a year rife with shifting consumer behaviors, inflationary pressure, and supply chain issues. These troubles are affecting every category, and fragrances aren’t immune. Still, there were more than $4 billion in sales across brick-and-mortar and online retailers in the past year. Clearly, the market is signaling that this is an area where they don’t quite want to give up spending even as they’re tightening their belts. There are many ways an emerging beauty brand can grow in a recession.

However, this doesn’t mean the road ahead is clear of challenges. With more big names and brands entering the category and consumers asking for more from brands, emerging companies need to stay on top of the trends. Unfortunately, it can be difficult pinpointing the trends that are affecting your brand and which ones are passing you by. The key comes down to following the data and understanding your target customers.

5 Key Fragrance Trends to Keep an Eye On

In the past few years, the market has seen strong shifts and fragrance brands are dealing with a variety of factors that affect demand. Luckily, most emerging brands are agile and able to react and capitalize on trends more quickly as they grow.

With that in mind, here are 5 fragrance trends for emerging brands in 2023:

1. Brand Extensions are Succeeding

One of the biggest trends in online and in-store fragrance growth is the proliferation of brand extensions. That is, new fragrance products being introduced from existing brands that weren’t previously competing in the space. In the brick-and-mortar environment, 2 of the 5 fastest-growing emerging online brands are brand extensions with nearly $6 million in sales last year combined. However, in this environment, the extensions come from brands with an already strong presence in personal care.

In the online space, this is even more common. Half of emerging online brands are brand extensions. And 3 of the 4 fastest-growing emerging online brands are. So, this shows that brand awareness and loyalty can go a long way when introducing new product offerings. If you’re already in the beauty industry, but not in fragrances, there may be a path for you to get your foot in the door with breakthrough innovations.

2. Health & Wellness Claims Gaining Traction

One thing is very clear, wellness and sustainability matter to the public. Becoming more popular on-shelf and online are “free-from” claims. These are statements made on packaging or advertising that highlight the absence of certain ingredients or substances in a product. For example, a product labeled as “allergen-free ” is claiming to not contain any allergens. This is important for people with life-threatening or disruptive allergic conditions. Similarly, a product labeled as “paraben-free” is claiming to not contain any chemicals in the paraben family, which were common in beauty products for years.

These claims were present among emerging 4 of the top 9 fastest-growing emerging fragrance brands. This falls in line with growing consumer concerns about health as well as an increased need for personalized products. More importantly, these brands are doing a good job of highlighting these claims to get discovered by consumers. It’s important to use stated and qualified product attributes that make it clear to consumers that a product is appropriate for their individual needs.

3. Online Sales Continue to Grow

Currently, online sales account for one-third of beauty and personal care sales. However, In 2022, the online fragrance market was worth $3 billion. Even better, there was an astonishing 21.4% growth year-over-year. Beauty brands are also some of the greatest beneficiaries of the growth of social media marketing. It gives brands the opportunity to highlight their products and target consumers more accurately. For example, many beauty brands are using TikTok to grow and reach a younger, more active audience.

However, it’s also important to understand how the eCommerce DTC model for beauty brands has fared in recent years. The DTC model once seemed a pretty secure option for beauty and personal care brands launching in the U.S., but NIQ sales data from 2021 paints a different picture. Between October 2021–September 2022, eCommerce DTC sales reached $3.5B in the U.S. up by +7.8% from the previous period. However, owned DTC eCommerce site sales have stagnated, up by just +1.3% on the previous year and MLM DTC sales have been hit hard—dramatically dropping by -25.1%. Many have even asked if the DTC beauty model will survive 2023. Understanding how and where your target customers shop will be key to navigating this shift.

4. In-Store Gains are Slow

In 2022, the in-store fragrance market was worth $1 billion, with a growth rate of only 2.9%. Clearly, in-store fragrance sales are not surging in the way online sales are. However, there are many reasons for this discrepancy, and understanding them can help you better align for sales online and offline. First, though consumers are shopping in-store more than during the pandemic, the focus on convenience and shopping ease has shifted many sales to online or click-and-collect. Additionally, many emerging brands begin their journey in the eCommerce world, not in retail. As such, the overall market for frangrances online is much larger.

Still, this doesn’t mean you should ignore the brick-and-mortar channel altogether. Though 40% of Health and Beauty sales occur online, in-store presence is still key. In fact, 50% of consumers surveyed prefer to pick out personal care items personally in the store, even when collecting an order they made earlier. This shows much the omnichannel environment is affecting sales across the category and the opportunities for upselling and cross-selling.

5. Multipurpose Products Making an Impact

Another major trend impacting the fragrance market is the growing use of multipurpose products. That is, products that are both fragrances and serve an additional purpose. Consumers are filling their scent needs through a variety of products including scented shower gels, body lotions, hair mists, and more. Instead of spritzing perfume or cologne on themselves, consumers are turning to beauty products that negate the need for a fragrance altogether. In fact, 2 of the top 9 fastest-growing emerging fragrance brands fall into this category and show the impact a nontraditional approach to the category can be.

With so many consumers taking a nontraditional approach to fragrances, it can be difficult for the more traditional brands to make any headway. If you are already in a position to add to your assortment or modify an existing product, it may help you compete. If not, there are still plenty of opportunities to take these brands on by focusing on your product differentiators and value.