How to Start a Fragrance Line

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Are you thinking of starting a fragrance line? You're in luck. The global fragrance market is forecasted to have a 3.7% compound annual growth rate between 2019 and 2025. It was worth over $70 billion in 2018, and it continues to grow each year.

Research the fragrance market and choose your niche before launching a custom perfume. You are offering an exclusive product, so it's important to carefully define your audience and use two or three distribution channels rather than trying to be omnipresent.

Research the Fragrance Industry

Whether you want to design a custom fragrance or sell brand-name perfumes, research the market thoroughly. Study the latest trends, define your audience and check your competitors. Analyze popular companies to see what they do best and what could be improved. If you're planning to ship your products worldwide, make sure you have a clear picture of the global fragrance market.

The U.S. perfume industry generated about $3.6 billion in 2019 and has grown 2% per year since 2014. A large share of its revenue comes from department stores. Eau de parfum, eau de toilette, eau de cologne and perfume extracts are among the most popular types of products. Many brands are now offering natural fragrances and ditching synthetic ingredients, and that's an aspect you need to consider, especially if you want to make your own cologne or custom fragrance.

Consumer income has the biggest impact on perfume sales. Fragrances are not considered essential goods; therefore, when income falls, the demand for these products declines as well. If you intend to sell perfumes online, seek ways to lower your expenses and pass on the savings to your customers. In a 2015 survey, nearly 70% of respondents said that getting a good price is essential when shopping for fragrances over the internet.

Find Your Niche

Customers' demand for exclusive and identity-based brands is shaping the fragrance industry. More and more brands are offering niche perfumes with original scents and natural ingredients. Designer perfumes, by comparison, appeal to the masses and can be found in most stores. Niche fragrances come with a higher price tag but last longer and appeal to specific customers.

Find your niche before starting a fragrance line. Decide whether you want to offer drugstore perfumes like Old Spice, designer fragrances, designer limited-edition scents, niche perfumes or indie fragrances. These products can be further broken down into several categories, including eau de toilette, eau de parfum, unisex fragrances, men's fragrances and so on. Depending on the ingredients used, they can be organic, natural or synthetic.

Niche perfumes and indie fragrances are now a billion-dollar industry. Byredo offers unique scents with Eastern and Western influences, which appeal to a more thoughtful customer, while Bois 1920 caters to families. D. S. & Durgahas created a unique line of luxury fragrances inspired by legends, ancient rituals and historical events. Another important distinction between niche fragrances and designer perfumes is that the former invests in service rather than marketing; additionally, they often have their own perfumers and use a selective approach to product distribution.

Design a Custom Fragrance

Once you've found your niche, reach out to suppliers and vendors. Request multiple quotes and then estimate the costs involved. Study the most popular perfumes on the market to see what they have in common and what makes them stand out. Read fragrance line reviews to better understand customer preferences.

When it comes to starting a fragrance line, you have two options. You can contact suppliers, hire a perfumer and do everything yourself, or you can team up with a company that creates private label perfumes. MeFragrance, for example, can design a signature perfume based on your requirements; all you need to do is to choose a bottle style along with your favorite combination of essential and fragrance oils. The company will create three unique samples and design packaging that incorporates your logo and other branding elements.

Another example is Privé Label, which produces niche perfumes and cosmetics. They will not only create a unique fragrance but they also handle bottle design, packaging, printing, marketing, branding and product distribution. If you prefer to do it on your own, expect to pay a lot more. According to Alpha Aromatics, it costs anywhere between $8,000 and $10,000 to produce 200 bottles of perfume.

Make a Business Plan

Next, put everything on paper and draft a business plan. Describe your fragrance line and its characteristics, define your target audience and outline your goals. This document should also include an overview of the industry and your competition as well as financial projections, legal requirements and marketing strategies. Consider the following aspects too:

  • Where are you going to get your ingredients, bottles and packaging?
  • Who will design the bottles?
  • At what rates will you be buying?
  • How do you plan to sell your products?
  • What distribution channels do you prefer?
  • What does your marketing plan look like?
  • Who will be in charge of what?
  • What will be your profit margin?
  • What services are you planning to offer?

Decide whether you want to sell online, offline or both. A brick-and-mortar perfume store has different requirements than an online shop. You may need to hire a store assistant and security guards, apply for zoning and signage permits, pay rent and more. An online store, on the other hand, is easier to maintain and involves less paperwork and lower costs.

Cover these aspects in your business plan before starting a fragrance line. Ideally, conduct a SWOT analysis as well. This acronym stands for strengths, weaknesses, opportunities and threats. The first two are internal factors that influence business growth and development, while the last two are external factors over which you may not have control.

Achieve Legal Compliance

The legal requirements for starting a fragrance line depend on your location, business model and more. The first step is to register your business with the state and decide on a type of legal entity, such as a partnership, corporation or limited liability company. If you're planning to launch a small-scale perfume business, you may opt for a sole proprietorship. LLCs are typically the go-to choice for perfume development companies because this business structure protects you from personal liability and has more flexible requirements than a corporation.

If your goal is to build a strong brand, consider registering your trademark. The United States Patent and Trademark Office offers three types of application forms that you can fill out online. Next, apply for an employer identification number, business licenses and permits. A brick-and-mortar fragrance store may require permits from the local fire department and other organizations.

Research your insurance options too. At the very least, you will need general liability, workers' compensation, equipment and property insurance. If you decide to apply for a loan or grant, consult a financial adviser to ensure you meet the legal requirements.

Promote Your Fragrance Line

Niche perfume brands focus more on customer service and less on marketing. However, you still need to promote your business and raise brand awareness; otherwise, you won't be able to reach your target customers. Draft a marketing plan with your audience in mind. If you're targeting local customers, advertise your products in newspapers, beauty magazines and online. TV, radio advertising and direct mail are particularly effective for local marketing.

Remember, you're selling exclusive fragrances, so don't try to be everywhere. Focus on a small number of distribution channels or stores to avoid ubiquity. Set up a website, display your products and leverage social media channels like Facebook, Instagram and YouTube. Create engaging videos and launch online advertising campaigns targeted to your audience.

Your marketing strategy should appeal to all five senses. Make sure your ads describe the scents you are offering. Use high-quality photos and videos that leave your customers craving more. Distribute branded merchandise such as T-shirts, pens and coffee mugs to your staff and employees and put your logo on your company's cars.