8/3/16

The Rise Of Niche May Be A Curse


Painting By Bruce Pennington


In the last ten years, the world has seen a proliferation of niche perfumes unlike any in history, with literally tens of thousands of independent and luxury perfume makers flooding the market. I won't go on and on about the nature of the industry in this post (this will not be a long post), as I'd rather ponder the implications that this phenomenon holds for society. In my view, things look grim.

Perfume is without question a luxury item, an unnecessary accoutrement to one's grooming routine that usually costs more money than it's worth. Yes, it's wonderful stuff, and sure, we're all the better for having it, but personal fragrance is the sort of thing that enters dead last on the list of Shit You Must Have. Food, shelter, steady work, transportation, all are infinitely more important.

What do we know about the fragrance industry as it parallels the global economy? We have seen in the last decade the formation of an incredible economic divide. In America, the top one percent of the population holds almost forty percent of the nation's wealth, while the middle class flounders at less than a quarter percent. The average niche perfume costs about $140 per 100 ml bottle. Which demographic do you think is buying these fragrances? Clue: the majority of middle class American families aren't blowing their money on niche perfumes.

The middle class makes up the majority of the population.

With this basic knowledge in hand, we must heuristically conclude that the majority of niche buyers are people in the upper class. They are a small subset of the population, but they are the drivers of the burgeoning luxury market, which sees continuing growth.

This bodes ill for society as a whole. While the majority of the American people (and European people, for that matter) struggle on a day-to-day basis to make ends meet, and an astonishing 43% of Americans live paycheck to paycheck, a tiny subset of anywhere from 5% to 15% of the population is making enough money to fuel an industry. Part of that industry is niche perfumery.

Of course there are outliers. Some who firmly inhabit the middle of the middle class will be tangential spenders who are either (a) bad with money, or (b) so obsessed, they don't care how they spend every last penny of disposable income. These people will buy niche at any cost and accumulate bottles as collectors, or as investors looking to re-sell. You can't tell me Dan "My Mickers" on Youtube is a one percenter - although he may be upper middle class for all I know. There are certainly many Dans out there.

But their numbers aren't enough to keep the insanely expensive niche perfume industry alive and well. Someone else is doing that. It's no coincidence that the niche market exploded after the crash of 2008. In the ensuing eight years, the economy stagnated for the majority of the population, but boomed at unprecedented levels for the already rich.

The chickens may be coming home to roost. The rise of niche may be a curse.

This election season has been many things to many people, but one thing I've noticed is that everybody is very, very scared. Everybody. Not just the lower and middle classes. Even the rich are terrified. The Koch brothers are scratching their heads, trying to fathom how we got to this point, with Donald J. Trump and Hillary Clinton the two major candidates. Two terrible choices. And if you know anything about the Koch brothers, you know they usually aren't scratching their heads during an election. They're usually rigging the shit out of our make-believe democracy. The fact that even they don't know what's going on has me, quite ironically, a little worried.

If Hillary wins, America's relationship with Russia will deteriorate further than it already has. A new Cold War will begin, which will be a gateway to WWIII. President Putin has already expressed rankling concern with America's missile defense system, stationed in Romania and several other remote outposts flanking his country. He astutely holds our "democracy" in low esteem, and considers anti-American foreign policy justifiable not only in bureaucratic terms, but also on moral grounds.

It's also reasonable to suppose that a Hillary victory would do little to stem the tide of ISIS attacks in Europe and the Middle East. And I'm a firm believer that we're headed for another catastrophic recession, possibly even a depression, with our fundamentally unsound stock market sitting a little too pretty.

A Trump presidency would guarantee a recession, triggered by evaporated investor confidence alone, and an emboldened Russia would simply go ahead with whatever plans it has to retake annexed Soviet territories, spurring all kinds of conflict. North Korea would grow the stones to act on its fantasies, our domestic economy would crater those tidy jobs numbers Obama's been bragging about, social politics would mudslide back to the fifties (in the last two years we've managed to make it as far back as the sixties), and the world would soon label America's vacationing travelers "refugees."

This all falls shy of being apocalyptic, but consider that at near negative interest rates on bonds, and certain commodities holding on by a thread, the Federal Reserve has no bullets left in its gun. Another crisis means we're on our own.

What does this have to do with perfume? Nothing and everything.

I'm not suggesting that these bad political choices are directly related to the world of niche fragrance. But I am suggesting that the burgeoning luxury market of niche is a symptom of a greater problem. It's nice that the wealthy have so much money that they can finance these start-ups and buy their overpriced compositions. It's wonderful that brands like Memo and Byredo and Clive Christian and Creed have sprung from the loins of Europe and found homes on the napes of lily-white necks across the continent. There's nothing wrong with it on an objective business level.

But the fact that there are so many of these niche fragrances, thousands of them priced at $250, $300, $500 a bottle (or more), signals danger on a social level. As Nick Hanauer said two years ago, "The pitchforks are coming." He couldn't be more right about that.

Don't let your scent trail lead them to you.





8 comments:

  1. The death of the middle class is quite troubling in the western world. Even the UN is predicting a number of nations devolving into militarized states due to the inequality. I've even heard some extremist "notables" predicting the US will become a militarized gov't.

    I couldn't help but notice when I was in Moscow last year how many perfume shops there were touting high end niche & not so niche but very expensive fragrances. Granted, there were not a lot of folks shopping in those stores but something's going on if that many shopkeepers can afford to keep that much $ in inventory. Just how many wealthy Russian plutocrats there are that buy niche I don't know.

    We deal a lot with the newly burgeoning middle class Chinese tourists here in Nepal. We have a chain of gift shops in 5 star hotels. I'd guess the average middle class Chinese citizen makes $10-25,000USD - not an income that's going to allow them to buy these pricey niche fragrances. They're usually a very hard sell too- we show our finest hand loomed silk carpets or hand painted thangkas (portable Buddhist shrine) and they'll insist it's fake, printed, machine made etc. It take a few hours of education to get them to realize quality & value. We've had to stock our shops with some cheaper, very shiny jewelry pieces and pashminas that frankly look like they're made of dryer lint to accommodate their tastes and what they're willing to spend. China will definitely be growing the stones to act out it's fantasies regardless.

    I'm also wondering about how many of these successful niche perfumeries will be bought out by huge corporations such as Estee Lauder did with Malle. L'Oreal seems hellbent on owning every cosmetic, haircare & possibly fragrance co. too worldwide.

    Frankly, I haven't found much of this high priced & hyped niche stuff worth buying. There are a few gems out there but Le Labo, Juliette has a Gun, & Escentric Molecules are just silly. I like modern minimalism but this single synthetic substance artfully diluted & blandly packaged trend is hopefully over. I'm not a fan of the 'all natural' frags that are over in 45 minutes either. If there's any high priced scent (over $100USD) I really want I usually buy a 5 ml decant & live with it for a month or 2 to see if it's really worth the full purchase price. I'd guess the numbers of these decant vendors is going to rise as more perfumistas are priced out of niche.

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    1. If a big corporation like Lauder buys a niche brand, it means it is failing on its own and its owners want to cash out. Malle was clearly floundering and was bought out in a rescue bid. Lauder and L'Oreal could care less about maintaining customers. They just want a bigger "portfolio."

      I'm not as worried about China as I am about Russia. China is a dangerous (and dangerously large) country, but they have so many internal economic issues that I'm sure they've pegged every last second of their future to the health of the US dollar.

      Russia, on the other hand, makes me worried. Putin is old-school KGB and the sort of character who isn't easily intimidated. It doesn't surprise me that Moscow has fancy fragrance shops - at one time in the last ten years it was the wealthiest city in the continent. If America is going to survive it's going to have to learn how to play fair with Russia. Yes, their military is outdated and their people are generally not very well off, but their leadership is organized and ours is not.

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    2. "If a big corporation like Lauder buys a niche brand, it means it is failing on its own and its owners want to cash out."
      I don't know. L'Oreal just bought the booming IT Cosmetics brand for a whopping $1.2 BILLION- other American brands like Nyx, Redken, Carol's Daughter, Urban Decay, & Kiehl's were bought at ridiculously low prices. I agree with you about L'Oreal not wanting to maintain customers as most of products of the US brands they've bought have suffered in quality as a result of the buy out.

      China's going to expand & secure it's sea route for trade & ain't nothing anybody's going to do about it. They're building a train to Kathmandu & finishing the new highway to Pakistan. YAY! I can buy more cheap Chinese crap here in Nepal!

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    3. Buying IT Cosmetics doesn't = the loss of IT's identity though. IT was never "indie" or "niche." Maintaining that "indie" feel is what propelled most upstart niche brands ten years ago, and what its founders were religiously committed to. For any of them to allow a big corporation to buy them out suggests trouble to me, but that's just me.

      I do notice China building military installations on remote islands throughout the Indian and Pacific regions.

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    4. Buying IT Cosmetics doesn't = the loss of IT's identity though. IT was never "indie" or "niche." Maintaining that "indie" feel is what propelled most upstart niche brands ten years ago, and what its founders were religiously committed to. For any of them to allow a big corporation to buy them out suggests trouble to me, but that's just me.

      I do notice China building military installations on remote islands throughout the Indian and Pacific regions.

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  2. A lot of things that I care about in one post. As I am from Eastern Europe, we understand here the importance of elections results for us, when Russia is and always be our neighbour. And I agree with most of what you say about tendencies around, though it sounds apocalyptic. Almost.
    Very good post, thanks.

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  3. Seconding what Darius says - a thought provoking and worrying read, but one which chimes a lot with me too. Am very worried about Russia's next move, and feel sure Putin is chuckling about the cracks appearing in the EU as a result of Brexit. There is a slew of overpriced niche around and I for one am not buying it - or into much of it - anymore.

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