Perfume price war intensifies

THE OFFICE of Fair Trading is expected to rule in the next fortnight on the legality of perfumiers refusing to let their products be sold at a discount.

While Chanel, Givenchy, Estee Lauder and the rest wait to see whether what they call 'mystique' and critics call 'profiteering' can be sustained, the Littlewoods group, which has 120 shops, has this week announced that it will sell the 10 most popular perfumes and aftershaves at a discount of up to 25 per cent.

Earlier this year Superdrug, a High Street discount toiletries store, reported the fragrance houses to the Office of Fair Trading for refusing to supply it with perfumes. Superdrug began selling the brand names at reduced prices in two of its shops and by Christmas will have extended the number to 20 out of its 670 stores. Superdrug and Littlewoods have had to obtain supplies on a legal but unauthorised 'grey market', mainly composed of wholesalers on mainland Europe and in the United States.

Although Superdrug has spent thousands on new perfume counters, the top makers maintain the stores do not have the right image or ambience for the sale of fine fragrances. The glossy magazines agreed, and have refused to take the group's advertisements for discounted perfume.

Nicholas Coleridge, managing director of Conde Nast, agrees that Superdrug was turned away because to accept its adverts would have upset the fragrance houses, who are good and long- standing customers.

About pounds 100m a year is spent on advertising perfume but attempts to maintain prices seem to be failing. Simon Hinde, senior editor of the Consumers' Association magazine Which?, said a survey for December's issue would show that a wide range of other high street retailers are already offering discounts, often more than those who have publicised their move.

By keeping quiet, they have managed to continue being supplied directly by the manufacturers.

Leading manufacturers fear the growth of discounting could lead to a change in the industry's economic balance of power.

According to the Economist Intelligence Unit, retail margins usually vary from 30 per cent (excluding VAT) for mass market perfumes to 40 per cent for finer fragrances. This compares with 20 to 25 per cent for general toiletry products.

If discounts became commonly acknowledged, all supermarkets would start to stock expensive perfumes, and use their vast buying power to negotiate discounts from the manufacturers, who would have to reduce their wholesale prices.

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