March 2024 sees the fashion industry enter a new precarious state. With a slew of longstanding creative directors stepping down, an impending economic downturn and sales slumps forcing brands to diversify, it appears as though the battle for profits comes down to the beauty industry. With consumers tightening their purse strings, brands are using their beauty and perfume lines vis-a-vis the “lipstick effect”, which is an economic term whereby customers are more likely to spend money on small indulgences like a premium lipstick as opposed to large purchases. LUXUO looks at how the fashion industry plans to leverage on its beauty counterparts in the near future.
Creative Director Conundrum
First, the creative director conundrum. Last week, Dries Van Noten released a statement confirming that he will be stepping down from his namesake brand at the end of June. “I want to shift my focus to all the things I never had time for. I’m sad, but at the same time, happy,” said the Belgian fashion designer. Shortly after, Valentino’s creative director Pierpaolo Piccioli announced that he would be leaving the Italian fashion house after 25 years to be a part of a new “creative organisation”. However, if Ludovic de Saint Sernin’s return to his eponymous brand upon leaving Ann Demeulemeester after a six-month stint in 2023 has taught us anything, it’s that nothing is set in stone. These industry shifts could be a sign of new creative direction as seen with Alessandro Michele’s Gucci and Jeremy Scott’s Moschino or perhaps by the decisions made by anonymous stockholders. Perhaps now is the new era of the “all-encompassing creative director” — the multi-hyphenate who understands fashion and fragrances.
If one recalls, it was Tom Ford that revolutionised the Gucci brand during his tenure from 1994 to 2004 with fragrances playing a key part of Gucci’s expansion strategy. Gucci Envy, Gucci Rush and Gucci Pour Homme contributed to the brand’s success in the perfume market but it was also his salacious campaigns that caused a controversy. At Gucci, he made the now-famous “G” logo “landing strip” for Gucci’s Spring/Summer 2003 campaign but his rise in olfactory success arrived when he helmed his eponymous label Tom Ford with the Black Orchid and Neroli Portofino fragrance in the early 2000s. The fragrance line was marred with controversy for its hypersexualised (and now banned) “vulva” campaign visual which was a not-so-subliminal connotation that the fragrance was the smell of a woman’s nether region. Alongside this, his salacious representation of Gucci’s brand image saved the company from near bankruptcy.
Sales Slump Saved by Perfume Power
Next came reports of luxury conglomerate Kering losing approximately USD 9 billion in market value after warning of a slump in China sales. As a result, luxury brands are turning to beauty. LUXUO previously discussed how luxury brands were leveraging on the growth of Southeast Asian countries. Now, LVMH-owned beauty brand Sephora aims to ride the “lipstick effect” wave as it sees more growth amid the continuing economic downturn.
As of 2023, LVMH’s Perfumes & Cosmetic sector is valued at USD 8,948 million with fragrance extensions of fashion houses including Stella by Stella McCartney, Parfums Christian Dior, Givenchy Parfums, Loewe Perfumes, Kenzo Parfums and most recently Celine Beauté. Large conglomerates understand the value of the beauty and fragrance industry. There is a reason why Kering does not own Gucci’s fragrance extension. In 2023, COTY CEO Sue Naby told journalists that “there will be no discussion on the renewal of any of our licences before at least 5 years,” when asked about whether Kering would take back the licence for beauty products for its fashion label Gucci.
Perfumes are no longer sold as separate entities but are now marketed as the sensorial counterpart to a brand’s sartorial selections and integrated into one’s wardrobe. Take Hugo Boss’ BOSS fragrance range for instance. Boss released a collection of 12 scents that mirror tailored pieces found in men’s wardrobes. From the Courageous Rose that is aimed to mirror the touch of a silk tie on a suit to The invincible Bergamot that forms a powerful liaison with an urban leather coat. In opposition to generic fragrance marketing that evokes a mood or a sensual “fantasy”, each composition is tailored to be paired with a fabric — from suede to silk or outfit the final touch on an individual’s look before heading out the door.
The Beauty Battle
Once again LVMH finds itself squaring up against Kering as Celine Beauté was announced earlier this month as the extension to the French luxury label under the helm of creative director Hedi Slimane. The creation of Celine beauté is an expansion from Celine’s haute parfumerie collection launched in 2019 and is aimed at enriching the cultural roots, “promoting a French idea of femininity and allure, distilled over the last five years” by Hedi Slimane in his new institutional codes for the Maison.
So why are fashion houses venturing into the beauty industry? First off, beauty allows for brand extension. By venturing into beauty and perfumes, fashion houses can extend their brand and offer a more comprehensive lifestyle experience to their customers. Beauty and fragrances allow fashion houses to reach a broader audience and engage with consumers who may not (in the current economic climate) purchase their clothing or accessories. This is how the aforementioned “lipstick effect” strategy by LVMH comes into play. The division that houses Sephora was LVMH’s fastest growing by sales in 2023, with the beauty retailer garnering a 20 percent increase in sales to approximately USD 19.3 billion and a 76 percent rise in profits to USD 1.51 billion. LVMH’s new strategy is to hone in on the resilience of the beauty industry to carry them through any impending economic downturns in 2024.
Read More: 9 Beauty Superstars in Focus
Next, the diversification in launching beauty and perfume lines allows fashion houses to branch out into new revenue streams and reduce dependency on a single product category. This diversification can help mitigate risks associated with fluctuations in fashion trends and economic conditions. Next, the demand for luxury beauty and fragrance products is not as competitive as that of luxury fashion. Consumers seek quality and prestige over exclusivity. Fashion houses leverage their brands’ prestige and craftsmanship to attract customers to their beauty and perfume offerings.
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