2024 Guide: How to Start a Perfume Line
This comprehensive guide will cover the logistics of starting a perfume brand and what to consider for marketing and retail distribution. We want to see the next generation of niche perfume houses flourish. This guide is intended for entrepreneurs and creatives who want to make the leap into the fragrance industry. Before dedicating your time and money to starting a perfume business, it is important that you understand how the fragrance industry works from a business perspective. This guide will give you a birds-eye view of the perfume industry and contextualize some common industry benchmarks.
Some Perspective on the Size of the Perfume Industry
The global perfume market size was valued at $48.05 billion in 2023 and is projected to grow to $50.45 billion in 2024. By 2032 the market is forecasted to be $77.52 billion with a CAGR of 5.51%.
Table of Contents
How to develop a fragrance
Costs associated with bringing a perfume to market
How to grow retail distribution
How to Develop A Fragrance
Innovating on scent design and bringing new olfactory experiences to the market is not an easy process. Fortunately, there are several ways to approach creating a perfume scent. Most perfume brands will either hire an independent perfumer, hire an aroma chemical company, or develop the perfume in-house.
Before diving into different approaches to creating fragrances, it is important to understand how scents are bought. How it normally works is a perfume brand will approach a fragrance house / oil house / aroma chemical company with a concept for a perfume. The fragrance house will create the scent with their team of in-house perfumers. Scents are treated as IP. Fragrance houses that manufacture perfumes will commonly lease perfumes to perfume businesses. This means that the perfume brand will buy the fragrance exclusively through the fragrance house. The perfume brand does not own the fragrance formulation and may not even know all of the ingredients in the formulation.
Hiring an Independent Perfumer
Often, niche perfume brands hire an independent perfumer to create a specific fragrance. An advantage of hiring a perfumer is that the perfumer already has extensive knowledge of perfumery and working with aroma chemical companies. This can be a great way to fast-track product development and minimize costly research and development expenses that you would incur if you were to attempt creating a perfume without any previous experience. A master perfumer will already have an understanding of the adjustments that need to be made to formulate a cohesive scent. Another advantage of hiring an independent perfumer is that you can often buy the fragrance rights outright instead of leasing the fragrance (as mentioned earlier).
A major con to hiring a perfumer is that your business operations are now reliant on an outside entity, which obviously comes with it’s own set of inherent risks.
For a perfumer who is new to the industry and without a portfolio of previous scents, you can expect to pay $500-2,000. If you are really trying to bootstrap the production process, you can hire some perfumers on an hourly basis, or for consultations on an as-needed basis.
Expect to spend $2,000-15,000 for a decently well-known artisan / indie type perfumer (e.g. someone who shows up in Art and Olfaction award shortlists) for each composition.
For master perfumers like Dominique Ropion or Alberto Morillas you can expect to pay $50,000-150,000.
Creating the Perfume Yourself
If you're creating the fragrances yourself and you're not already a professional perfumer, then the learning curve is going to take longer than you think. You can realistically plan on 2+ years before you make a marketable scent. It takes trial and error to learn perfumery. Refined fragrance compositions are not formulated overnight. Whatever budget you have planned for creating scents, double it.
Many niche perfume brands like Surge and Lutens, Etat Libre D‘Orange, and DS & Durga have built their brands with in-house perfumers (often the founder themself is a trained perfumer). Buying all of the materials to spin up marketable fragrances costs a lot of time and money, however, you will have much more control over the fragrance development process, and the benefits of this should be self-evident.
Using a Compounding House for Packaging
After developing a fragrance, the next step is to scale production. This involves:
Sourcing larger quantities of ingredients
Making the perfume
Bottling the perfume
Packaging the perfume
All of these processes require a dedicated space and a large upfront expenditure for equipment. Instead of taking production in-house, many perfume brands opt to outsource production to compounding houses. Perfume brands will specify the mixing, filtering, and bottling of the perfume for the compounding house. The compounding house will formulate the perfume. Sometimes the perfume brand will be left with the final step in the formulation, to dilute the perfume to the proper concentration.
A compounding house can buy larger quantities of ingredients in bulk which saves smaller brands a lot of money in ingredients sourcing. For indie perfume houses in Europe that use this service, it is commonly referred to as a "conditioning house".
Using an Aroma Chemical Company
Aroma chemical companies offer a full service perfume production solution. Their clientele is normally larger perfume brands. They tend to work with larger brands because they make money selling (a lot of) perfume compounds. It is not common for these aroma chemical companies to work with small perfume brands ordering 10kg of perfume because they won’t make their money back. Many aroma chemical companies don’t even charge clients design fees. A common scope of services includes perfume making, labeling, and packaging. As discussed earlier, their business model normally involves leasing the fragrances. Givaudan , Symrise, Takasago, Mane, and DSM-Firmenich are some of the larger aroma chemical companies in the perfume industry.
This business model is similar to a white label perfume business because the perfume brand is not producing the perfume themselves. The manufacturing process has been outsourced. This is not entirely white labeling because the perfume brand will work with the aroma chemical company to develop the scent rather than the aroma chemical company giving out pre-made scents with no input from the perfume brand.
Many perfume brands seek out contracts with well-established aroma chemical companies because they hire the best perfumers. Often graduates from the top Perfumology Schools end up working at these fragrance companies. Some perfume companies will actually hand out their briefs to a few perfume companies and they will fight to win the project with the best mod.
Costs Associated With Bringing a Perfume to Market
The average price for a niche fragrance is something like $400/kg before dilution in alcohol. At 15% concentration, you're looking at 15g of fragrance per bottle, or roughly $6. Some fragrances cost considerably more, but that's a reasonable ballpark figure.
For stock perfume packaging you can expect to pay $3-7 for the bottle. A nice heavy metal cap can be $3-7. The minimum order quantity for stock perfume packaging is very minimal for most vendors and shouldn’t be an issue.
For full custom perfume packaging, you will spend:
The custom bottle design can be $10,000-15,000
Custom molds for the bottle average $3,000-4,000 in China and $8,500-10,000 in Korea
Want to print directly on the bottles? Depending on how complex your bottle printing is and your volumes, you can be looking at another $2-3 per bottle
Expect to spend $20,000 for an order of custom perfume bottles, caps, and sprayers
Minimum order quantities for custom perfume packaging is normally 1,000 on the low end
$150-700 for artwork design for the perfume label
$200-1,300 perfume label printing machine
Note: Always ask for a sample of the perfume packaging before making a purchase order
Costs to Hire a Perfumer or Aroma Chemical Company
$500-2,000 for a recent perfumer graduate or a perfumer with a limited portfolio
$2000-5,000 for a decently well-known artisan / indie type perfumer
$5,000-30,000 for a master perfumer
$50,000-150,000 for the top perfumers in the world
Something to consider: That superstar perfumer you hired to make the fragrance costs the same amount, whether you made 100 bottles of it or a million. A $15,000 pricetag to develop a perfume composition, split among 100 bottles is $150/bottle, while if you're selling thousands of bottles, it's pennies.
$200-400/kg for the fragrance base will get you something that smells pretty great. Each kg is roughly 65 100ml bottles of perfume.
Perfume Packaging Costs
For stock perfume packaging boxes that have a colored or glazed surface, depending on order volume you can expect to pay $2-6.50 per box. A refined iphone-style clamshell packaging with printing and gold foil stamping can run at $15/box unless you order in large quantities.
Total Costs to Make A Perfume Bottle That Is Ready to Ship
So we’re at $6 per unit for the juice, let's call it $5 for the composition of the scent, $3 for the bottle, $4 for the cap and sprayer, and $5 for the rest of the packaging.
That's $23 total. This total does not account for labor costs, storage costs, and the product hasn’t been distributed or shipped yet.
These ballpark numbers also do not account for any marketing and advertising spend.
Costs Associated with Retail Distribution
Lets say you want to sell somewhere like Barneys, they only pay 20% MSRP when buying your fragrance. Larger retailers like Sephora, Nordstrom, and Macy’s you can expect to sell at 25%-50% MSRP.
Lets use a 40% MSRP. So if you sell at $110/bottle (plus tax, etc), you would be selling to the retailer at $44/bottle. After taxes and processing fees, your profit margin has been compressed, leaving you with $12-22 per bottle.
Let's double that price tag.
If you are selling at $220/bottle, you're making $30-65 per bottle. The fixed expenses to make the perfume stay the same while the MSRP price and taxes are the only thing that scales with the increased price tag. Even if your other business expenses are zero, you have to sell a lot of bottles to make a reasonable living.
With everything factored in, you should be looking at $17,000 as the minimum amount needed to start a niche perfume business that isn’t cutting corners on outer packaging and has a marketable scent. This number was corroborated by Victor Wong, the owner of niche perfume brand Zoologist Perfumes, who publically said on an online forum that $20,000 is the minimum needed to start a perfume line.
How to Grow Retail Distribution
Getting into retail is crucial to expand your distribution and increase total revenue. While the e-commerce sales channel is the fastest-growing channel for the fragrance category, the majority of perfume purchases are still happening in retail stores.
Before diving into different ways that you can positively influence landing a spot on a retailers shelf, it is important to understand what a retailer is looking for when determining if they should stock a particular perfume.
The answer: can your perfume drive sales?
That is it. It really is that straightforward. Obviously, there are other factors that get taken into consideration, like does your product fit within the existing catalog, whether you can iterate on the product, can you bring in foot traffic etc. This is all secondary to the ability of your product to generate sales. Preferably high ticket sales in order to increase top of line revenue for the retailer. I want to lay this out forthrightly so that you can more accurately understand retail distribution from the buyer’s perspective. When you are able to see retail expansion through this lens, you will be better able to negotiate with buyers. Buyers represent businesses, and the primary objective of a business is to make money. Your perfume lines’ unique branding and the popularity of your social media accounts are irrelevant if you aren’t generating adequate sales based on your allotted shelf space.
Factors Needed to Increase Your Perfume Stockist List
Previous Sales: As already mentioned, having a strong sales history is paramount to getting into retail stores. When you are negotiating with buyers, this will be the first factor considered. It helps to have sales from other retailers that you can use to validate your perfume. Having direct-to-consumer sales is also a proof point that cannot be dismissed, however, the DTC sales channel and retail sales channel are very different so buyers will not judge your product’s retail sales potential based solely on its previous DTC sales alone.
The Juice: How refined is your scent? Is it in line with existing consumer fragrance trends? This should be pretty self-evident, but you need to have a great fragrance that is unique and well composed in order to make it onto retail shelves.
Brand Awareness: How aware are people of your perfume brand? Retail buyers have multiple ways of analyzing this. Previous sales, social media following, website traffic, email list size, other sales distribution channels, previous PR.
Manufacturing Ability: Your ability to increase production and the robustness of your supply chain is crucial for larger retailers. If they need more of your perfume, they expect you to be able to deliver it within a reasonable timeframe.
Packaging and Branding: Your packaging needs to be high quality to get onto sought-after retail shelves. Your packaging is important with online DTC sales, it is VERY important with retail sales. Your perfume packaging has to get people to stop scrolling with online sales. With retail sales, your perfume packaging has to get people to stop walking. Big difference. A perfume with good merchandising will also help it stand out. If you are able to provide merchandising along with your perfume, this will help retail buyers feel more comfortable giving your product shelf space.
Pricing Strategy: Retailers want a higher Average Order Value (AOV). They don’t just want a product that moves, they want a product that boosts top-of-line revenue. If your perfume pricing is on the higher end of the retailer’s own pricing range AND your product sells, you will have more negotiating room.
Can You Generate Foot Traffic: If you have a big email list and social media following, you can potentially drive a lot of people to retail stores. We know retailers care about this metric because oftentimes the retailers will specify in the contract that the perfume brand emails their lists with the update that they are now carried in the new retailer. It serves as social proof for the perfume brand and also drives brand recognition and potential foot traffic to the retailer.
Does Your Brand Appeal to a Specific Niche: If a retailer has a gap in their product offerings that your perfume can fill then you have more negotiating leverage. This product gap can manifest in a number of ways. For example, lets say that the retailer currently doesn’t carry a single Oud perfume. Parfums De Marly will have an easier time getting the retailer to carry their Haltane perfume. Or maybe the retailer is looking to appeal to the young, male, counterculture demographic. A brand like Room 1015 has a lot of power to negotiate shelf space because its brand fills that niche and can potentially bring that demographic into the retailer’s store.
Expanding your retail distribution should always start with researching the retailers that you want to carry your product. Understand their needs. Who is their customer avatar? How might they be looking to expand their customer demographics? What are their current perfume offerings? What is their pricing strategy?
Another consideration is that different types of retailers will be assessing whether to carry your brand based on different criteria. The metrics that are taken into consideration by an independent boutique buyer will differ significantly from what a buyer at Macy’s is looking for. Understanding this will help you more smoothly roll out your perfume into retail.
You will not find a niche perfume brand that begins its retail distribution with Sephora, regardless of how well-funded the perfume brand is. The normal progression of retail expansion looks like local events > independent beauty product retailers > independent perfume boutiques > regional beauty product retailers > national retailers and department stores.
Tactics to Connect with Retail Buyers
The best way to position your brand and give you more leverage in negotiation is to build your brand online and have retail buyers approach you. This is the best-case scenario, if you build an incredible perfume brand the doors will swing open for you and buyers will be tripping over themselves to carry your products.
Major retailers have specific days at their corporate offices where you can go and pitch your product. Researching the retailer beforehand is mandatory if you want to find success with this method.
LinkedIn is still the number one platform to connect with people in the corporate world. Many brands have found huge success in connecting with retail buyers by upgrading to LinkedIn Premium. When you first connect with the buyer of a specific retail business, do not immediately pitch your brand. This is a common mistake many salesmen / BDR’s and brand owners make with their outreach.
Tradeshows are the lifeblood of many industries. Within the fragrance industry and broader beauty product industry, there are numerous tradeshows and events including ScentXplore, Esxence, ASD, and WPC to name a few. Having a presence at these trade shows is not enough. You don’t need to have a booth or a sponsorship slot at these events. It certainly helps get your perfume brand exposure to the right people, however, you can also connect with decision-makers by networking the old-fashioned way and just meeting people. Shake as many hands as you can and bring business cards and samples (if the event allows it).
Cold email outreach
Important Note: You need to work on your sales pitch. You are the expert on the notes of your perfumes. You are the expert on your logistics and production capabilities. They are not. Practice your sales pitch until it becomes second nature. Review your sales pitch script and have others review it.
Record a video of yourself giving the pitch on your phone and then watch the video twice.
Watch the video with the sound off. What do you notice about your body language? What are your facial expressions conveying? Do you look confident?
Put your phone screen face down so that you can only hear yourself speaking. Do you sound confident? Are you using too many filler words? Are you not concise? Do you talk about the retailer’s needs?
You have to be constantly refining your sales presentation. Every word should be analyzed. Every question you expect to receive should have a prepared answer. It should be second nature to you. Above all else remember, buyers are people. You should always default to making an authentic human connection.
Final Note: You can never contact a purchaser or a buyer too much. If you started annoying them, they would have let you know. You need to be consistent. Make sure that if you send emails, it's every few days. These buyers are getting thousands of emails every week. You are not top-of-mind for them. But as soon as they hear about consumer trends changing towards fragrances similar to your perfume line, you become top of mind for them because you kept reaching out to them and they remembered.
Consignment and Wholesale Pricing
You can take some of the risk off the board for the retailer by offering to sell your perfume with a consignment agreement. This means the retailer does not pay upfront for the perfume and only pays for the perfume they are able to sell. For consignment, the retailer will often accept a lower margin as there is no up-front cost, aside from the shelf space your product takes up. For wholesale pricing, the retailer will expect a higher margin for themselves because they take on all the risk when they buy your perfume. If the perfume doesn't sell, that's money lost. Consignment is a good place to start when you are working with retailers until your product is a proven seller. Then the retailer could upgrade to wholesale pricing as they start making larger purchase orders.
This might be obvious but, lead with your best, top-selling perfume. The probability is low that you get your entire perfume line into a retailer. If you can get your top perfume into a retailer and it sells well, you can expect a follow-up email asking for more perfumes from your collection.
Conclusion
Starting a perfume business involves a lot of moving parts. You need to understand the buyer’s journey and be intimately familiar with the unit economics of your business. If you know your numbers and the business has a healthy profit margin, the most crucial aspect of growing your business is understanding how brand marketing works. The product category of perfume is notoriously difficult to scale with paid advertising so you must find other ways to cost-effectively raise brand awareness. When you have a firm grasp of how everything comes together and how you should approach marketing, you can start pulling the big levers in order to grow your perfume brand.