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Scents and sense -- or perfumes for peanuts?

By Johanna Gibson, David Pearce, Jeremy Phillips and Ilanah Simon.

Having just read "Estée Lauder defends brands", a Financial Times article published today and composed by Jonathan Birchall and Francesco Guerrera in New York, the IPKat has been pondering over the purchasing patterns of the market for scents, cosmetics and so on. This is because it is a long while since he has read anything particularly positive about selective distribution agreements. The article reads, in relevant part,

"Europe's small city-centre perfumeries and luxury boutiques have gained an ally from across the Atlantic in their continuing efforts to prevent the top brands they sell being available at cut-price rates on the internet.

William Lauder, chairman of Estée Lauder, ... warned ... that changing European competition laws could turn the business of buying beauty and skin care brands into an experience akin to flying on EasyJet, the low-cost UK airline.

Estée Lauder, whose brands include Clinique, MAC and Aveda, currently benefits from a "selective distribution" exemption to European competition law that allows the company to sell exclusively to authorised retailers, including the small city centre shops that are part of the traditional fabric of retailing across western Europe.

But the European Commission is reviewing the selective exemption rights that it grants to leading luxury companies that allows them to restrict distribution to favoured retailers and to their own branded e-commerce websites.

Mr Lauder described small local retailers as having "a real familiarity about the local clientele" that is "one of the key, core fundamental social principles of so many cultures and societies in Europe".

Mr Lauder compared the potential impact of taking away the selective distribution exemption to the experience of flying on EasyJet. "You got on the plane, they throw you a bag of peanuts . . . that's a commoditised experience," he said.

... the Commission is not expected to contest the "selective distribution" principle when it puts new draft guidelines out for consultation next week.

However, there has been heavy lobbying over some of the details and Brussels-based advocates for the brand manufacturers say there is still concern that, if a luxury manufacturer does not have an authorised distribution channel in one of the European Union's member states, unauthorised distributors could move in.

They are also concerned that imprecise language in the proposals could encourage litigation - although they say the unpublished draft has improved".

The IPKat notes that, when faced with the opportunity to purchase expensive perfumes and cosmetics, a very large number of consumers excitedly jump at it. If nothing else, this suggests that there exists a market for expensive products sold cheaply and without the hassle or the embarrassment that some feel when purchasing the equivalent product following a face-to-face encounter with an upmarket assistant in a fancy shop. It's equally plain that there are some people who value the experience, the intimate personal touch, the advice and the ambience that a sweet-smelling retail outlet can provide.

Full post as published by IPKat on July 23, 2009 (boomark / email).