Dollars and scents.

• Author: Honingsbaum, Mark
• Position: Gray market of perfumes - Scams, Hustles, and Boondoggles

Dollars and Scents

Outside the main entrance to Garfinckel's, in downtown Washington, a Viennese waltz wafts over the sidewalk gently beckoning passers-by to the store's groundfloor fragrance department. Inside, in white coats, assistants stand ready with advice behind glossy booths stocked with the latest bottled dream. On a typical day, no small number of limousines will brush the curb and dispatch their cargo--the well-heeled women of Georgetown--into this other-world to play out their fantasies, whether it's Beautiful (This is your moment to be beautiful) or Poison (Poison is my potion). Their presence in the store, of course, also serves another purpose. It signals the fragrance's cachet.

A block away is a less elegant perfume department. This one belongs to Abdul Majid, a Pakistani who touts scents from a sidewalk stall. Here, the only wafting rhythms are from the boom-boxes of passing black teenagers. Majid's specialty is surgical instruments, but he also has Nina Ricci, Opium, and Paco Rabanne.

Abdul may not know it, but his stall is a part of the "gray market"--a bizarre network that circumvents the limited distribution of perfumes to the top department stores and puts scents in the hands of "less desirable" vendors like Abdul and the many like him who stand near the department stores on Fifth Avenue, Rodeo Drive, and the Miracle Mile. The gray market also includes many discount drug stores and "cosmetics conventions," where thrifty noses meet. And while you might think it's a boon merely for street vendors and frugal shoppers, the gray market is actually a godsend for the perfume manufacturers. Here's why:

Selling scent is a tough business. For a number of reasons--including an aging clientele increasingly reluctant to spend $185 for an ounce of scent--sales of concentrated perfume at prestige outlets slipped from $231 million in 1980 to $208 million in 1985.

The market's not only shrinking, it's ferociously competitive. With some 800 fragrances, to sustain even those sales levels requires ever slicker and costlier promotions. Since the late 1970s, the cost of launching a new perfume has risen from $4-6 million to $11 million and up. Calvin Klein, for instance, spent $17.5 million in 1985 to launch Obsession in an advertising campaign that represented a new high in spending and a new low in sexual innuendo. In the Klein print ads, three blurred male figures pawed at the body of a naked female, while television commercials featured a young temptress breezily driving her boyfriend toward some unspeakable crime: "If Obsession is a sin, let me be guilty," he intoned as he was consumed by flames.

If your business is manufacturing clock radios or tube socks, there's a way to deal with a competitive market. You try to cut your prices or you hustle to get more stores to take your latest digital AM/FM model. But the perfume companies deliberately limit their products to fancy department stores...