By supporting its sales staff and bringing off-price luxury goods to customers, this retail and wholesale company will weather the storm.

At the end of February, Perfumania Holdings, Inc. finished the bulk of its corporate integration process following the August 2008 merger of a national off-price designer fragrance retail chain and a wholesale fragrance company.

Mike Katz, current president and CEO, joined the company in 2004 and helped facilitate the merger. He said it’s been a long and challenging process, but the result is a retailer that’s maintaining its strength despite a recession.

Perfumania opened 57 new locations in 2008 for a total of 356 stores nationally, with emphases on the New York metro area, California, Texas, Florida, and Puerto Rico. Previously, the retail company was based in Florida, and Katz said one of the biggest challenges was relocating the warehouse to New York.

“There are a number of offices we’ll keep in Florida to support some reduced regional departments, but we saved a lot of money by consolidating warehouses and our marketing and accounting departments in New York,” said Katz. “We’ve hired between 80 and 100 new employees to do that, but luckily, the reorganizing behind the scenes didn’t effect our network of stores.”

That’s because Katz and the Perfumania management team have a very clear idea of their role in the company: supporting the sales associates and managers in the field. Retail makes up roughly 60% of the company’s total business, and when Katz and his team first arrived, strengthening the store network was their first priority. Today, they meet with a rotating committee of district managers, regional managers, and selected store managers every quarter, and Katz said the district managers themselves communicate more regularly. He added that especially in today’s economy, it’s important to support and motivate sales associates.

“The corporate office doesn’t sell anything; it’s the associates on the floor selling product who drive our success,” he said. 

Elements of success

Katz cited four specific values that have guided Perfumania’s success in the midst of a recession: service, quality, selection, and value pricing. Nearly every sale in a Perfumania store happens through an associate. That makes for many potential interactions with customers, and the 

company aims to make them all positive through strong support and training programs. 

Hiring the right people is crucial in that endeavor. Katz said Perfumania looks for people who want more than just a part-time job. The company uses a mentoring program in which managers grade associates and identify candidates for promotion. Favoring the promotion of current employees, according to Katz, helps create a knowledgeable management team and a more customer-centered culture.

Perfumania’s high quality products and wide selection are factors of its close relationships with manufacturers. “We’re fortunate enough to be working with some of the biggest names in this industry, and they understand that, by being receptive to our pricing model and supporting us with consistently high quality product, both of our businesses succeed,” said Katz.

In addition to third party products, the company also holds licensing rights for specific brands, like Bijan, Michael Jordan, and Royal Copenhagen. As part of its wholesale division, Perfumania manufactures and distributes those brands in its own stores and beyond. This year, the company introduced several other new brands, creating a diversified offering in the company’s locations. Katz said there is huge growth potential for the company in this sector. The challenge, he explained, lies in making the right partnerships to complement its customer base.

But today, no one piece of the Perfumania philosophy plays out so well as value pricing, and Katz and his team are focused on continuing to find the products with the highest demand and pricing them attractively. 

“We offer a luxury item at a value our customers can’t find in many other places. Although this is a terrible time for retailers, we see the opportunity in reaching out to new customers who might have otherwise thought they’d never afford our goods,” said Katz.

Next steps

In the year ahead, Perfumania plans to open 20 new stores; a more modest goal than Katz and his team had previously hoped for but a more ambitious one than many retailers. Perfumania tends to cluster stores together to take advantage of advertising dollars and economies of scale. Instead of trying to expand into new geographic markets, the company will open stores in high-traffic outlet malls in their current regions.

Katz predicted that outlet malls will see steadier traffic than regional malls in the next 12 months as American shoppers stay focused on spreading their dollars as far as they can. However, Katz said early next year, Perfumania hopes to roll out a new store design that should fit better in upscale, regional malls. 

“In talking with our managers and sales associates, we learned that other chains in these kinds of malls were upgrading and adopting new looks that were getting customers excited,” Katz said, adding that the company’s manufacturing partners have had a hand in upgrading the look of its stores, too. “We’ve had a new model in design for roughly eight months now, and we see great success for it in maybe 18 months as the economy stabilizes.”

A big growth sector for the company will be its online business. Currently, Perfumania’s Web site makes up less then 5% of its total sales, and, although Katz said the company is happy with the overall look and feel of the site, there are big steps to take. In the last few weeks, Perfumania brought a team of Web developers in-house for the first time. They will focus on search marketing techniques, and the company will seek out new partnerships to help drive referrals to the site.

“Every retailer is doing everything they can to condition themselves to succeed in this new economic environment, and our focus on supporting our field staff and bringing value to our customers will be what sees us through,” concluded Katz. 

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