How business, doctors and journalists prey on your food anxieties I

I
By selling at big discounts <strong>and</strong> from no-frills stores,
Perfumania was going to bring perfume to the masses .
More than a few things went wrong .
Scents off
By Zina Moukheiber
Perfumaria's
= chairman,
Simon ralic
Getting away
from deep
discounts .
BROTttsRS[N Lntv Ilia Lekach <strong>and</strong> Simon
Falic took Perfumania Inc . public
in December 1991 through Josephthal
Lvon & Ross . wall Street
loced the "concept"-pcrtume for
the masses- Pertumania aas a chain of
no-frills stores offering more than
170 br<strong>and</strong>s of expensire pertt:me--
Estee Lauder, Cahin Klein, Chanelat
20% to 700 off department store
prices . The stock quickly surged from
S850 to 525 .50 a share .
Lekach talked about a smelle %ersion
of ToNs "R" Us . He projected
500 stores bv 1998, <strong>and</strong> e~'entually as
manv as 4,000 .
Four vears later Perfttmania has
added a net total of 109 stores <strong>and</strong> its
stock has sunk to 4s/sLekach <strong>and</strong> Falic <strong>and</strong> their partisans
had overlooked one cogent fact :
Manufacturers, ni %cere reluctant
to sell to stores that undercut
their dependable, full-price customers
. So Perfumania depended for its
supplies on the grav market, the net-
~cork of unauthorized <strong>and</strong> authorized
distributors, wholesalers <strong>and</strong> middlemen
around the world . It also took
advantage of price discrepancies benveen
countries-a sort of arbitr:tge-since
perfume makers tend to
charge much higher prices in the U .S .
than else" here .
But grav markets are not ahvavs a
dependablesourceofsupplc ;coutake
stihat is available . At times Pertiimania
had ample stock of, say, Volupte by
Oscar de Ia Renta . but sometimes it
didn't-<strong>and</strong> perfume buyers tend to
be tinickv about their fa~rorite br<strong>and</strong>s .
Neither could Pertiumania of}er the
depth of assortment found in a department
storc, the lotions <strong>and</strong> powders
ofthe same scent .
Then in 1992 Pertumani :t bought
a lot of L'Oreal's Drakkar Noir from
a supplier in France . The stut£alleged1v
Was counterfeic L'Oreal sued,
<strong>and</strong> Pertiimania «as forced to destrov
its stock of the fake Drakkar
Noir . To salvage its tarnished reputation,
it aerced to reimbtuse customers
. This~cost the company mer S3
million, <strong>and</strong> the company lost monar
in the fiscal vears endcd Januan' 1994
<strong>and</strong> 1993 . Its reoutation ~%ras se% 'erelv
damaged .
All is not lost, hoscever . ktakers of
ezpensi%re perfume arc incrcasingl% '
selling their products to the gray mar-
44
Forbes 0 August 14, 1995
http://legacy.library.ucsf.edu/tid/agf97d00/pdf