A short cut to the scents business

It seemed like a logical move for Swiss Fragrances, Inc., an importer and supplier of imported fragrances for 20 years, to go into the franchising of kiosks that sell fragrances in smaller sizes. The kiosks are called Buy The Liter.

"We simplified the whole process. Instead of making the entrepreneur undergo a workshop on how to make and mix their own scents, we produce the ready-to-sell scents for them. All they need to do is concentrate on marketing. By putting their own labels on the product, one fragrance can be marketed under several different brands in the market," said John Chung, president of Buy The Liter, Inc., a unit of Swiss Fragrances.

Repacking

The business model involves selling 25 men and 25 women eau de toilette fragrances in liter-sized bottles. Sold at P1,200 per liter, the fragrances are meant to be further repacked by the buyers into smaller containers and sold to the end-consumer.

A variant is the starter kit, which also sells for P1,200, and consists of two units of 200-ml fragrances (eau de toilettes, one each for men and women); 10 units each of 10 ml and 30 ml empty bottles; 10 different testers/samplers of fragrances; and sticker labels made to the specification of the buyer.

The mathematics are impressive. At 1,000 ml to a liter, this means a milliliter costs P1.20. The production cost of a 10 ml bottle of fragrance is P12 for the fragrance itself, P16 for the bottle, and P2 for the sticker/brand name for a total cost of P30. In the market, the 10 ml bottle of fragrance can retail for between P50 and P80.

The 30 ml fragrance can be sold for P100 to P150 on a production cost of P66.

"We also sell eau de cologne at P550 a liter and eau de parfum at P1,800 a liter. The eau de parfum has to be ordered two days before pick up," said managing director Michael Yao.

Outlets

With three company-owned kiosks, Buy The Liter is now ready to franchise. The business model is the kiosk, measuring three to four square meters. Total investment package is P150,000, broken down into P50,000 licensing fee, P50,000 inventory, and P50,000 for the kiosk itself and other peripherals. Operating within a 10-hour mall, each kiosk would need three people operating in two shifts.

The franchise is good for five years.

"Since we are in the business of helping micro enterprises rather than selling our fragrances directly to end-users, we do not consider the existing fragrances companies as competitors," said Chung.

Popular fragrances are fruity ones for the young female, floral for sophisticated women, and fresh scents for men.

Plans

By end-2005, the company hopes to open two more company-owned stores and five franchised stores.

"We hope to have 20 outlets by the end of next year. It’s not necessary that half of the outlets would be franchised. We want to make sure that the radius of each outlet does not overlap into that of another outlet. We do not want our partners to compete with each other unnecessarily. Our vision is to spread out the stores so that our buyers–the entrepreneurs who do direct selling of our products–can source their requirements from the store nearest their operation instead of going to the head office," said Yao.

To encourage repeat sales and draw in more customers, the company is also looking at selling other products by the liter such as shampoos and conditioners for beauty salons and spa products and scented bath foams for spas.