Holiday Central

Fragrance sales to be flat this holiday

Plush Studios | Digital Vision | Getty Images

What used to be a go-to Christmas gift is no longer smelling quite as sweet.

After gaining back some of the ground lost after four years of negative sales during the economic downturn, fragrance sales are basically flat on the year, and experts predict they will continue their holding pattern during the holidays.

According to The NPD Group, 15 percent of shoppers will purchase a fragrance this holiday, which is unchanged from 2012; similarly, Euromonitor forecast that the category's sales will tick higher by only 0.2 percent this year.

But despite waning interest in the category, and competition from the lower-priced lip and nail care segments, fragrance can't be ignored. NPD reported that fragrance will still be the fourth-most popular holiday purchase this season, which experts attributed to its reputation for being an easy gift, its attractive packaging and its characterization as a value buy.

And with 45 percent of the year's fragrance sales occurring from October to December, retailers will continue their efforts to push the category on to shoppers' lists to ring up positive holiday sales.

"Fragrance is something that I feel like the stores are always pushing," said Virginia Lee, senior research analyst at Euromonitor.

(Read more: Blue Christmas for retail? Maybe not)

Most of the growth in the prestige fragrance category—sales logged primarily in department stores—has come from pricier, niche fragrances such as Demeter Fragrance Library's Oud, and scents from Jo Malone and Tom Ford, Lee said.

She pointed to Bond No. 9, Estée Lauder's Modern Muse and 's Marc Jacobs Honey as other fragrances she expects to perform well.

While celebrity perfumes continue to saturate the market—including scents from Rihanna, One Direction and Taylor Swift—the category's real value growth is now being driven by an older, more sophisticated shopper who doesn't care to smell like a pop star, Lee said. She also predicts prestige will continue to outperform mass offerings, as higher-income shoppers have the money to burn on a $250 fragrance, she said.

Cutting back on Christmas? Holiday 'naughty' list

Bloomingdale's, Sephora and Saks all listed fragrance as one of their top areas of focus for the season, with Bloomingdale's calling out its Tory Burch fragrance exclusive; Sephora its multibranded fragrance samplers; and Saks its mini-fragrance collections and fragrance sets, including Carven and Viktor & Rolf's Flowerbomb.

"Sets, kits, the things that are bundled—stores are definitely pushing those because it's hitting people with the value message," Lee said. "Discounting is very rare, so the use of these gifts where the packages are touting $70 valued at $160, that's kind of their way of discounting without damaging the brand equity."

(Read more: Advantage Amazon... At least for now)

But kits and value buys are not restricted to the fragrance arena. According to NPD, more consumers this holiday plan on purchasing skin care products, which have seen a rise in bundling over the past five years, Lee said. More shoppers are also looking toward makeup, which can be sold as gift packages with multiple color palettes.

Among cosmetics, lip care, in particular, has gained stride this year, said NPD's Karen Grant. As the previously skyrocketing nail care segment has slowed from double-digit sales growth, it's back to the lipstick indicator, as shoppers return to lip color as their low-entry point beauty buy during tough economic times.

According to NPD, lip color posted sales gains of 16 percent on the year ended in August.

Aside from the economy, Grant attributed consumers' renewed interest in the category to hybrid products, such as fashion brands releasing stains that are also a gloss and a moisturizer.

One example is YSL's Rouge Pur Couture Vernis à lèvres, which parent company L'Oréal presents as "not entirely a lipstick, but not entirely a gloss, and even less a simple stain."

"I think one of the things that are going on again is the sense of small indulgences and an ability to play," Grant said.

(Read more: The gift almost everyone is buying for the holidays)

Lee said fashion's emphasis on a strong brow and a bold lip, as well as Michael Kors and Marc Jacobs' cosmetics debuts, will also help the makeup category this holiday. If someone knows that their mother-in-law loves Michael Kors handbags, snatching up his new lipstick is an "easy buy," she said.

While she doesn't predict Coty will perform particularly well this holiday, Jacobs' beauty line, sold exclusively at Sephora, will be a top-seller, Lee said.

"It's attractive packaging, and while the prices are still high, compared to Marc Jacobs apparel or handbags, his makeup line, since they're under $50, is relatively affordable for gifting."

What products consumers plan to buy for holiday 2013

2013 2012
5Video Gaming Systems or Video Games14%12%
6Small Personal Accessories12%11%
9Sporting Goods/Equipment8%9%

Source: Source: The NPD Group, Inc. / Holiday Spending Survey

These types of products could cushion cosmetics purchases—which tend to rely more on self-purchasing than fragrance—from the 2 percent dip in self-buying predicted by the National Retail Federation.

The abrupt stall seen in nail care sales is also likely to push shoppers toward lip care this holiday. Lee noted that outside of Sephora, which still has a large nail polish display for its exclusive colors, retailers have trimmed the square footage dedicated to the category and toned down their displays.

"It's not the newest news right now," she said. "The whole novelty of having color and texture is not a novelty now."

(Read more: Discount retailers trail on the Web)

Even at their peaks, nail and lip care's values fell well short of fragrance. According to NPD, the total prestige nail care segment raked in around $40 million on the year ended in September, while prestige lip care generated $665 million in the 12 months ended in August. Total prestige fragrance sales, on the other hand, reached more than $3 billion.

Still, regardless of its volume, it's evident that fragrance doesn't have the same stronghold on consumers that it once did.

Amanda Ripley, 26, said she is considering making a beauty purchase for her mother or younger sister this holiday, but will likely steer toward moisturizers or hand creams. Similarly, she said would rather not receive perfume because she typically doesn't wear it.

"I think I would rather get makeup or something like that," she said.

—By CNBC's Krystina Gustafson