Silk road to free gifts makes luxuries smell even sweeter: Cosmetics and perfumes prove more tempting when the retailer throws in a bonus

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AS CHRISTMAS looms the cosmetic and fragrance industry, worth nearly pounds 5bn, limbers up for its busiest season.

In an effort to ensure that those perfumes keep wafting off the counter, promotions will abound, enticing potential customers with the promise of a free pillar-box red lipstick or an evening bag. According to retailers' research, women are much more likely to purchase a 'luxury' item on this basis. And recession has not dulled their appetite. In fact, small luxuries make people feel things are not that bad.

It is on this premise that Kay Glennie has built her business. Silk Connections supplies luxury gifts for manufacturers to offer as an incentive to customers to buy cosmetics, fragrances and toiletries.

The tiny company importing silk goods from Thailand has grown in four years into a sophisticated supplier of products to retailers. This year it is set to turn over half a million pounds.

'Losing my marketing job with a cosmetics sourcing company five years ago was the best thing that could have happened to me,' Ms Glennie says. 'It was one of those classic situations where I was forced into making a decision, and this was the best decision. I went to the Far East to find suppliers, and started the company.'

The idea came from her background in cosmetics and from having lived for a short time in Hong Kong.

Silk Connections was launched in 1988, when the end of the boom meant that banks were reluctant to make loans to start-up firms. But National Westminster Bank offered a pounds 20,000 overdraft facility and Ms Glennie and her partner, Annabel Pickthall, topped up the loan with several thousand pounds of their own.

'In this business there is obviously a problem in terms of cash flow because all the money has to be raised initially, when the order is placed. You've got to pay your suppliers in the Far East, and seven months could go by before the product has been manufactured and the client has paid me.

'So we were dealing with large sums of money and not getting any return until six or seven months later. But once the ball was rolling on the promotions, the situation improved. On the whole, my clients always set a time frame for paying and are very good about sticking to it.'

Usually, customers - which include Procter & Gamble and Boots - will approach Ms Glennie with an idea of their customer profile and what they want to offer. Sometimes they will want to do a promotion but have no idea what to use. She will look at their company and customer profile and come up with a range of options - such as cosmetic brushes, bags, leather wallets, scarves - within their specified budget.

'They will give me quite a long lead time. For example, they will come to me in February for a Christmas promotion. It takes 60 days to manufacture a product, then 30-45 days to ship it,' she says.

All the manufacturing is done in the Far East, mostly in China, not simply because of the cost, but because 'the quality of the fabrics and standard of craftsmanship is fantastic'. Ms Glennie has a very good relationship with her suppliers, two of whom have been with her since start-up.

'The promotions look very generous, but the cost of manufacturing in the Far East is very low. That's obviously how gift with purchase works. The whole idea is that it's a very high perceived value,' she says.

Recession has not really affected the business - if anything retailers have had to use promotions more frequently to get things moving off the shelves. 'The main result is that I have stopped exhibiting, because it's expensive. I'm in weekly contact with my clients, so it's not essential to go to exhibitions.'

As for the future, Ms Glennie says: 'I want to stay small because I deal with clients directly; and when you've built your company up from nothing, you can't imagine handing it over to someone else.

'But I do believe it's possible to be a very small company and still grow, particularly in this industry. There are always new products and ideas, so there will always be potential new niches.

'I think if you really believe you can succeed, you will. Four years ago I never would have thought I could have the company I've got now.'

(Photograph omitted)