Sit through a TV ad break and you'll quickly find two senses assaulted on behalf of a third: smell. Businesses looking to sniff out a commercial oppor-tunity have been aware of its power for a long time, even if this has usually focused on shifting products that cover up malodorous breath, armpits or feet.

Time magazine reported last month that the aromas of chocolate and baked bread in the Net Cost grocery store in Brooklyn, New York, are all artificial, being pumped into the store by machine. Their story kicked up a bit of a stink, and generated considerable interest in a form of marketing that has, until relatively recently, been largely overlooked.

"It seemed to hit a raw nerve with a lot of the major supermarket chains here," says Steven Semoff, the acting co-president of the Scent Marketing Institute. "Because, when you think about it, in the world of product promotion, advertising and branding, everything is about sight and sound. Our senses are basically saturated. No one has really been tapping into smell, and the sense of smell is directly hardwired into your brain."

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Although Time and some of the supermarket chains are just starting to get a whiff of the idea, it's not such a new one, having grown up over the past five years or so as "nebulisation technology" – through which a fragranced oil is converted into a dry vapour. This has become more commercially viable and useable on a wide scale. Smells can be distributed through a store as simply as with a fan, or via complete integration with an air-conditioning system.

Five companies in the US control around 80 per cent of the world market in scent marketing and an estimated 10-20 per cent of retailers in the US are their customers. "It is fairly widespread here," says Mike Gatti, the executive director of marketing at the National Retail Federation. "A lot of retail companies use it, and its purpose really is to keep customers in your store, to create this welcoming environment – and it works; it does keep people in your store longer. It helps people feel better in their shopping, and in a lot of cases causes them to spend more money."

Semoff says that a study run by Nike showed that adding scents to their stores increased intent to purchase by 80 per cent, while in another experiment at a petrol station with a mini-mart attached to it, pumping around the smell of coffee saw purchases of the drink increase by 300 per cent. "Numbers are pretty outrageous," he says.

It's thought that it works so well because the sense of smell is most directly connected to the parts of the brain responsible for processing emotions. "It goes directly to the limbic system, which is the emotional control centre of your brain, so you smell something and – bang – it triggers an emotion," says Semoff. "Whereas all the other senses have to be processed first."

But is it ethical, particularly in the case of businesses selling food? Dispersing the scent of chocolate or bread through a store implies that those smells come from the products being sold, which is not the case. Surely it reeks of deceit and manipulation? Maybe not, according to Alex Hiller, an expert in marketing ethics from Nottingham Business School. According to him, marketing ethics frameworks usually take into account consumers' freedom, autonomy and wellbeing, and making supermarkets more fragrant doesn't necessarily violate any of these tenets.

"Yes, changing smells is manipulative – this is the whole point," he says. "But it is mild, and I would argue that consumers realise and accept that in all artificial, and especially retail, environments, some mild form of manipulation does take place and it in no way constrains anyone's freedom, autonomy or well-being."

Compared to, say, fast-food outlets displaying photographs that bear no resemblance at all to the limp-lettuced burgers actually on sale, it comes out rather well. "A picture should provide a visual cue to the product you receive, and if you don't receive this then some form of deception has taken place," Hiller says.

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"You're basically drawing attention to particular items," says Rachel Herz, a visiting professor in the department of psychiatry and human behaviour at Brown University in Rhode Island and the author of The Scent of Desire. She gives the example of using the smell of cinnamon at the location where cinnamon buns are found in a store, which will make people more likely to buy that product. "If you have any appetite for sweets, it's an enormous draw," she says.

Scents aren't just used to promote particular products, though. Stores, hotels and clubs can use artificial smells more generally to create a more pleasant environment for the customer – and to reinforce a company's brand. "They're effectively adding a scent logo to their establishment," says Herz. Just as bits of music played on TV adverts can become irrevocably associated with the product they're being used to sell (this writer can't hear Bill Withers's "Lovely Day" without thinking of a certain popular brand of tea), so too for smells – they can bring to mind the experience of, say, being in a hotel and, thanks to the strong link between smell and memory, work as a powerful reminder.

To work positively, the experience being recalled would need to be a good one. "Smells don't have any meaning prior to being associated with an experience, then after they become experienced with something, that's what they represent," says Herz. If a lousy time was had by all, the associated smell would bring that to mind too. So the technology is predominantly used by upmarket hotels and resorts, rather than budget accommodation.

This more general application, rather than for specific food products, seems to be the principal use now that manufactured smells are beginning to waft over to the UK too. None of the supermarket chains contacted by The Independent is using scent marketing – most prefer to use natural smells of, say, their bakeries, while one seemed offended at the very suggestion. There are few scented aisles on this sceptred isle.

But a number of other retail outlets and other enterprises do employ artificial smells. ScentAir UK, Britain and Ireland's biggest distributor and a cousin to the American firm supplying that Brooklyn grocery store, has attracted around 600 clients since it set up in 2008, including developing the piña colada smell being used in children's toy shop Hamleys over the summer (it makes parents "linger longer" apparently), and supplying fragrances to celebrity-favourite nightspot Chinawhite. One of their newest customers is the M&M World store in London's Leicester Square, which became the world's biggest sweet shop when it opened in June. "What they sell comes pre-packaged," says ScentAir UK's managing director Christopher Pratt. "So although it looked like the place should smell of chocolate, it didn't." It does now.

Pratt says the company provides a "full service" package to its clients, from supplying and installing the machines to replenishing the fragrances. The monthly fees range from just under £100 to £250. "As a percentage of a typical marketing budget, it's tiny," he says, telling of hotels spending twice that on scented candles alone. Particular smells can be bought off the shelf or custom designed – for between £5,000 and £10,000. "It's not about any scent: it's about the right scent," he says.

The right scent can depend on several factors. Research by Eric Spangenberg, the dean of the college of business at Washington State University, who has been researching the effect of smell on customer behaviour since 1996, has found that it affected everything from cultural norms, gender and appropriateness to the product. "Another area where we've seen effects is if you've got a scent that's congruent with a season. So, for instance, shopping and the seasonal effects of scent – people expect Christmas to smell like cinnamon or something like that," he says.

Comparing this with a scent more appropriate for Easter, he found positive effects for the seasonal smell and negative effects for the incongruous one. Using the correct smell is crucial. "If you get it right, it's a good thing," says Herz. "If you get it wrong, it's worse than no scent at all."

For businesses across many sectors, getting their fragrances right could mean the difference between the lingering stench of failure or the sweet smell of success.