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Retail comment: Lipstick effect still exists


There is a theory that even in difficult times, when money is tight, consumers still want to pamper themselves. Aaron Chatterley, CEO of online health & beauty retailer, debates whether this phenomenon - dubbed the ‘lipstick effect’ - still exists in today’s cosmetics sector.

I opened the paper this morning to see a huge picture of Lady Gaga wearing the brightest red lipstick imaginable.

Without sounding too much like a gawky teen, it was a very striking image. Young people tell me that Lady Gaga is the biggest thing in music right now. This is apparently something to do with her wearing meat. Perhaps Feelunique should start marketing lipstick colours that go well with bacon.

But it does bring me to my topic for this column: the lipstick effect, or as some staid economists prefer to call it - the Leading Lipstick Indicator.

For those of you who are not aware of the term, the lipstick effect is the theory that when facing an economic crisis, consumers will be more willing to buy less costly luxury goods. So instead of buying the latest Mulberry bag, they will invest in an expensive lipstick instead.

Consumers still want to spoil themselves, the only difference being they opt for smaller ticket items.

It has been reported, for example, that after the 9/11 attacks, lipstick sales in the US doubled. That assertion has been attributed to Leonard Lauder, Chairman of Estee Lauder.

I am not certain whether lipstick sales doubled, but it is certainly the case that when consumer confidence is low, we opt to spend our disposable income on items that have less impact on our available funds.

The underlying assumption is that consumers will buy luxury goods even if there is a crisis.

Looking briefly at sales at Feelunique, it is clear that the lipstick effect also applies to items such as nail varnishes, eye shadow, blushers and anything else that makes an instant visual difference.

Also, recent figures from Australia for March show that cosmetics sales were up 2.6 per cent while high street spending fell 0.5 per cent - an illustration of the lipstick effect at work.

On the basis that a great many consumers are worried about their jobs, maybe we are all trying to look our best to make a better impression in the workplace? Is this some sort of personal economic mating dance we are witnessing - an outward manifestation, in difficult times, of some deep-rooted requirement to stand out from the herd? Or is it simply that we just want a cheap fix to make ourselves feel better?

Obviously the lipstick effect doesn’t apply to the vast majority of men - but there must be an equivalent. Domino’s Pizza instead of eating out? I am sure somebody will be in touch and tell me.

The lipstick effect theory should never be regarded as an accurate measure of economic confidence. But the cosmetics sector is doing very well at the moment, particularly e-tailers with strong brand support behind them.

So anyway, lipstick sales are up. In fact, between January 1st and May 1st sales of lipstick at Feelunique soared by 62 per cent over the same period last year.

And if you believe in the lipstick effect theory as an accurate indicator of economic confidence, then times must be very tough indeed.

But you don’t need to look at rising lipstick sales to work that one out.

Note: The views expressed here are those of Aaron Chatterley and do not necessarily represent the views of Retail Gazette.

Published on Monday 16 May by Editorial Assistant

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