Why do lipstick sales increase before and during the recession?

Lipstick sales generally increased during recessions, whether it was the Great Depression of 1929, the dot-com bubble of the 1920s, the housing market crash that led to the recession in 2008, the September 11 attacks in the United States, and most recently the COVID-19 pandemic.

Lipstick brands saw a significant rise in sales in countries such as India and the USA even during the COVID-19 pandemic and when people were wearing masks.

Several news articles and trade commentators have highlighted similar trends for rising lipstick sales. Some even noticed a general rise in purchases in the beauty and personal care sector during the above events.

Slack and lipstick index

Technically, a recession occurs when an economy's real GDP falls consecutively for a three-quarters period. The severity of a recession, as measured by the National Bureau of Economic Research by tracking economic activity in the country, also depends on the depth of the decline in real GDP, scattering, which shows the extent to which the recession spreads across sectors of the economy, and the same period of time during which the economy will experience freezes and obstacles at this level.

All of these values are reached by looking not only at real GDP, but also at wholesale and retail sales, real incomes, employment, and industrial production.

However, Estée Lauder, Estée Lauder's emeritus chairman, noted that lipstick sales rose during the recession caused by the Sept. 11 attacks. This rise was observed back in 2008 and coined the term "lipstick index" in response to the rise in its annual sales.

The lipstick trace was first used in the book "The Overspent American" by economics professor and sociologist Juliette Shore.

Spending money on lipstick when the personal disposable income in the economy falls would be irrational. Traditional economic theory classifies this as irrational behavior.

Investigating the rise in lipstick sales

Few studies have been done on this strange phenomenon, and there are contradictory opinions based on sample size, geography and product selection within the beauty care sector. However, let's dive into the possible reasons that have been highlighted.

One fairly conservative and somewhat misogynistic study by professors at Texas Christian University highlights increased lipstick sales because women tend to feel the need to look good during interviews and look for potential buddies during a recession.

Another study argued that the increase in sales is rooted in the "psychology of female mating" to escape during troublesome times due to the recession. There are a large number of reasons why buying lipstick is considered a beautiful indulgence that adds a little joy to a woman's mating psyche. While all of these are social and psychological lenses on the situation, they are also highly contextual and vary from country to country.

Larissa Jensen, vice president of NPD Group and beauty industry consultant, believes that the rise in sales is due to "lipstick making a transformation: a single swipe on the lips makes your face stand out." This is unlike other makeup products that require more time and effort.

Whether it's part of one's daily routine, or whether consumers replace lipstick with relatively expensive goods, remains a mystery, as studies reveal such diverse causes. There is considerable disagreement about the mechanism that drives this phenomenon.

Economists classify goods as substitutes or luxuries. Substitute goods are used instead of each other when the price of one commodity rises. Luxury goods are jointly consumed to meet consumer needs.

When viewed through this lens, lipstick is an alternative not only when buying other self-care items, such as eye makeup or facial cleanser, but also for something like cars, holidays or furniture. This explains to some extent that spending on lipstick is justified compared to spending on more expensive things.

These expensive things can include buying a car, designer handbags, expensive electronics, furniture, and much more.

Lipstick extension

However, why doesn't this seem to affect other beauty care products? For this reason, the results of the research are fairly diverse, with an increase in the sale of luxury perfumes, lip balms and false nails also observed in a few cases.

The lipstick effect has now been expanded to include all sales of personal care products. That's because, for example, in countries like the United States, in data measured by the Bureau of Labor Statistics' consumer spending surveys, lipstick is just one element in the cosmetic spending category.

Thus, the term is applicable now when the economy, despite being deflation, sees its citizens spending on luxury goods.

Economic impact

Over time, the effect of lipstick has been expanded to include other cosmetics. Although the sale of cosmetics or luxury goods has risen, economists still do not rely on this as a valid indicator of the economy. These trends can be useful for brands to plan their inventory during recessions, but they may not necessarily be guaranteed.

Lipstick sales cannot be used as a reliable indicator, as they have also been disliked by statistical evidence. The Economist team tested this in 2009. The results concluded that the impact was exaggerated, as they failed to derive any strong correlation between the research and the increase in lipstick sales across all brands.

Simply put, consumers may indulge in expenses that are easy on their wallet, but it may also happen in the form of going to watch a movie while buying lipstick. Just looking at lipstick sales as an indicator of deflation will not be enough.