Have you ever heard the phrase “Lipstick Effect”? It is a phrase supposedly coined by Leonard Lauder in November of 2001 and refers to an observation that
During a recession, the tendency for consumers to purchase small, comforting items such as lipstick rather than large luxury items.
Essentially, the theory says that when people start spending money on small luxury items like lipstick, the economy is in trouble. Good news for the lipstick manufacturers, not such good news for the rest of the economy.
But is it real?
Many people doubted it last year because the lipstick market didn’t show any significant upturn. However, according to Mintel the lipstick effect can be seen in the European color cosmetic market. They look like fairly modest growth numbers to me so I don’t know how much faith I have in the reality of the lipstick effect.
Whether the lipstick effect is real or not, it is still interesting to see how the cosmetic market is predictive of the overall economy. It seems to me that no matter what, people are going to continue to buy personal care products. It should be a recession-proof business.