Without looking into a crystal ball or hoping for the all-seeing powers of precognition, how could you possibly know if we’re heading into a recession? Well, the answer might literally be right under your nose: The lipstick effect.
Before we go any further, we want to clarify that this isn’t a foolproof means of economic assessment, even though there is considerable evidence in support of it. It is simply one possible indicator, and we feel it is an interesting look at consumer behaviour, if nothing else.
What Is The Lipstick Effect?
The lipstick effect is a psychological byproduct of falling consumer capital and confidence. As the value of people’s money drops, they spend less on high-end luxury products. However, they still want to pamper themselves and have some escape from the economic doom and gloom. Lipstick is that cheaper escape. “The one thing about us women,” said Alana Howard, founder of Cosmopolitan Academy, “Is that we will take our last little bit of money, and we’ll spend it on ourselves.”
As you should!
During the Great Depression, cosmetic sales actually increased by 50% over 4 years. During the recession in the early 2000s, cosmetics once again saw an increase in sales. Even looking at our most recent global and economic disaster, the pandemic, cosmetic sales took a dip in 2020, but then rose the next two years.
Even as we push our way into the next recession, cosmetic sales are projected to grow year-over-year. It is a billion-dollar industry that seems immune from any sort of economic downturn.
A Rising Tide
Just as cosmetics are immune to downtrends, the same is true on the upswing too.
When incomes rise, inferior goods are often the first thing to see a drop in sales. For example, those cheap cans of beans a consumer has been buying will take a backseat to a steak dinner once the money is more readily flowing.
Cosmetics seem to float above these rising and falling trends with relative ease.
Guys and Gals
Now, just because we’re talking about lipstick doesn’t mean it can’t apply to other products (or that anyone can’t wear lipstick for that matter!). Even though the old saying holds true, “Men buy, women shop”, guys will also spend discretionary funds on things that make them feel better.
The lesson here is not that you should be targeting women during a recession, it’s to show you that people still spend money during a recession. Yes, they’re more careful with it, but few people can be happy without the little things in life that bring them joy.
So, how does this help you? It’s about meeting your consumer where they are, providing the path of least resistance, building the desire path, etc. Offering smaller products at lower prices, bundles, alternative products you might only offer during a recession.
Now is not the time to get entrenched in your ways, nor is it the time to shake up the foundations. There is a middle ground, but it’s on you to find it.
Want to learn more? Check out the latest episode of the Thinc. Underground Podcast!
This episode of the Thinc. Underground Podcast features Alana Howard, educator, innovator, and Founder of Cosmopolitan Academy. Join host Arif Khan as he speaks to Alana about the incredible resilience and growing equality of the cosmetic industry, as well as the role cosmetics play in mental health, confidence, and self-acceptance. “I don’t believe in vanity. If there is a career, service, product, etc. that will make you feel better. Do it! Luckily, people are talking about this now. You don’t need to ask permission anymore.”