There is a crisis in almost all sectors – the cosmetics industry, on the other hand, appears unimpressed. Lipstick in particular is currently the best seller. Behind this is a phenomenon that does not bode well for the economy.
“Shopping” is associated by many with a feeling of freedom. At the moment, the majority probably finds it rather oppressive. Even going to the supermarket hurts because of the massive price increases. But there has to be a little bit of luxury – especially in times of crisis like now, when otherwise only bad news will hit the mind.
Many women therefore use lipstick. So many, in fact, that the phenomenon is dubbed the “lipstick effect.” Sounds nice, but when it comes to this development, economists think of another word: ugly.
A run on lipstick can be observed again and again in phases of an economic crisis. In beauty circles, the “lipstick effect” or “lipstick index” is therefore regarded as the leading economic indicator. In detail, the model states the following: In times of economic tension, people cannot afford large purchases such as cars or real estate. Nevertheless, they want to treat themselves to at least a little luxury in everyday life for a little emotional boost – without breaking the budget.
While men are increasingly resorting to perfume, women are shopping for one thing in particular: lipstick. So if significantly more lipstick is bought, this can be a warning sign for the economy.
Although traditional economic sectors pay little attention to the lipstick index, data from the German market research institute “Growth for Knowledge” (GfK) underscores its informative value. While the economy in Germany weakened in 2021 and 2022, according to GfK, eight million consumers bought at least one lipstick in 2022 and six million in 2021. Since then, sales of lipsticks have continued to increase.
The Hessian family company Cosnova has also noticed this. Compared to the previous year, the company was able to increase sales of lipsticks from its best-selling brand Essence by a third.
Several studies also provided another abnormality with a view to the lipstick index. Prestige brands are particularly popular with purchases. They would have a larger share of sales than the mass-market brands. According to GfK, sales of branded lipstick products have increased by more than 48 percent over the past twelve months, while ordinary retail brands have only increased by a good 32 percent.
The beauty industry benefits holistically from the desire for an emotional boost. According to the Industry Association for Personal Care and Detergents, the decorative cosmetics sector, including face cream, eye shadow and nail polish, recorded growth of 16 percent in 2022 compared to the previous year.
The phenomenon that people in crises turn to beauty products is not new. As early as 1998, economics and sociology professor Juliet Schor spoke of these observations in her book The Overspent American. “Cosmetics are a way out of an otherwise dreary everyday life,” she wrote. In 2001, Leonard Lauder, chairman of US cosmetics company Estée Lauder, endorsed the lipstick effect increased lipstick sales, a statement he repeated after the 2008 financial crisis.
A study from Texas Christian University takes the lipstick effect to another psychological level. According to the researchers, women buy beauty products to increase their attractiveness to men. The calculation behind it: This makes it easier to win a life partner who represents additional security in difficult times. Here, too, the following applies: More expensive brands are preferred to no-name products because women expect them to increase their attractiveness more effectively.
Some economists fear a falling economy in connection with a rising lipstick index. However, this does not automatically apply to every crisis, as lipstick sales are not a hard economic indicator. Even in economically prosperous phases, cosmetics are in greater demand, for example in 2013 and 2014.
During the pandemic, however, the lipstick effect did not occur: German gross domestic product (GDP) fell by 3.7 percent in the first year of the corona virus, 2020, and sales of lipsticks also fell by almost a fifth. The demand for decorative cosmetics lost almost 13 percent overall.
The reason is obvious: no concerts, no bar tours, people worked from home. The face was barely visible behind the mask, so lipstick wasn’t worth it either.
The most recent increase in sales in the lipstick industry can not only be attributed to a recession, but also to catch-up effects. “Hardly any masks are required anymore, or no longer, parties and events without restrictions: We also attribute the fact that we will be able to record record sales in 2022 to the end of the pandemic restrictions,” says Yvonne Wutzler, Head of Marketing at Cosnova, in an interview with Der Spiegel.