The Lipstick Effect and Other Unlikely Indicators of the Economy
During tough economic times, we start cutting down on frivolous expenditures. We stop spending on the nice things. Save the money for the pulses and grains. Medical expenses. Petrol. For all those bare-bone necessities.
E-commerce websites catch a sales fever. McDonald’s doubles its sales. Movie theatres are jam-packed. And lipsticks? They fly off the shelves.
You walk through the mall wondering, aren’t we in a recession?
This is the Lipstick Effect – when consumers tend to buy more affordable luxuries, such as lipstick, rather than expensive items such as cars or jewellery.
It’s a relatively low-cost item that can give people a feeling of luxury and satisfaction without breaking the bank. Sales of lipstick tend to increase during a recession, and this is seen as an indication that the economy is improving.
Falguni Nayar, CEO of Nykaa Cosmetics shared that the website saw higher sales of skincare products after the second wave of COVID. Items like lipsticks, fragrances and skincare are an easy way for people to find a pocket of pleasure in times of economic doom. They are often a way to feel better about themselves.
When budgets are tight, a rational human is expected to be logical and not spend on anything other than necessities. Well, lipstick is hardly a necessity. But our decisions are driven by more than just how much we have in the bank. Our emotions play a key role too.