Painting Over the Recession: How Lipstick Becomes a Lifeline for Consumers
Jennie Kim for HERA’s Rouge Classy campaign
Consumers should be expected to tighten their purse strings and forgo all but essential purchases during uncertain economic times. Yet, the lipstick effect shows how certain customers may continue purchasing certain luxury goods, but on a smaller scale, during recessions. The effect has repeatedly shown individuals resorting to low-cost cosmetics and beauty goods to improve their emotional state and preserve their appearance of normalcy.
Generally speaking, lipsticks are regarded as a normal good. When consumer income declines during economic recessions, the demand for such goods decreases. Nevertheless, data has demonstrated the opposite. During the 2008 financial crisis, leading cosmetic companies of the time reported increases in sales compared to the previous year. Sephora, a luxury cosmetic retailer under parent company Moët Hennessy Louis Vuitton (LVMH) saw its sales grow by 10%, while its wines and spirits revenue declined by 3%. Similarly, during the 2020 global economic recession, reports state that compared to the pre-COVID-19 era, Sephora's US online sales during the COVID-19 pandemic increased by a whopping 60% compared to 2019, despite the revenue of LVMH’s wines and spirits decreasing by a 14.7%.
But why do consumers continue to spend money on unnecessary goods in a recession? Consumers often continue to purchase discretionary goods such as beauty products, theatre tickets, and sweet foods even during economic downturns. This is because these goods can often provide a sense of gratification and comfort that is craved by the general public as the standard of living is threatened by economic recession. Hence, the price elasticity of demand for these types of low-cost goods that take up a small proportion of one’s income tends to be lower, as consumers have developed habitual buying behaviors that persist regardless of the broader economic conditions.
Other factors than economic conditions influence the extent of the lipstick effect. Difficult financial times often set off anxiety, stress, and other negative emotions. Purchasing small, reasonably priced luxury items like lipstick might be a coping mechanism for certain customers, enabling them to treat themselves and improve their mood despite financial constraints. Buying these goods might offer a brief sense of security, control, and routine in the face of the unpredictability that recessions bring. Others, who look to dependable self-care routines and small luxuries as a means of finding stability in the face of turmoil, may see such purchases as an attempt to restore a feeling of security and routine that economic downturns have upended.
Under the strict quarantine regulations during the COVID-19 pandemic, the social media boom undeniably heightened the effect. Many people lost their jobs as a result of the economic recession and turned to being online content creators instead. For beauty influencers, they had the perfect opportunity to earn commissions from the comfort of their homes by promoting cosmetic products to their loyal followers. Given the financial incentive, some influencers may have been motivated to promote and hard-sell certain products aggressively, and their followers may have been persuaded by their loyalty to purchase these products, even if they were not necessarily essential. Furthermore, with the rising trend of fast fashion and the continuous emergence of new beauty trends on social media, some consumers may have felt pressure to keep up with the latest looks and styles to appeal to their online peers and maintain a curated social media presence, driving additional lipstick effect-fueled purchases.
Apart from social media, the growth of e-commerce also played a pivotal role in the evolution of the lipstick effect. Consumers can more easily discover, purchase, and share small beauty products like lipstick with a click on their browsers. The convenience and accessibility of e-commerce platforms prevent consumers from carefully assessing their financial conditions before purchasing and adding items to their online carts impulsively. This increased accessibility in the purchasing process has lowered the psychological barriers to buying small, affordable luxuries like lipstick, even during economic downturns. The ability to quickly and discreetly purchase such products online, without the in-person social pressures of traditional retail, further contributes to the growth of the lipstick effect phenomenon. Such ease of access and impulse purchasing power has amplified consumers' inclination to treat themselves to small indulgences as a mood booster, even when larger discretionary spending may be constrained.
Ultimately, the lipstick effect illustrates how consumer behaviour does not always adhere to conventional economic principles of strict rationality. Consumers' innate psychological needs for self-care, comfort, and a sense of regularity, combined with the pervasive influence of social media and the ease of online shopping, continue to heighten the effect even in economic hardships. The lipstick effect accentuates the complex relationship between economic factors, emotional drivers, and evolving consumer habits and trends. It reveals how consumer decision-making can be shaped by different motivations beyond just financial considerations alone.
Sources:
Estee Lauder Companies. (2008, June 30). The Estee Lauder Companies Inc. 2008 Annual report. annualreports.com. https://www.annualreports.com/HostedData/AnnualReportArchive/e/NYSE_EL_2008.pdf
LVMH Group. (2009, January 25). The LVMH Group 2008 Annual Report. annualreports.com. https://www.annualreports.com/HostedData/AnnualReportArchive/l/OTC_LVMUY_2008.pdf
Statista. (2024, May 13). sephora.com: e-commerce net sales 2016-2024. https://www.statista.com/forecasts/1383797/sephora-revenue-development-ecommercedb
Statista. (2023, December 21). Sales of LVMH Group’s wine and spirits segments 2011-2022. https://www.statista.com/statistics/289309/sales-volume-of-lvmh-group-s-wine-and-spirits-segment/
