Lipstick Effect: What Cosmetic Sales Say About Looming US Recession

Experts say the US is currently experiencing a recession. This has sparked discussion about the Lipstick Effect. 

What is the Lipstick Effect?

The Lipstick Effect is an economic theory. It suggests that during a recession or tough times, people cut back on big expenses but increase spending on small beauty products, especially lipstick or similar less expensive luxury goods. The reason is that these small items provide personal pleasure and emotional satisfaction at a low cost.

Recession in America – Lipstick Effect Connection

The Lipstick Effect was also seen during the Great Depression of the 1930s, the dot-com bubble of 2001, the 2008 financial crisis, and the 2020 Corona lockdown in the US. While sales of big-ticket items like cars, houses, and luxury fashion goods declined, sales of lipsticks and small beauty products increased. According to psychologists, people tend towards “Affordable Luxury” during difficult times.

Why does this happen?

Emotional Relief: Using beauty products during tough times brings happiness.

Low Cost – High Impact: A small luxury item gives a special feeling at a low cost.

Self-Confidence: Improving one's appearance even during a crisis boosts self-confidence.

Examples in History

2001 (Post 9/11): Lipstick sales increased even though the airline and travel industries in the US were severely affected.

2008 Financial Crisis: Luxury handbag sales plummeted, while lipstick sales rose by 11%.

2020 Corona Period: Even with masks and Zoom calls impacting lipstick sales, other small beauty products (nail polish, skincare) sold well.

What's the situation in the US now?

According to some reports, sales of lipstick, nail polish, and low-cost cosmetic products are currently increasing in the US. Even though big spending is down, these small luxuries provide emotional comfort.

Lipstick is often cited as an indicator of the country's economic condition and consumer sentiment. Market analysts also consider it a “Recession Indicator”.