People are buying more lipstick — here’s why we should be worried
These days, news about the approaching financial downturn is inescapable. You can’t turn on the TV, scroll Instagram, or chat with an acquaintance without the terms ‘inflation,’ ‘cost of living’ or ‘recession’ popping up.
We’re seeing this reflected in our everyday habits, too: with work fridges suddenly full with packed lunches, and many people swapping their high-maintenance, platinum blonde locks for a more natural look. There’s no doubt about it — people are already feeling the financial squeeze.
But at the same time, spending in certain categories is holding strong. Research from Catalina found that despite rising prices due to inflation, consumer spending on cosmetics more than doubled between Q4 2022 and Q1 2023. Specifically, NPD Group found that lip makeup is growing more than twice as fast as other products in the beauty category.
It may seem encouraging (for the economy, at least) that people are still spending their hard-earned money on these little luxuries. But, history tells us that it’s not necessarily the beacon of hope you’d expect.
That’s because of something known as ‘the lipstick effect’.
1. What is the lipstick effect?
The term ‘lipstick effect’ was coined by economist and sociologist Juliet Schor back in 1998. Schor noticed that people purchased more lipstick during recessions while spending less on luxury, big-ticket items. As she described it “They are looking for affordable luxury — buying ‘hope in a bottle.’”
The concept went mainstream in 2001 when Estee Lauder chairman Leonard Lauder reported people were buying more lipstick and fewer dresses in the aftermath of the 9/11 recession.
Now, the term ‘lipstick index’ is used widely as an economic shorthand for consumer spending. Along with the cardboard index (when demand for cardboard goes down, people are buying less stuff) and the champagne index (consumers tend to swap champagne for more inexpensive types of alcohol), it’s considered one of the main early predictors of a financial downturn.
So far, the theory has held up pretty well — although, its relevance faded during the peak of the COVID-19 recession when people’s lips were covered by mandatory masks. During that time, other small beauty luxuries like eyeshadows and highlighters eclipsed lipstick in popularity.
2. What will be the new lipstick in a 2023 recession?
It’s not just lipstick that people splurge on during times of uncertainty. In a time where convenience is king, there are plenty of other barometers of financial turmoil.
Another contemporary indicator is online dating apps, which tend to become more popular during economic downturns. During recessions, people don’t want to go to bars and spend money. Instead, they meet people on dating apps, from the comfort of their own homes. This was the case in the 2009 recession when dating site Plenty of Fish saw a huge spike in users, and history is repeating itself now. In late November, Match Group, which owns Tinder and Hinge saw a 2% increase in paying subscribers across its brands, with a 7% increase for Tinder specifically.
Other affordable luxuries that tend to perform well during a recession are edible treats like cakes and chocolate, and home goods like candles and cushions.
3. Why is this relevant for designers?
The enduring legacy of the ‘lipstick effect’ doesn’t do much to alleviate concerns about the global financial future. However, there are some important takeaways that we, designers, can use to recession-proof our products and career.
Think small: Study the daily routines of your customers. What are some small ways your products or branding can add some magic to the day-to-day grind — whether it’s that beautifully-designed coffee keep cup, or that $5/month subscription that brightens their days.
Go for affordable over cheap: It would be easy to assume that cheaper is better during a recession. But, people are splashing out on the most accessible product from their favorite luxury brand, not on drugstore cosmetics. These high-quality yet affordable items give people a semblance of control over their own lives, so keep that in mind as you price your products.
Design for emotions: During challenging economic times, consumers often seek emotional comfort through their purchases. Lip products provide a soothing balm that makes stressful days feel a little bit easier. Consider what other products could help provide that much-needed emotional security blanket to your customers.
Whether or not we’re heading for a financial downturn, it’s nice to know that we as designers can continue to make a positive impact in the lives of customers in small-yet-mighty ways.