Recession warning? Economists say watch women’s lipstick purchases

During economic downturns, unexpected trends often reveal consumer behavior shifts. One such trend, the “lipstick index,” was identified by Estée Lauder chairman Leonard Lauder after the September 11, 2001 attacks. He observed that cosmetic sales, especially lipsticks, tend to rise when the economy falters, as women opt for smaller luxury items over more expensive purchases. For instance, U.S. lipstick sales increased by 11% in the fall of 2001. Similarly, during the Great Depression, overall cosmetic sales surged by 25%.

However, during the 2020 economic slump caused by the COVID-19 pandemic, this trend shifted. As people wore masks and stayed home, Estée Lauder CEO Fabrizio Freda noted a rise in skincare products instead of lipsticks, dubbing it the “moisturizing index.” Despite changes in specific products, the concept that small luxury items gain popularity in tough times persists.

Current Beauty Market Trends

This trend is re-emerging. Sephora recently reported record sales, and data from consumer research group Circana indicates that high-end beauty products are outpacing mass-market products, with a 9% growth in the first quarter compared to 2% for cheaper alternatives. Though the “lipstick index” is more of an informal economic indicator, it highlights how consumers shift their spending habits during economic uncertainty.

Interview with Overeon CEO Neela Montgomery

In an interview, Neela Montgomery, CEO of Overeon, which includes brands like BareMinerals, Laura Mercier, and Buxom, discussed the resilience of the beauty market. She attributed this to the industry’s focus on self-care during COVID-19, which has made beauty products more resistant to economic downturns. Montgomery noted that while consumers may cut back on high-end fashion, they still find value in affordable luxuries like beauty products.

Montgomery also emphasized the industry’s constant innovation and the appeal of new trends, such as BareMinerals’ Lip Gloss Balm. She believes that beauty products offer a relatively accessible luxury, which explains their steady demand.

 Influence of Social Media and Future Trends

Social media, especially platforms like TikTok, significantly influences beauty trends and sales. Montgomery explained that while they can’t chase every trend, they align their products with broader, lasting trends that resonate with their brand identity. For instance, Laura Mercier focuses on trends like the “latte look” rather than fleeting ones.

Looking ahead, Montgomery highlighted the importance of “clean beauty” and the growing demand for effective, natural products. She also noted a division in the market between those seeking a natural look and those opting for cosmetic procedures, indicating a need for products catering to both preferences.

Conclusion

As the economy fluctuates, consumer behavior shifts in fascinating ways, often reflected in the beauty industry. The resilience and adaptability of this sector, driven by innovation and social media trends, suggest it will continue to thrive even amid economic challenges.