The lipstick index: sign of the economic times

When cash is tight, shoppers readily ditch luxury investments, foreign holidays and premium foods – but make-up and skincare are items they seem to refuse to skimp on. 

That's according to the "lipstick index", a theory that posits "purchases of smaller luxuries get a boost" during slumps, said The Independent. Because when "life's bigger aspirational items" are out of the question, things that provide a short-term morale boost – like "having an immaculate face" – remain "within reach". 

Aesthetic index 

The consumer trend was first observed in 2001 by Estée Lauder's chair, Leonard Lauder. After analysing customers' behaviour in the aftermath of 9/11, Lauder suggested lipsticks provided "a good gauge" of the economic landscape. He developed the term "lipstick effect" or "lipstick index" to sum up his hypothesis. 

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The "intriguing" idea "captured the consumer consciousness", and it has been "wheeled out" in times of economic decline since. Granted, it's "less technical" than other economic indicators, said CNN – but it's much "more fun". And though it "isn't always entirely accurate", it's a concept "worth exploring".  

Little luxuries

In 2020, "at the height of the Covid economic downturn", said CNN, Estée Lauder's CEO Fabrizio Freda announced that moisturisers had supplanted lipsticks as an indicator of economic health, as customers were wearing masks – "but the concept of the index is still there", he added. 

Indeed, the lipstick effect might now be in need of a rebrand, said The Independent. Other "smaller indulgences" like "fancy chocolate, barista-made coffees and takeaways" are now also part of the "'life's little luxuries' portfolio", a barometer of consumer mood and behaviour. 

And as companies see an uplift in smaller-scale purchases, "retailers are more than willing to help these shoppers treat themselves", said BBC's Worklife. US retailer Target has "staked a flag" in what they market as "affordable joy". Macy's is touting a "mix of high-end and 'off-price'" luxury goods, rather than relying on discount sales periods. It's a strategy that "encompasses a mix of affordable and aspirational luxury items, available year-round".  

Sign of the times 

The psychology of the "lipstick effect" is "deeply rooted in how consumers seek emotional gratification and comfort during stressful times", professor of entrepreneurial marketing and consumer behaviour Zubin Sethna told The Independent. Small purchases provide "an accessible form of temporary escapism" that can spark a "dopamine rush and provide a psychological lift". 

Beauty retailer Sephora made record sales last year, said CNN. And in the UK, "bad weather, tightening pocket strings and sustained working from home" may have led to a fall in in-person purchases, but "prestige and luxury beauty sales are buoying" the numbers, said the British Beauty Council. "Haircare and fragrance are propelling this success." 

But spikes in small indulgent purchases are also a symptom of the "ostrich effect", behavioural scientist Richard Shotton told The Independent. There's research pointing to the trend of people burying their heads in the sand during tough times. It's "human nature", but it "isn't rational" – and "there's a tendency to adopt a fatalistic approach" that's temporarily alleviated by feel-good purchases. But "lipstick certainly can't buy you long-term happiness".