Do sales of lipstick really go up in difficult times?

Cosmetics in the downturn

Lip reading

Jan 22nd 2009
From The Economist print edition

Do sales of lipstick really go up in difficult times?

RECESSIONS mean that Ferraris stay in showrooms and designer dresses on shop racks, but lipstick bucks the trend: in difficult times, women buy more of it, since it is an affordable indulgence. That, at least, is the idea behind the “lipstick index”, a term coined by Leonard Lauder, the chairman of Estée Lauder, a cosmetics firm, in the 2001 recession. In the gloomy autumn of 2001, lipstick sales in America increased by 11%.

Believers in the lipstick theory trace the phenomenon back to the Depression, when cosmetic sales increased by 25%, despite the convulsing economy. Some, like Dhaval Joshi of RAB Capital, an investment-management firm, point out that employment in the cosmetics industry has been known to rise as overall employment falls, suggesting that demand for cosmetics increases when consumer confidence is low. This was so in the recessions of 1990 and 2001, according to Mr Joshi’s recent report on what he calls the “lipstick effect”.

Not everyone is convinced. Reliable historical figures on lipstick sales are hard to find, and most lipstick believers can only point to isolated, anecdotal examples as evidence of the larger phenomenon. Data collected by Kline & Company, a market-research group, show that lipstick sales sometimes increase during times of economic distress, but have also been known to grow during periods of prosperity (see chart). In other words, there is no clear correlation.

Lipstick sales are merely the latest example of a single measure that has been seized upon because it supposedly reflects economic confidence, or lack of it. Hemlines, alcohol consumption, laxative sales and even who wins the Super Bowl have all been proposed as ways to chart recessions, with varying degrees of success. So is the lipstick index dead?

Karen Grant of the NPD Group, a market-research firm, suggests that it might make more sense to look at a wider “beauty index”, rather than lipstick alone, because she thinks it is beauty as a category that holds up well in recessions, whereas sub-categories (such as lipstick) tend to go in and out of style. Most women would sooner give up silk scarves or designer shoes than mascara or eye shadow, which they consider to be more essential. Men’s spending habits may follow a similar pattern, as they shift from spending on televisions and cars to less expensive luxuries, such as portable gadgets or personal accessories. Watch out: the “cufflink index” could be next.

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