Lipstick Index: Does increase in makeup sales really augur recession?

You would think that inflation and recession would force people to cut people on spending, buy cheaper alternatives to what they would otherwise buy, and be more thrifty in general. But call it a glitch in the matrix or whatever, but sometimes things do not make sense. Sometimes during hard times, people buy more luxury stuff, not less. There is a term called 'lipstick index', coined by Leonard Lauder of Estée Lauder cosmetic company, according to which women buy more lipstick and other cosmetics when the economy is in the doldrums. The basis of the theory is that lipsticks are cheap as far as "luxuries" go so they can be bought without a lot of ramifications on the finances compared to dresses and shoes.

What led Lauder to develop the lipstick index theory?

Lauder developed the theory after observing the significant increase in sales of lipstick in the recession during the early 2000s. He put forward that when the economy falls, sales of cosmetics go up.

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Natallia Bambiza, who works at a market research firm NPD Group, wrote in a blog post, "At times when discretionary income is scarce and splurging on expensive non-essential goods is not an option, buying lipstick could be a way of escapism. Priced significantly lower than designer accessories, apparel, or jewelry, a “nice-to-have” lipstick plays the role of “affordable luxury.” In fact, lipstick is one of the products most purchased on impulse, exceeded only by lip gloss, according to the Makeup Consumer Report from NPD."

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Is the theory valid now?

The theory does not have many takers these days as it has been disproven several times, including during the Covid-19 pandemic. For instance, there have been recessions in which women have cut down on buying cosmetic items like they cut down on buying everything else that is non-essential. Also, there have been times when the economy is cruising along just fine when the sales of cosmetics have shot up.

The increase in sales that Lauder observed may just be a fluke.

Should we reject the lipstick index?

But let's not reject the lipstick index summarily. The lipstick index theory also played out in the US during the depression. As per Business Insider, makeup sales got a boost in a time which was among the worst in modern American history.

Can the rise in makeup sales augur a downturn in the economy?

Maybe. Maybe now. Economists have been predicting a full-blown recession that should strike in the next few months. And as per media reports, the sales in lipstick and lip-gloss are seeing a considerable increase.