Lipstick Chronicles

+ Official Coverage on Business Times

Business Times and New Straits Times (9 January 2012)
Bernama Today (7 February 2012)

Lipstick Chronicles

Spire Research and Consulting CEO Leon Perera appeared on Bernama Television in Malaysia (7 February 2012) to discuss how the sales of lipsticks and other small indulgences point to the state of economic sentiment in every country. The story was also carried in the Malaysian New Straits Times (9 January 2012) and Business Times (9 January 2012).

The “lipstick effect” has been observed since The Great Depression. It is a term coined by Leonard Lauder, chairman emeritus of The Estée Lauder group of companies. It refers to a noted tendency for consumers to buy less costly luxury goods, such as lipsticks, when an economic crisis looms. This trend has been evident for decades across countries and cultures around the world.

Lipstick sales in the USA surged for a short while after the 911 attacks, despite a fall in the average price of lipsticks. A similar trend was also observed in North-Eastern Japan after the Tohoku earthquake of March 2011.

Spire Research and Consulting studied lipstick sales (in terms of both import value and volume) in Malaysia from 2008 to 2011. It was observed that, though the import value of lipstick remained the same in 2009, the import volume almost doubled when compared to 2008. This showed how Malaysian consumers were reacting to the economic recession of 2009 by buying cheaper lipstick more frequently – vindicating the classic “lipstick effect” hypothesis.

Of course, this phenomenon is not limited to just female consumers and lipsticks. Other than lipsticks, other “affected” industries include low-cost gadgets, movies and “comfort food”, such as chocolates and ice-cream.

Marketers should, Spire argues, take such observations into consideration when planning their marketing promotions. The sales of lipsticks and other “small treats” should be seen as a pointer to what consumers feel about their economic future. Companies that understand this will adapt their marketing plans and pricing more quickly and effectively to suit market conditions.

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