The Lipstick Effect: How Small Luxuries Reflect Consumer Confidence in Tough Times

Ever noticed how a simple tube of lipstick can make all the difference, even when budgets are tight? This isn’t just a coincidence—it’s the Lipstick Effect, a powerful reminder that during uncertain times, affordable luxuries hold their ground.

What Is the Lipstick Effect?

The Lipstick Effect is a concept that surfaces during economic downturns. It explains how, when people face financial constraints, they may scale back on big-ticket items but still treat themselves to small, feel-good purchases. First recognized by economist Juliet Schor and later popularised by Leonard Lauder, the former CEO of Estée Lauder, the term took off after Lauder noticed a surprising spike in lipstick sales after 9/11—a period marked by both economic and emotional turmoil.

The Psychology Behind the Lipstick Effect

During tough times, our purchasing behaviors shift. While vacations or major investments may be put on hold, affordable luxuries like a high-quality lipstick or skincare product become an easy way to boost mood and confidence. This reflects what economists call the substitution effect: people substitute larger purchases with smaller indulgences that provide emotional comfort without the hefty price tag. For many women, buying a beauty product is not just a purchase—it’s a moment of self-care and empowerment. It’s the kind of luxury that doesn’t break the bank, but still makes you feel like you’ve treated yourself.

The Lipstick Effect Through History

The Lipstick Effect is far from a recent discovery. In fact, it dates back to the Great Depression, when women turned to small indulgences like lipstick as a way to feel uplifted amidst widespread uncertainty. It reappeared during the 2008 global recession, when L'Oréal still managed to grow by 3.1%. Fast forward to 2023, and despite global challenges, brands like Sephora and Ulta Beauty saw massive growth—Sephora’s revenue climbed by 25%, hitting $19.8 billion, while Ulta Beauty exceeded $11 billion in sales. The trend proves that even in times of economic strain, people continue to find comfort in affordable luxuries.

The Lipstick Effect isn’t limited to beauty products. It’s a broader trend where small luxuries in various sectors thrive. During the pandemic, while masks concealed smiles, sales of beauty products surged. Retail platforms like Amazon saw beauty and skincare purchases increase by 70%. Even outside of beauty, industries like cinema and wellness flourished. In India, for example, despite GDP declines, people still flocked to cinemas and pampered themselves with artisanal foods and wellness treatments. These small indulgences become a source of comfort, normalcy, and emotional well-being in challenging times.

Affordable Luxuries: More Than Just Lipstick

While the Lipstick Effect is most closely associated with beauty products, it speaks to a larger trend of consumers seeking affordable luxuries during economic turbulence. It’s not just about lipstick or skincare—it’s about any small luxury that can offer a sense of normalcy. During difficult periods, people turn to things like artisanal chocolates, craft coffee, or a luxurious candle to create a little happiness and comfort in their lives.

What the Lipstick Effect Means for Women Entrepreneurs

For women entrepreneurs, the Lipstick Effect provides an important insight: consumers, especially women, are resilient and continue to seek small luxuries even when times are tough. This trend presents a unique opportunity for women-led businesses to innovate and capture a loyal customer base by offering products that deliver joy without a hefty price tag.

At She Capital, we understand that female consumers are driven by value and the need for comfort, even in uncertain times. This insight is an opportunity for women entrepreneurs to tap into their audience’s desire for affordable indulgence, creating products that empower while being mindful of the budget.

How Women-Led Brands Can Leverage the Lipstick Effect

1. Embrace Affordable Luxuries: Offer high-quality yet affordable products that bring comfort and joy. In tough times, people are drawn to small indulgences that don’t hurt their wallets.
2. Connect Emotionally with Consumers: Go beyond the product itself. Focus on the emotional benefits of your offering—confidence, self-care, and empowerment are key selling points that resonate in uncertain times.
3. Adapt to Shifting Consumer Behavior: Flexibility is essential. Whether it’s adjusting your product offerings or finding creative ways to connect with your audience, being agile will help your brand thrive during economic shifts.
4. Champion Resilience: Tell your brand’s story of resilience and understanding. Women-led businesses have a unique ability to empathize with consumer needs and adapt quickly to market changes.

Small Indulgences, Big Impact

The Lipstick Effect is not just a passing trend—it’s a powerful reminder of how small indulgences can provide comfort and confidence during challenging times. It’s about finding comfort and joy in the simplest pleasures, whether it’s a new lipstick, a skincare product, or another form of affordable luxury. For women entrepreneurs, understanding this effect offers a unique opportunity to innovate and connect with consumers, providing them with a sense of empowerment and normalcy when they need it most.

In the end, the Lipstick Effect reminds us that sometimes, even in the most uncertain of times, a little luxury goes a long way.