A brief look at whether the commonly held
lipstick theory holds up in the current
economic climate and what companies
need to do to plan for a bright future.
BY IMOGEN MATTHEWS
n Brands that maintain a sense of
luxury will be successful.
n Skin care is one of the more
resilient categories, partly because
companies have continued to invest
in new technologies.
n Direct sales has proven to be an
area of unexpected growth.
n Savvy brands are employing a mix
of complementary channels.
n Retailers may see niche as more of
a risk, but there is a genuine need to
have something new and interesting.
Beginning with the collapse of banking giant Lehman Brothers in September 2008, global economies have been on a roller- coaster ride. No consumer market has escaped unscathed, although the so-called “lipstick factor” may have helped cushion the beauty industry. The theory goes that the beauty
industry and sale of beauty products does not suffer as severely as other
industries or products when the going gets tough. As early as the
Great Depression during the 1930s, while the U.S. gross domestic product
nose-dived, cosmetic sales increased—suggesting that consumers were
and are unwilling to give up on life’s little luxuries—regardless of how
bad things may be. Further, it was Leonard Lauder who is credited with
coming up with the term lipstick factor, which claims that during tough
economic times sales of color cosmetics grow while consumers rein in
spending on big-ticket items such as cars and electrical goods.
So, did this theory hold water during the most recent economic
downturn? Well, yes and no. At the end of 2008, Euromonitor
International* noted that North America and Asia (particularly Japan)
had suffered the most, and that premium brands were particularly
hard hit. “Globally, the industry took a knock, but we have noticed
that consumers are ready to try [less expensive] brands, whereas in the
past there had been a taboo about budget beauty,” said Euromonitor
analyst Irina Barbalova, head of beauty and personal care, Euromonitor
International. She notes the success of rock-bottom priced ranges
from Primark, TK Max, Supderdrug and Aldi. However,
cheapness is not enough. “Brands that can keep the luxury feel
will be successful,” she claims. “Consumers want added value at
lower prices, but are looking for quality.”
* Euromonitor, Kline and Mama Mio participated at the 20th annual In-cosmetics
trends presentations held in Paris April 13–15, 2010. For more details on trends
presentations from the show, please visit www.in-cosmetics.com. GCI magazine and
its sister publication, Cosmetics & Toiletries magazine, will also run postshow coverage
and product launch information.