Thinktown Explains: Why are cosmetics sales doing so well in a recession?
During the pandemic, people spend much less money on dining out or traveling. So, where do they spend the majority of their money instead?
When there is an economic recession, people would feel the increased pressure in life and thus lower their future expectations and expenses. During this period, people would first avoid large purchases such as property, vehicles or going on a vacation abroad.
This actually means that people might even have more disposable income than usual, which leads them to turn to affordable but unessential products that could bring them a sense of satisfaction. Therefore, the sales of these less costly “luxury” items went through the roof.
Buy lipsticks, even in an economic crisis!
Lipsticks are a representative of “entry lux,” so this phenomenon is also called the “Lipstick Effect”. Think about it, when the whole economic environment is so bad, who would spend ten grand on a purse? But a lipstick with the same luxury brand is a different story. For less than $50, people could easily buy a luxury brand lipstick. Pulling it out, putting it on — still a good old status flex.
The Lipstick Effect has been tried and true in the past several economic crises. This economic phenomenon first appeared in the Great Depression in the United States in the 1930s. When almost all industries were in dire straits, Hollywood was booming.
People need even more consolation in tough times, and movies that could be enjoyed for only 20 to 30 cents became the best distraction from miserable daily hauls. Later, during both the economic contraction period after 9/11 and the economic crisis in 2008, the sales of lipsticks went against the economic disaster and showed an upward trend.
The Lipstick Effect during the pandemic
Although the sales of lipsticks did not go up when COVID-19 hit (when your whole mouth is covered, who even cares if you are wearing your lipstick?), this effect is still valid — in the cosmetics industry, eye makeup replaced lipsticks as the new favorite among female consumers during the pandemic.
According to data from Chinese online retailer Taobao, eye cosmetics sales went up by 150% last February. The same phenomenon also appeared on Japanese website Rakuten, eye products from brands like Bobbi Brown and Dior saw their sales increase by 40%.
The reality is, no matter how bad the economic environment is, it’s almost impossible for people to give up the beauty-loving nature. In addition to eye makeup, what other products did you buy?
The entertainment industry also showed great promise in this economic crisis. In addition to the above-mentioned movie industry, game consoles have also performed well in the COVID-19 epidemic. Because the lockdown limited people’s entertainment and social interaction options, many people moved their social venues online by visiting each other in “Animal Crossing.”
In the first half of 2020, the Nintendo Switch was out of stock in many parts of the world, and Nintendo also saw their revenue grow compared to before the economic crisis.
You might wonder, aren’t we supposed to be more frugal in a crisis like this? Why are we still buying all these unnecessary things? The answer is, everyone has great expectations for life. When we give up large purchases, we will use the “pocket money” in our hands to buy substitute products that can give us the same sense of satisfaction. And there’s nothing wrong with that, as long as you are responsible with your overall financial well-being.
