The Lipstick Index: An Economic Indicator of Consumer Behavior
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Chapter 1: The Lipstick Index Explained
The phenomenon known as the "Lipstick Index" suggests that sales of affordable luxury items, like lipstick, serve as counterintuitive economic indicators. During challenging economic times, consumers often become more selective with their spending, emphasizing essential needs over non-essential luxuries. Yet, as the Lipstick Index implies, they frequently seek out small pleasures that boost their mood without straining their budgets.
This might involve purchasing a new lipstick shade, enjoying a gourmet coffee, or acquiring a book or movie for home entertainment. The concept of the "New Lipstick Index" extends this idea by emphasizing the rising importance of sustainability and ethical considerations in consumer choices.
In addition to looking for budget-friendly luxuries, shoppers are increasingly mindful of how their purchases impact the environment and society. Consequently, brands that embody these principles and effectively communicate them are likely to thrive over time. The Lipstick Index and its modern counterpart reflect the shifting consumer behavior in times of economic uncertainty, as well as the changing values and priorities of today’s consumers.
Section 1.1: Understanding the Lipstick Effect in 2023
The "lipstick effect" suggests that during periods of inflation, while shoppers may cut back on high-end purchases, they still allow themselves modest indulgences. This trend is evident in the continued purchase of lipstick and other affordable luxuries.
The first video, "Lipstick index suggests tough economic times as beauty sales boom," explores how the Lipstick Index acts as an indicator of economic resilience, showing that beauty sales can thrive even in downturns.
Subsection 1.1.1: The Origin of the Lipstick Index
The Lipstick Index serves as a financial indicator that uses cosmetic sales to predict bear markets or recessions. This concept originated with Leonard Lauder, the billionaire heir to the Estee Lauder brand. He observed that during recessionary phases, even when consumer spending generally declines, sales of his products, particularly lipsticks, often increased.
Even when the economy struggles, makeup sales remain relatively stable, largely unaffected by inflation compared to other sectors.
The second video, "What is the lipstick index?", delves into the details of this phenomenon, illustrating how lipstick sales can signify economic resilience.
Section 1.2: The Lipstick Index vs. The Bourbon Barometer
The Lipstick Index and the Bourbon Barometer are two distinct economic indicators that reflect different facets of consumer behavior. The Bourbon Barometer measures the production or consumption of Bourbon whiskey, providing insights into trends within that market. In contrast, the Lipstick Index captures the tendency of consumers to maintain their purchases of small luxury items during economic hardships.
While both indicators shed light on consumer behavior and market trends, they are not directly related and likely do not influence one another.
Chapter 2: Changing Consumer Trends
Did you notice a trend where people are increasingly inclined to purchase smaller, more affordable items? This shift is a testament to the resilience of consumer behavior in the face of economic challenges.
Thank you!
Regia Marinho. May 14, 2023.