The cosmetic effects of a growth downturn

| Updated on: Nov 26, 2021
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Thanks to the pandemic and use of masks, theorising around ‘lipstick effect’ and ‘eyeliner effect’ have turned passé

Strange economic indicators afloat to gauge economic conditions. The ‘Hemline Index’, dated back from the mid-1920s, suggests that the lengths of skirts get increased in times of crisis, and skirts get shorter when the economy is booming. The Japanese ‘Haircut Indicator’ says that Japanese women tend to wear their hair long when Japan’s economy is doing well and short when there is a slump.

‘Lipstick’ is another such barometer of an economy to reflect the mood of many consumers amid a recession.

Yes, surprisingly enough, during America’s economic recession following the 9/11 terror attacks, lipstick sales increased — by about 11 per cent in the second half of 2001 compared to the first half. At that time, Leonard Lauder, Chairman emeritus at Estée Lauder, postulated the idea that the sales of lipstick were inversely related to the general health of the economy, thereby naming it the ‘Lipstick Effect’.

During an economic downturn, houses remain unsold, luxury cars stay in the showrooms, and women substitute cosmetics such as lipsticks as an affordable indulgence for more expensive purchases like dresses and shoes.

Century-old historical evidence exhibits that during the Great Depression of 1929-33, the cosmetics industry in America reported a 25 per cent growth in sales amid a decrease in industrial production by 50 per cent. Then, during the recession of 2008, the sales of L’Oréal registered an increase of 5.3 per cent. Even in early 2019, during the economic downturn in China, the sales of the cosmetic industry saw a 116 per cent surge; L’Oréal explained it by the ‘Lipstick Effect’.

The income effect

The lipstick effect is certainly a manifestation of the income effect — as income falls, consumers cannot afford big-ticket luxury goods and instead spend their discretionary income on smaller luxury items. Of course, some prefer to explain it in terms of a more competitive labour market during a recession — job-seekers spend more on the visible aspects of one’s job market appeal by using more or better cosmetics.

Not everybody buys into the relevance of ‘Lipstick Index’ though. The lipstick sales in the US declined by nearly 10 per cent in 2009, amid the bursting of the US housing bubble. Again, during the 2019 Chinese recession, the rising popularity of other cosmetic staples is indicative that lipstick may not be as useful an indicator as it is believed to be. Also, historically lipstick sales have also grown during a boom, indicating its poor correlation with the economy. In fact, in the 2010s, nail polish had replaced lipstick as the main affordable indulgence for women in many countries, and a ‘Nailpolish Index’ emerged.

Then came Covid-19, the once-in-a-century pandemic, where our lips and half of our faces remain covered when we go outside. With mandated mask-wearing, lipsticks will mostly surface only on virtual appearances, and, thus, it may be the time to kiss the lipstick index goodbye. Cosmetics such as eye makeup, skincare, and nail paints might have replaced lipsticks as affordable luxuries for comfort and a mood boost.

“The Lipstick Index has been substituted by the Moisturiser Index,” Estée Lauder Cos. Chief Executive Fabrizio Freda said recently. “But the concept of the index is still there.” Thus, it may be time to say hello to a new economic indicator — be than an ‘Eyeliner Index’, ‘Mascara Index’, or even a ‘Facemask Index’. Yes, demand for luxury hand-soaps, carry-in-bag handwashes, and pretty protective branded masks are on the rise, and the future of cosmetics fashion could be integrating them with makeup as well as outfits.

And, in a broader perspective, the ‘Eyeliner Index’ or the ‘Moisturiser Index’ might very well be a representation of the state of the present economic downturn. The ongoing pandemic has certainly induced a ‘new normal’ in every aspect of our lifestyle — it has induced widely different experiences across sectors and socio-economic, educational, and demographic groups.

Millions of job losses, devastating effect on leisure and hospitality sector, a huge surge in the work-from-home culture, surge in online meetings, online education, unprecedented prolonged global lockdown, and the urgent need of protection from and treatment of Covid might have induced a completely different form of representation and recovery than we are used to in any standard recession. Can this difference be symbolically represented by the shift to ‘Eyeliner Effect’ from ‘Lipstick Effect’?

The writer is Professor of Statistics, Indian Statistical Institute, Kolkata

Published on November 26, 2021

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