The Lipstick Index is back.
The term was coined during the 2001 recession by Leonard Lauder, then chairman of Estee Lauder Cos. He noted that lipstick sales rose this fall, suggesting that women facing uncertain economic conditions are turning to beauty products as an affordable indulgence.
Then the financial crisis of 2008-2009 spawned the Foundation Index as women valued flawless skin over a perfect pout.
This time get ready for the perfume index or maybe the bouncy blowout effect. Sales of fragrances or hair care products may rather reflect consumers’ shift from extravagant purchases to cheaper indulgences in the post-pandemic era.
Of course, makeup sales are booming. As masks are taken off, lipstick is leading the way – both in the US and Europe and in mainstream and premium markets.
But the cosmetic demand is not limited to lipstick. The natural “clean girl” aesthetic characterized by glowing skin has sparked interest in new makeup, as has a more dramatic look that’s growing in popularity — think bold, colored eyeliner and gems the TV show Euphoria.
Many consumers neglected their makeup bags while staying at home during Covid, much like they did with their dressier closets. Skincare, which had overtaken makeup for a few years, became even more important. But the beauty wand is now handed over to color cosmetics again.
Economic considerations play a role. Despite crumbling consumer confidence, sales are up. And beauty is less affected by rising input costs. Packaging aside, energy is a relatively minor component in the manufacture of makeup, and products take up little space in expensive shipping containers. Add in the buffer of fat margins, and the median price of U.S. premium beauty products rose just 2% year over year for the period January through Aug. 27, according to the NPD Group. Compare that to the headline inflation rate of 10.9% for groceries and 5.1% for clothing in July in the US.
This makes beauty a more accessible luxury. And while many shoppers reach for lipstick, others are turning to perfume as a pick-me-up.
“We call it the scent index or scent effect,” Coty Inc. chief executive officer Sue Nabi recently told investors. The company sees no sign of a downside trade. In fact, consumers are moving toward more concentrated versions of desirable scents, she said. Fragrance sales are also up at Estee Lauder, L’Oreal SA and US retailer Ulta Beauty Inc.
Supporting the demand is the fact that consumers have been buying fragrances online during the pandemic. The beauty giants had already begun to shift their focus away from celebrity fragrances and towards more artisanal, personalized perfumes that appealed to millennial and Gen Z shoppers. Fragrance became a way for people to lift their spirits while stuck at home – it was another part of the self-care regimen that also benefited skincare.
But unlike demand for face creams and masks, the reopening has been good for fragrance sales. Fewer people have more time for a 10-step skin routine, but there are more reasons to top up the scent as we head back to work and parties. Changes in taste can also be observed. For example, while sales of men’s fragrances in Europe rose 21% year-on-year between January and July, aftershave was flat, according to IRI.
Designer perfume has traditionally been an entry point into high-end goods. Sneakers and streetwear have caught on to a certain extent, but with inflation crowding out more marginal luxury shoppers, the role of fragrances could be revived. Can’t afford a Prada bag? How about a bottle of his new perfume Paradoxe?
Expect these trends to continue as travel retail continues to recover, the winter holidays boost gift sales and Chinese consumers buy more fragrances.
Another difference from earlier times of economic uncertainty is the explosion of premium hair care. This category includes brands like L’Oreal’s Kerastase, US-listed Olaplex Holdings Inc. and Kardashian favorite Ouai, which was acquired by Procter & Gamble Co. late last year. Socializing again means more need for styling products. At the same time, consumers have not abandoned the treatments like hair masks that they discovered during lockdown.
Hair care has experienced a massive boost thanks to social media. There are endless TikTok videos on how to achieve curtain bangs and beach waves, for example. The undisputed star of “HairTok” is the Dyson Airwrap. But at over $500, the tool is far from an affordable treat. A $30 bottle of Olaplex oil is a cheaper way to get shiny hair. It’s no wonder, then, that Olaplex’s revenue rose nearly 40% in the second quarter. Another area to consider will be at-home hair color as more women replace visits to the salon or increase the time between their visits.
Social media will play a big part in which categories benefit from the lipstick effect. This poses a challenge for beauty manufacturers and retailers because when a product goes viral, there can be a sudden surge in demand. Take Clinique’s Almost Lipstick in Black Honey. The universally flattering hue was introduced in 1971 but became a TikTok sensation last year, causing demand to outstrip supply.
But for high-end beauty, this can’t be a bad thing. As in the luxury industry, sometimes scarcity is just the thing to send consumers into a frenzy and send the lipstick index skyrocketing.
More from the Bloomberg Opinion:
• Is Burberry ready for a new creative direction?: Andrea Felsted
• Can you afford to hoard? The cost of toilet paper is exploding: Javier Blas
• Paying for YouTube makes sense. But Facebook?: Parmy Olson
This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.
Andrea Felsted is a columnist for Bloomberg Opinion covering consumer goods and retail. She was previously a reporter for the Financial Times.
For more stories like this, visit bloomberg.com/opinion
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