How the ‘lipstick effect’ can create a gloss in an economic downturn in Hong Kong
Economic theory shows that alcohol, sporting goods, cheaper daily necessities, cosmetics and personal care products are resilient to recessions
Certain types of consumer goods tend to buck the trend and do better in an economic downturn.
Alcohol-related products, sporting goods, and cheaper daily necessities are among those which have proven resilent to previous recessions. Cosmetics and personal care products have also tended to thrive as female consumers continue to buy them.
An economic theory, known as the “lipstick effect”, has been used to describe the phenomenon. The idea is that woman would buy cosmetics, such as lipstick, as an affordable indulgence while making cutbacks elsewhere.
Research by four American universities in 2011 on the “lipstick effect” found a positive connection between unemployment and spending on personal care and cosmetic products. As the unemployment rate went up, people allocated a larger portion of their monthly spending budgets on such products.
Financial results of big beauty groups also support the theory.
Amorepacific – South Korea’s biggest beauty company, with brands such as Sulwhasoo, Laneige in its portfolio – reported a 23 per cent jump in sales last year. Japanese player Shiseido also topped the market estimate in its 2015 sales, which the company said was benefited from the increasing wave of tourists to Japan.
