Lipstick Effect

The economy is slowing down, and as a result, we’re tightening our financial belt. For instance, we were going to buy season tickets to see our local football team, but now we’re just going to upgrade our cable package instead and watch the games at home. And we were going to head to Hawaii this summer for a week of fun in the sun with our besties, but we’ve decided to stay home instead and maybe just do a spa day or something.

This is an example of the “lipstick effect." When financial times are tough, sales of less-expensive luxury items go up.

It gets its name from the phenomenon that the chairman of Estee Lauder noticed after 9/11: the company’s lipstick sales were going through the roof even while the economy was tanking. The theory here is that people can’t necessarily afford the luxury items they would’ve bought before—like, say, a diamond necklace—so they compensate by buying a smaller, cheaper luxury item. Like lipstick. Or to refer back to our earlier example, we can’t necessarily afford the season tickets or the week-long Hawaiian vacation, so we compromise with a TV football package or a spa day somewhere local.