min read
· Posted on
February 21, 2024

The lipstick effect: Lux spending in a cost of living crisis

The lipstick effect explains indulgent spending in a time of high prices. Sooo there might be a reason behind all those Uber Eats orders

What's the key learning?

  • What is the lipstick effect?
  • Differences between the lipstick effect now and in the past

With the cost of living on the rise, economists have started talking about this thing called the ‘lipstick effect’.

Um…what is that?!

The term was actually coined by Estée Lauder’s Leonard Lauder. Yep, the cosmetic king and queen.

It goes a little bit like this.. when economic conditions are hella stressful, people still like to dabble in a bit of retail therapy.

Except rather than indulging on the big-ticket items, like a new watch or holiday, consumers tend to treat themselves with smaller luxury items (like a lipstick). And hence why it’s called the lipstick effect.

But this trend isn't just limited to cosmetics. The term is used for other indulgences too like food or inexpensive clothing as well. Think Uber Eats, or a shirt on sale at Cotton On.

In fact, 2022 data suggests that the lipstick effect is well and truly happening…but unlike during the Global Financial Crisis in 2008, this time the lipstick effect looks a little difference. There's a greater focus on “experiential” indulgences rather than the traditional lipstick. Things like Airbnb or fast food like KFC.

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