12 October 2022

A few days ago, the flower seller in my neighborhood asked me if people will still buy Christmas trees. Because today she is a bit worried about the side effects of the expensive life for her business for the coming end-of-year period. I tried to reassure her. Even though consumers have to pay attention to the little ones in these times of crisis, there is also such a thing as ... the lipstickeffect. What effect?, I hear you say.

The lipstick effect may not be so well known, but it is certainly not a new phenomenon during a crisis. The lipstick effect occurs when consumers still spend money on small treats during recessions, economic downturns, or when they are personally low on money. They don't have enough money to spend on luxury items with a high price tag, but many still find the money for purchases of small luxury items, such as premium lipstick. And so they forget their financial problems for a moment.
For this reason, companies that benefit from the lipstickeffect are generally resilient, even during an economic crisis. For example, Leonard Lauder, the then chairman of Estée Lauder, noted in the aftermath of the dotcom crisis in 2000 and the terrorist attacks of September 2001 in New York that his company sold more lipstick than usual. For that reason, he is sometimes called the spiritual father of the lipstickeffect. However, economists note that there is no statistical co-relationship between an economic crisis and the increased sale of lipstick. Even in prosperous times, consumers buy lipstick. Moreover, it turns out that those who feel the water up to their lips can no longer spend any money on lipstick.
Nevertheless, even during the banking crisis of 2008-2009, consumers continued to indulge in small pleasures, while they had to tighten their belts for other products and services. Sales figures from one of the world's largest cosmetics companies, L'Oréal, revealed that in 2008, cosmetics experienced sales growth of 5.3%. Dining in cheap restaurants, dreaming away in the cinema, a day out with the children in an amusement park or buying seductive lingerie are other patterns that indicate that consumers want to continue to pamper themselves for a short time when things go badly economically and financially.
Possibly we will soon visit each other at the end of the year in the intimate atmosphere of our living room, with the thermostat a few degrees lower than usual, with candle lights and with presents from the thrift store under a beautifully decorated Christmas tree. Musing about how it might all have been better in the past. But also with the observation that this kind of crisis brings people closer together again and makes them see what really counts. A Christmas tree as a lipstickeffect.
I told all that to the flower seller while she put together a beautiful bouquet for my wife's birthday with a lot of care and good taste. It made her hopeful, it seemed. 'But just to be on the safe side, I ordered smaller sizes of Christmas trees this year', she winked at the farewell.