Politics, Business & Culture in the Americas

Putting Lipstick on a Piggybank

Reading Time: < 1 minuteEconomies that are surviving the financial crisis.
Reading Time: < 1 minute

Not all businesses suffer in a downturn. Even when things are tough, consumers are willing to fork out cash for goods that give them personal satisfaction—a phenomenon analysts call the “lipstick economy.” The term captures the idea that, in the past, when the economy has soured, cosmetics and other small, luxury goods have been immune to recessionary belt-tightening.

In the current crisis, the phenomenon has held true for video games and consumer electronics— the most-gifted goods during the 2008–2009 holiday season—according to Marshal Cohen, chief retail analyst with the NPD group, a market research company based in Port Washington, NY. And while the apparel industry lost the top spot, many premium denim and T-shirt apparel companies are still showing some growth as economy-minded shoppers prefer to tweak their wardrobes rather than replace them.

Ironically, the “lipstick economy” apparently hasn’t helped lipstick sales. Estée Lauder, the cosmetics giant that coined the term “leading lipstick index” to describe such discretionary, recession proof spending, reported a 6 percent decline in net sales for the fiscal quarter ending December 2008. William P. Lauder, the firm’s chief executive officer told BusinessWire, “The factors that impacted our quarter results were . . . not different from what many other companies have experienced, especially those companies dependent on consumer spending…”

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