A statistical analysis of the new markers of economic downturn in consumer behaviour
A colleague of mine recently idly brought up the lipstick index, wondering what impact masks would have on its usefulness as an economic marker. I hadn’t heard the term, but the more I read, the more fascinated I became — and the deeper I looked into the topic. After applying a statistical analysis on what’s available in the market, I’d argue that there are a couple of alternatives that we can now use instead.
What is the lipstick index?
The lipstick index was coined during the 2001 recession by Leonard Lauder when he was the CEO of Estée Lauder. He noticed that lipstick sales spiked during times of economic downturn and reasoned that women were turning to lipstick as an affordable luxury that made them feel better about themselves while presenting a cheerier face to the world. When researched, this pattern held up going back as far as the Great Depression.
Over the past 20 years, the lipstick index has been used as shorthand to represent customer spending, especially trends in the consumer goods market. The rationale is that during a recession, extravagant luxuries might fall out of reach for most consumers worried about economic conditions, but lipstick remains affordable. You can splurge on yourself as a type of self-care to boost your morale without feeling guilty for spending money when times are tough.
The collapse of the lipstick index
Of course, there are two big problems with the lipstick index during an economic crisis caused by a pandemic.
- No one is going out to places where they wear makeup as often as they did in the past.
- When they do, masks are covering their mouths.
It’s hard to feel a burst of pleasure from wearing lipstick when no one will see it — and it will probably end up smeared all over your mask anyways. In fact, it’s not exactly a distraction to buy a lipstick nowadays. All it does is remind you of how much things have changed.
Unsurprisingly, the lipstick index hasn’t been a reliable measure of consumer behaviour during the pandemic. Lipstick sales have dropped 49% compared to last year. Of course, lipstick purchases have not been behaving according to this pattern for some time now. During the 2008 financial crisis, retail sales of lipstick actually dropped, as well. An interesting alternative pattern emerged. Sales of nail polish and other nail products spiked instead, taking the place of different cosmetics. Yet overall, the basic pattern held; women were investing in low-cost, high-value-for-money luxuries even while cutting back on other splurges.
When asked about the dip in lipstick sales in 2009, Lauder himself pointed out that lipstick itself was never the point. We need these small luxuries to make the economic stress more manageable and to feel a bit better, even just for a moment. If there’s not a lipstick index, there will always be something equivalent in its place.
We have long observed the concept of small luxuries, things that can get you through hard times and good ones. And they become more important during harder times.
— Leonard Lauder, Originator of the Lipstick Index and Chairman Emeritus of Estée Lauder
What is the new lipstick index?
If the lipstick index is out, what’s its replacement? People have argued for everything from a mascara index to a nail polish index to even a candle index. Others say we should be more general to accommodate the myriad of ways people define self-care these days and create an all-inclusive self-care index (although how we could possibly measure that is debatable). The only clear consensus was a lack of agreement.
I wanted to see if I could apply a statistical analysis to the problem and see if any particular new lipstick index substitute stood out. Based on what I’d read and trends in Euromonitor’s sales data, it looked like overall sales of eye products and skincare products were the self-care items experiencing the most resilience — and in cases of products like high-quality moisturisers and skin creams actual increases in sales. I decided to focus on these two categories when drilling into the data.
What gives me joy while grocery shopping? — Product availability
Because any lipstick index product must be both easily accessible and affordable, the first issue to analyse was what was actually available in the market. I used Evo’s Market Tracker tool to monitor what kinds of self-care beauty products were available in grocery stores in Italy, including Esselunga, Pam Panorama, Carrefour, and Coop, over the past couple of months.
Why the grocery store? For most people, their weekly grocery shopping excursion is the only time they are willing to go out to make a purchase. While the quarantines may have ended, most people are still only shopping for necessities. Any new index item would have to be something that could be easily and mindlessly added to the cart during a virtual “Sunday grocery shopping stroll”. This item should give shoppers a small moment of happiness during a strictly necessary online shopping trip. Most stores do carry health and beauty products, including some that have potential as a new index.
As a comparison, I first looked at lip products. Most stores stocked multiple brands in varying colours and styles. If other factors did not hinder the lipstick index, it could still be in the running.
Next, I assessed my two new contenders: eye makeup and skin creams. Skin creams are definitely available at most major grocery stores, and there is plenty of variety to allow consumers to feel that they are enjoying a small luxury.
Eye products were another story. Very few stores had any eye makeup available, and those that did had only one or two brands. It is hard to imagine that many women would feel like they are treating themselves when forced to choose from such a limited number of options — if their grocery store even had any eye makeup in stock at all.
Just this first look already makes a skin cream index seem more appropriate, but first, we must also consider the prices.
Not too cheap, not too expensive, just right — Pricing
Any product featured as an alternative lipstick index has to be cheap enough to be affordable to anyone tightening their budget, but it also can’t be too cheap. Otherwise, people may discount its quality and no longer feel the temporary mood lift associated with small luxuries. It’s a very similar calculation to the type we do when suggesting promotions to our clients. You need to balance these competing needs to find the perfect price.
Overall, there is a healthy price distribution for health and beauty products and our control of lip products. Prices remain in the expected range to appeal to a last-minute cart addition. Skincare products had a similarly healthy average. A majority fall between 4€ to 8€ — slightly pricier than lipstick, but close enough to the median ranges in lip prices.
Eye makeup, on the other hand, had hardly any product variety and, as such, hardly any pricing variety. These prices were also higher, especially the median prices. Since buying the cheapest option often does not trigger the feeling of luxury desired by this kind of purchase, the higher price point puts them out of reach for some buyers.
The skin cream index: my analysis and results
As you can see, the mascara index may be interesting in theory, but less practical in real-life. With such low availability and a higher price, it seems an unlikely candidate for the new index. That holds up in the actual purchasing data as well. Eye makeup may be selling better than lipstick, but sales are also down compared to last year.
Skin creams and other skincare products, however, have real potential as a replacement for the lipstick index. It has similar availability and a reasonable average price point. Plus, it triggers the same sense of “small luxury” that a nice lipstick does. In a time where we are all concerned about “maskne” and the impact of masks on our skin, skincare products make us happy while making us look better.
Sales have fallen in the beauty industry overall, but skincare products may be its saving grace. Skincare sales for several major companies have increased compared to last year, and that trend seems to be holding strong. I propose that the data points us towards a new skin cream index — at least while Covid is still a concern.
If we propose the skin cream index as a replacement for the lipstick index, it still measures women’s purchases primarily. While this was historically assumed ideal because women have traditionally been responsible for shopping, it seems an outdated — and a bit sexist — assumption, especially amidst a pandemic. Men are consistently shown to be doing more household shopping — and likely even spend more money than women shopping for themselves.
That’s why it’s short-sighted to create a new index that primarily measures women’s behaviour. In part 2 of this article, I’m going to explore whether or not there are comparable gender-neutral products that may perform similarly to the lipstick index. In the meantime, I look forward to your analyses of my results here.
Big thanks to Kaitlin Goodrich.
About the author
Elena Marocco joined Evo as data scientist in 2016 after a very successful internship experience. A cum-laude graduate in Mathematics at the University of Turin, she defended an MSc with an innovative solution for Fashion Inventory Management.
She is excited about the world of probability, statistics and, more generally, in discovering useful maths that can have a significant impact through real life applications.