The lipstick effect is the theory that when facing an economic crisis consumers will be more willing to buy less costly luxury goods. Instead of buying expensive fur coats, for example, people will buy expensive lipstick. The underlying assumption is that consumers will buy luxury goods even if there is a crisis. When consumer trust in the economy is dwindling, consumers will buy goods that have less impact on their available funds. Outside the cosmetics market, consumers could be tempted by expensive beer or smaller, less costly gadgets.
It has been rumored that lipstick sales doubled after the 9/11 attacks on the United States; however, other sources say this is an overstatement. In a New York Times article published May 1, 2008, Leonard Lauder is quoted as saying that he noted his company's sales of lipstick rose after the terrorist attacks, he did not claim they doubled. Juliet Shor in her book The Over Spent American talks to consumer's purchase of higher-priced, more prestigious lipsticks, specifically Chanel, that are used in public, vs. lower-priced, less prestigious brands that are used in the privacy of the bathroom.
The Economist tested the lipstick effect in 2009 with statistical analysis, stating that "Reliable historical figures on lipstick sales are hard to find, and most lipstick believers can only point to isolated, anecdotal examples as evidence of the larger phenomenon. Data collected by Kline & Company, a market-research group, show that lipstick sales sometimes increase during times of economic distress, but have also been known to grow during periods of prosperity. In other words, there is no clear correlation."
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- Cuthbertson, Dawn (April 3, 2009). "Lipstick effect grips consumers". Archived from the original on 2009-04-08. Retrieved 2009-04-05.
- "The lipstick as an economic indicator". economictimes.indiatimes.com. May 2, 2008. Retrieved 16 December 2016.
- Schaefer, Kayleen (May 1, 2008). "Hard Times, but Your Lips Look Great". The New York Times. Retrieved Apr 10, 2013.
- "Lip reading". The Economist. January 22, 2009. Retrieved 2018-04-30.