Monday, February 2, 2009

The Lipstick Index: Myth Busted?

The first time I heard about the Lipstick Index was from a Mary Kay rep: I learned from her that the three recession-proof products are lipsticks, alcohol, and cigarettes. It is not difficult to understand why alcohol and cigarettes are recession-proof: if you are addicted to something, you are going to get your drink on, in good times or hard times. (The same can be said of drugs and "purchased sex", then? I imagine a flat line across the chart for these addictions?)
Above is the Daily Chart from The Economist on January 23, 2009, comparing national GDP to lipstick sales from 1989 to 2007.

The term Lipstick Index was coined by Leonard Lauder, the chairman of Estée Lauder, in 2001 during the recession. Lipstick sales in the US jumped by 11% in the 3rd quarter, (and more excitingly for the would-be theorists, the sales increased 25% for cosmetics during the Depression). The common theory states that lipsticks is a relatively inexpensive luxury for women with tighter purse strings. But statistics shown here does not show an obvious trend to prove this theory.
In my view, there will always be people who can purchase luxury goods when the rest of us are forced to "eat cake". The retail anecdotes for this past Christmas season tells an interesting story: when stores were saddled with unsold inventories, 3 (relatively) big-ticket items were hot hot hot, couldn't keep them on the shelves: Nintendo Wii, Uggs Boots, and Amazon's Kindle.

Go figure!

Now if anyone could explain to me the attractions of those Uggs Boots...

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