The lipstick as an economic indicator

Last month, Betsy Stein made a beeline for Bloomingdale’s to buy a shirt, but the Nanette Lepore top she found was $280. Stein, 33, a business manager for a classical music composer in Manhattan, told herself that in the current economic climate, she shouldn’t charge it. “With the scare of the downturn ,” she said, “I decided to cut back on my shopaholic problem and exercise some restraint.” But the next day, she made a substitute purchase. “I could buy one or two lipsticks for about $40,” she said. “That’s far less than $280.” Stein’s rationale for buying lipstick echoes a theory once proposed by Leonard Lauder, the chairman of Estee Lauder Cos. After 9/11 deflated the economy, Lauder noticed that his company was selling more lipstick than usual. He hypothesized that lipstick purchases are a way to gauge the economy. When it’s shaky, he said, sales increase as women boost their mood with inexpensive lipstick purchases instead of $500 slingbacks. Beauty brands remain true believers in the theory, even though in the last few years the lipstick market has fallen on hard times as its glistening cousin, lip gloss, has had robust sales.

But do economists, and not just companies that need to move a lot of lip colour, believe that lipstick sales could skyrocket as the economy tanks? And what’s the draw of lipstick in particular for women worried about having to pay as much for gas as they would a handbag? Not only is the lipstick theory plausible , “it’s perfectly consistent with all kinds of economic theory,” said Richard DeKaser , the chief economist with National City Corp, a financial holding company and bank in Cleveland. Three sorts of products sell robustly during tough times, said Lou Crandall, the chief economist at Wrightson ICAP, an independent research firm. The first is what economists call traditional inferior goods, what people have to buy when they can no longer afford their favourites. If you’re a salmon lover eating tuna casserole , you’re chewing on inferior goods. Lipsticks aren’t inferior goods, economists say, but they could be small indulgences , an inexpensive treat meant to substitute for a bigger-ticket item. Or lipsticks could also be morale boosters, like Charlie Chaplin films were during the Depression. A warm shade that perfectly matches your skin tone might make you forget how far your 401(k) has tanked. Although this relationship exists, Lauder was wrong about one thing: Counting lipstick purchases won’t confirm whether we’re in a recession. “It doesn’t surprise me that lipstick sales go up,” Crandall said, “but if I had to choose my top economic indicators to take to a desert island with me, I’m not sure it would make my top 20.”