The Lipstick Index Returns and Smells Better Than Ever

The Lipstick Index is back.

The term was coined during the 2001 recession by Leonard Lauder, then president of Estee Lauder Cos. He noted that lipstick sales increased in the fall of that year, indicating that women facing an uncertain economic environment are turning to beauty products as an affordable treat.

Then the financial crisis of 2008-2009 gave birth to the Foundation Index, with women prioritizing flawless skin over a perfect pout.

This time around get ready for the Scent Hint, or maybe the Bouncy Blowout Effect. Fragrance or hair care sales may further reflect consumers’ shift from extravagant purchases to cheaper indulgences in the post-pandemic era.

To be sure, makeup sales are booming. As the masks come off, lipstick has led the way – in the US and Europe, as well as in mainstream and high-end markets.

But cosmetic demand is not limited to lipstick. The natural “clean girl” aesthetic, characterized by glowing skin, has sparked interest in the new makeup, as has a more dramatic look that is increasingly popular – think colorful, bold eyeliner and gemstones from the TV show “Euphoria”.

Many consumers neglected their makeup bags while staying home during Covid, just as they did with their dressier wardrobes. Skincare, which had overtaken makeup for several years, has become even more important. But the relay of beauty now returns to colored cosmetics.

Economic considerations play a role. Despite the loss of consumer confidence, sales increased. And beauty is less affected by spiraling input costs. Packaging aside, energy is a relatively small component in makeup production, and products take up little space in expensive shipping containers. Add to that the big-margin buffer, and the average price of high-end beauty products in the U.S. rose just 2% year-over-year in the January-August 27 period, according to the NPD Group. Compare that with the overall inflation rate of 10.9% in food and 5.1% in clothing in July in the United States.

This makes beauty a more accessible luxury. And while many shoppers turn to lipstick, others turn to perfume for a pick-me-up.

“We call it the scent index or the scent effect,” Sue Nabi, CEO of Coty Inc., told investors recently. The company sees no signs of slowing down. In fact, consumers are moving upmarket to more concentrated versions of desirable scents, she said. Fragrance sales are also increasing at Estee Lauder, L’Oréal SA and US retailer Ulta Beauty Inc.

Demand is aided by the fact that consumers have purchased perfumes online during the pandemic. Beauty giants had already begun to shift away from celebrity perfumes towards more artisanal and personalized fragrances, which appealed to millennial and Gen Z shoppers. Perfume became a way for people to cheering themselves up when stuck at home – this was another part of the self-care regimen that also benefited skincare.

But unlike demand for face creams and masks, the reopening has been good for fragrance sales. Fewer people have time for a 10-step skincare routine, but there’s more reason to restock on fragrance as we head back to work and the holidays. Taste changes are also observed. For example, while men’s fragrance sales in Europe rose 21% year-on-year between January and July, aftershave remained flat, according to IRI.

Designer fragrance has traditionally been an entry point into high-end products. Sneakers and streetwear have taken over to some extent, but with inflation crowding out more marginal luxury shoppers, the role of fragrance could be revived. Can’t afford a Prada bag? How about a bottle of her new perfume Paradoxe?

Expect these trends to continue as retail recovers further, the winter holiday boosts gift sales and Chinese consumers buy more fragrances.

Another difference from past periods of economic uncertainty is the explosion of high-end hair care. This category includes brands such as L’Oréal’s Kerastase, US-listed Olaplex Holdings Inc. and Kardashian favorite Ouai, acquired late last year by Procter & Gamble Co. Socializing again means more need styling products. At the same time, consumers haven’t given up on treatments, such as hair masks, that they discovered during lockdowns.

Hair care has received a huge boost from social media. There are countless TikTok videos on how to get curtain shots and beach waves, for example. The undisputed star of “HairTok” is the Dyson Airwrap. But at over $500, the tool is far from an affordable treat. A $30 bottle of Olaplex oil is a cheaper way to get shiny hair. It’s no wonder, then, that Olaplex sales grew nearly 40% in the second quarter. Another area to watch will be at-home hair color, as more and more women are replacing salon visits or extending the time between visits.

Social media will play a big role in determining which categories benefit from the lipstick effect. This presents a challenge for beauty product manufacturers and retailers because if a product goes viral, they may face a sudden surge in demand. Take Clinique’s Almost Black Honey Lipstick. The universally flattering hue launched in 1971 but became a TikTok sensation last year, causing demand to outstrip supply.

But for high-end beauty, that can’t be a bad thing. As in the luxury industry, sometimes scarcity is exactly what it takes to send consumers into a frenzy, and the Lipstick Index soar.

More from Bloomberg Opinion:

• Is Burberry ready for a new creative direction? : Andrea Felsted

• Can you afford to hoard? Toilet paper prices are skyrocketing: Javier Blas

• Paying for YouTube makes sense. But Facebook? : Parmy Olson

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.

More stories like this are available at bloomberg.com/opinion