Home / Opinion / Columns /  The ‘Lipstick Index’ is back as post-pandemic makeup soars

The Lipstick Index is back. The term was coined during the 2001 recession by Leonard Lauder, then the chairman of Estee Lauder. He noted that lipstick sales rose in the autumn of that year, indicating that women facing an uncertain economic environment turn to beauty products as an affordable treat. Then the financial crisis of 2008-09 spawned the Foundation Index, as women prioritized flawless skin over a perfect pout. This time around, get ready for the Perfume Index, or perhaps the Bouncy Blowout effect. Fragrance or hair care sales may be more reflective of a shift from extravagant purchases to cheaper indulgences in the post-pandemic era.

Makeup sales are booming. As masks come off, lipstick has been leading the way in both the US and Europe. But cosmetics demand isn’t confined to lipstick. The natural aesthetic, characterized by glowing skin, has generated interest for new makeup, as has an increasingly popular more dramatic look—think bold, coloured eyeliner and gems from the TV show Euphoria.

Many consumers neglected their makeup bags while they stayed at home during covid, much like they did with their dressier wardrobes. Skincare, which had outpaced makeup for several years, became even more important. But the beauty baton is now being passed back to colour cosmetics.

Economic considerations do play a part. Despite crumbling consumer confidence, sales have grown. And beauty is less affected by spiralling input costs. Aside from the packaging, energy is a relatively small component in producing makeup, and products take up little room in expensive shipping containers. Add in the buffer of fat margins, and the average price of US premium beauty products rose just 2% year-on-year in the period from January to 27 August, according to the NPD Group. Compare that with the 10.9% headline rate of inflation in food and 5.1% in apparel in July in the US.

That makes beauty a more accessible luxury. And although many shoppers are reaching for lipstick, others are turning to perfume for a pick-me-up. “We call it the fragrance index, or fragrance effect," Coty CEO Sue Nabi told investors recently. The company is seeing no sign of trading down. In fact, consumers are moving upmarket to more concentrated versions of desirable scents, she said. Fragrance sales are also surging at Estee Lauder, L’Oreal SA and US retailer Ulta Beauty. Demand is aided by the fact that consumers bought fragrance online during the pandemic. The beauty giants had already begun to shift their emphasis away from celebrity scents and toward more artisanal, personalized perfumes, which appealed to millennial and Gen Z buyers. Fragrance became a way for people to lift their moods while stuck at home — it was another part of the self-care regime that also benefited skincare.

But unlike demand for face creams and masks, reopening has been good for scent sales. Fewer people have time for a 10-step skin routine anymore, but there’s more reason to restock on fragrance as we go back to work and to parties. Shifts in taste are being seen, too. For example, while sales of men’s fragrances in Europe rose 21% year on year between January and July, aftershave was flat, according to IRI.

Designer perfume has long been a point of entry into high-end goods. Sneakers and streetwear have taken over to some extent, but with inflation squeezing out marginal luxury buyers, the role of fragrance may be revived. Can’t afford a Prada bag? How about a bottle of its new Paradoxe perfume?

Another difference with past periods of economic uncertainty is the explosion of premium hair care. Socializing again means more need for styling products. At the same time, consumers haven’t given up the treatments like hair masks that they discovered during lockdowns. Hair care has gotten a massive boost from social media. There are endless TikTok videos on how to achieve curtain bangs and beach waves, for instance. The undisputed star of ‘HairTok’ is the Dyson Airwrap. But at more than $500, the tool is far from an affordable treat. A $30 bottle of Olaplex oil is a cheaper way to get shiny hair. Its sales rose almost 40% in the second quarter. Another category to watch will be home hair colour.

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

But for high-end beauty, this can be no bad thing. As in the luxury industry, sometimes scarcity is exactly what’s needed to send consumers into a frenzy and the Lipstick Index soaring.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry.

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