Lipstick Effect: The Irony of Looking Beautiful During Economic Turmoil

Estée Lauder, one of the world’s beauty giants, has stood strong and continued growing its business since it was founded in 1946. Starting with cleansing oil, skin lotion, and creams, its product range expanded over the years into a prestigious brand. Estée Lauder’s international market presence solidified even more in the 1960s.

About half a century later, Leonard Lauder, Chairman of the Board of Estée Lauder, observed an intriguing phenomenon within his company's business. Sales of Estée Lauder lipsticks saw significant increases starting in 2001. That year witnessed the attacks on the World Trade Center (WTC) Twin Towers in New York and the Pentagon headquarters in Virginia, USA, on September 11, 2001.

That rise in lipstick sales persisted amid economic uncertainty. Leonard hypothesized that this surge was linked to macroeconomic conditions and consumer behavior patterns. Leonard later published this finding in 2008, coining the now-famous term "Lipstick Effect." This hypothesis proposes that consumers become more willing to buy lower-priced luxury goods during downturns. It emerged because cosmetic sales consistently increased throughout US economic recessions.

Economic uncertainty prompts people to seek enjoyment or luxury through cheaper items, one way being the purchase of cosmetics like lipstick. While overall consumption might decrease during economically pressured times, the proportion of spending shifts. People engage in 'small indulgences' – like buying cosmetics – that bring happiness.

A study by MacDonald and Dildar (2020) showed a significant increase in average cosmetic spending among young women aged 18–40 during the Great Recession in the U.S. Lipstick sales in the country rose by 11% in the last quarter of 2001.

The Lipstick Effect occurs due to expenditure substitution: consumers shift spending away from items like clothing towards cheaper goods like lipstick, even as they reduce spending in other categories. The study indicates that the psychological desire to indulge oneself in an affordable way during tough economic times is the primary driver of the Lipstick Effect.

However, a different trend appeared in 2020. Despite severe economic pressure due to the COVID-19 pandemic, lipstick sales actually fell. According to Forbes, citing McKinsey & Company’s analysis of Amazon sales in the U.S., lipstick sales dropped by 15%, and prices also fell 15%. Makeup products in general sold less than skincare products.

One key reason was the shift to working from home, reducing the need for extensive makeup. Even when going out, mask-wearing covered the mouth and nose, diminishing lipstick use. Furthermore, the rise of video calls/conferences (e.g., via Zoom) made makeup application less relevant and more limited.

Did the Lipstick Effect Happen in Indonesia?

Since 2020, the global economy has been under pressure due to the COVID-19 pandemic, which restricted daily life, disrupted trade and services, and hit capital markets. Itsprolonged economic impacts are referred to as the scarring effect. For developing countries, it became harder to recover due to the loss of economic potential and the challenge of regaining growth.

In Indonesia, the scarring effect has impacted purchasing power, household savings, and job availability. Since the pandemic, household consumption has consistently grown slower than the overall economy, indicating weaker purchasing power.

Research by the Mandiri Institute in April 2025, analyzing consumer spending during Ramadan and Eid al-Fitr 2025, revealed a phenomenon of "doom spending" in Indonesia. Lifestyle and impulsive spending on sports, hobbies, entertainment, and gadgets grew higher compared to Ramadan and Eid al-Fitr 2024. In the previous year, high growth was seen in essential spending categories like groceries, household necessities, and durable goods.

Among lower-income groups, spending on sports, hobbies, and entertainment during Ramadan and Eid in 2025 made up 13.2% of their total spending — up from only 3.1% the year before. Gadget spending also rose to 7.5% in 2025, compared to 3.1% in 2024.

Meanwhile, supermarket spending dropped significantly during the same period — from 30.8% in 2024 to 16.8% in 2025. Spending on electronics (other than gadgets) also declined, from 10.1% to 6.2%.

According to think tank Next Policy, the trend of buying luxury goods reflects people’s need to escape economic stress. In 2024, Indonesia experienced five consecutive months of deflation — a sign of weakened purchasing power. At the same time, IDEAS (Institute for Demographic and Affluence Studies) pointed out that small luxury purchases can create a false sense of economic stability, even when real purchasing power is falling.

This “escape” from financial pressure is also seen in the growing number of people attending concerts. According to research from the Center of Economic and Law Studies (Celios), the rise in concert attendance doesn’t necessarily mean the economy is doing well rather, it signals that young people are looking for a way out of their financial worries.

Sources:

• https://www.sciencedirect.com/science/article/abs/pii/S2214804319304884
• https://www.wsj.com/articles/SB1006731471172641080
• https://www.economist.com/business/2009/01/22/lip-reading
• https://www.forbes.com/sites/angelachan/2021/03/26/the-road-to-retail-recovery-the-lipstick-index/
• https://www.imf.org/en/Publications/WP/Issues/2023/08/04/Revisiting-Covid-Scarring-in-Emerging-Markets-537590
• https://ekonomi.bisnis.com/read/20250205/9/1836994/konsumsi-rumah-tangga-di-bawah-pertumbuhan-ekonomi-2024-daya-beli-lesu
• https://www.instagram.com/reel/DHsvJ9jT0A1/
• https://nasional.kontan.co.id/news/survei-mandiri-institute-masyarakat-mengerem-belanja-pada-libur-lebaran-2025
• https://tirto.id/fenomena-lipstick-effect-mendorong-utang-menggerus-tabungan-g5gb
• https://www.instagram.com/reel/DKzXK3pJSg7/