Skip links

Is a recession the push we need to truly enjoy “the little things in life”?

What is the first thing that pops into your head when I tell you to think of luxury? A lavish and striking mansion? A vacation abroad? Driving your favourite sports car? A designer wardrobe? Whatever it may have been, I am sure barely anyone of us would think of… say, buying lipstick! Lipstick is an affordable luxury which, although not as fancy as the things I mentioned above, is definitely not something you would consider an essential good either. It is simply something that makes life a little more pleasant. Technically, the demand for non-essential goods, like lipstick, should fall in times of economic distress, but this does not always stand true. “The Lipstick Index” is a term which was first coined in 2001 by the then Chairman of Estée Lauder, Leonard Lauder. According to an article by The Economist, during the 2001 recession, while most other sectors were incurring losses, lipstick sales in America increased by 11%. Lauder's theory is based on the idea that when there is a recession, since the general public cannot afford to treat themselves to fancy vacations, cars or clothes, people spend their money on more affordable luxuries such as lipsticks to get themselves through the recession blues. This pattern was initially observed during the Great Depression of the 1930s.

While most developed and developing countries were fighting crippling poverty, mass unemployment and a steep rise in homelessness, the cosmetics industry was booming. “In the four years from 1929 to 1933, industrial production in the US halved, but sales of cosmetics rose.” (Elliott, 2008) Along with the increased demand for cosmetics, cinema tickets, another small luxury, were in high demand. This was observed again during the 2008 recession when we saw a rise in sales of nail paint. “The industry rang up $327 million in nail polish sales to the mass market, and sales have grown 21 per cent in the first half of this year, according to market researcher NPD Group” (Kalinske, 2011) The COVID-19 pandemic in 2020 caused everything to come to a standstill.

According to the National Bank for Agriculture and Rural Development (NABARD), the economic impact of the COVID-19 pandemic in India was highly disruptive. Economic growth slowed down due to the shutdown of different production channels. Additionally, there was also a shortage of labour resulting from reverse migration of the workforce. Many critics of the theory state that according to a report from McKinsey & Company, makeup, especially lipstick, sales had fallen up to 30% globally in 2020, thus disproving Lauders' theory. But what these economists failed to consider is that cosmetics are not the only affordable luxuries that act as morale boosters during recessions. The need to wear masks all the time made lipsticks a meaningless buy. Instead, people opted for other inexpensive luxuries such as fragrances and skin-care products. The theory has been dismissed by some through sexist rationales for being solely based on women-centred products. A 2012 study, "Boosting Beauty in an Economic Decline: Mating, Spending, and the Lipstick Effect", did not consider the lipstick index as a viable economic indicator.

The study actually suggested that the hike in demand for cosmetics during a recession was "driven by women’s desire to attract mates with resources and depends on the perceived mate attraction function served by these products." "The paper's authors theorise that since the supply of financially stable men falls during recessions, the price that women choose to pay for their attention spikes. They say this impulse is rational because moneyed men are more able to afford raising children well." (Kavoussi, 2012) Despite the various speculations, a report in the Times of India suggests the Lipstick Index does apply to the Indian market.

India had undergone a GDP slowdown for six quarters straight, starting June 2018. The GDP growth rate for July to September 2019 stood at 4.5%, a decline of about 50 pp from the previous quarter. Despite that, Lakme and L’oreal recorded double-digit growth rates in 2018-19. (‘Lipstick Index’ Holds True for Indian Market, 2019) Nykaa Cosmetics also experienced exponential growth in yearly revenue from 2018 (500 Cr INR) to 2022 (3200 Cr INR) despite the pandemic. (Nykaa: Revenue 2022, 2022) Box office numbers and OTT platform subscriptions also soared during recent recessions in India. During the 2018-19 slowdown, "PVR Cinemas and Inox Leisures, two of India’s largest multiplex chains performed steadily despite the slowdown. "(Sanyal, n.d.) With cinemas and movie theatres closed due to the lockdown, 2020-21 became the year for OTT entertainment. India is the world’s fastest-growing market for streaming platforms with an annual growth rate of 28.6 per cent. According to SBI Research, the over-the-top (OTT) market is expected to reach Rs 11,944 crore by 2023, up from Rs 2,590 crore in 2018. An increase or decrease in lipstick sales cannot be the sole indicator of a recession. However, studying consumer behaviour and taking the demand for affordable luxuries into account with other tried-and-tested economic indicators can help us better understand the state of our economy. NPD data showed that lip products were the fastest-growing makeup product from January to June 2022, with revenue rising 28% in the second quarter. Post the Russia-Ukraine War, a few of the brightest economic minds like JPMorgan Chase CEO, Jamie Dimon; Chairman of Icahn Enterprises, Carl Icahn, and Citadel CEO, Ken Griffin, have been telling us to brace ourselves for a global recession. Will the Lipstick Index stand true this time as well? Well, only time will tell.

Prisha Chandgothia
Writing Mentorship 2022


References Elliott, L. (2008, December 21). Into the red: 'lipstick effect' reveals the true face of the recession. The Guardian. Retrieved October 22, 2022, from Gerstell, E., Marchessou, S., Schmidt, J., & Spagnuolo, E. (2020, May 5). How the beauty industry can survive

coronavirus. McKinsey. Retrieved October 22, 2022, from Hartmans, A. (2022, August 9). What Is the Lipstick Index? How Makeup Sales Could Forecast Recession. Business Insider. Retrieved October 22, 2022, from

-comes-from-and-whether-it-can-really-predict-a-recession-/articleshow/93460989.cms Kalinske, A. (2011, September 19). Forget the Lipstick Indicator, It's All About the Nails. CNBC. Retrieved

October 22, 2022, from Lip service. (2009, January 23). The Economist. Retrieved October 22, 2022, from ‘Lipstick index’ holds true for Indian market. (2019, August 29). Times of India. Retrieved October 22, 2022, from

market/articleshow/70883707.cms Nykaa: revenue 2022. (2022, August 25). Statista. Retrieved October 22, 2022, from Ossola, A. (2020, August 6). It is time for the "lipstick index" to go away for good. Quartz. Retrieved October 22, 2022, from

away-for-good Schaefer, K. (2008, May 1). Lipstick May Be an Economic Indicator. The New York Times. Retrieved October 22, 2022, from Hill, S. E., Rodeheffer, C. D., Griskevicius, V., Durante, K., & White, A. E. (2012). Boosting beauty in an economic

decline: mating, spending, and the lipstick effect. Journal of personality and social psychology, 103(2), 275. Kavoussi, B. (2012, June 19). Women Spend More On Beauty Products During Recessions. HuffPost. Retrieved October 28, 2022, from OTT about to dethrone multiplexes as India's go-to entertainment option. (2022, August 26). The Economic Times. Retrieved October 28, 2022, from Sanyal, R. (n.d.). The Lipstick Effect in India. CEIC Data. Retrieved October 28, 2022, from

Leave a comment

This website uses cookies to improve your web experience.