The Lipstick Effect of Covid-19

The luxury spend trend

With a global recession due to Covid-19, consumers are pulling back on their spending, especially on big luxury goods and services. Generally, they are spending more time deciding what they want to buy and focusing on more on necessities rather than desires. Or are they? Let’s look at the eCommerce trend of luxury item spending.

Why the 'lipstick effect'?

Emerging trends are showing that some consumers are splurging on smaller ‘luxury’ items amidst this recession. Reminiscent of the 2008 global recession, where economists found that lipstick sales rose rapidly throughout the year while most other consumption spending dropped.

It turned out that consumers wanted a small pick-me-up item to make them feel better during the economic uncertainty, and purchases like a new lipstick was the perfect way to treat themselves without breaking the bank.

This trend became known as “The Lipstick Effect” and economists now look for similar trends in more recent recessions, noting which products consumers tend to splurge on while they pull back on most others.

Which luxuries are people indulging in?

This time around, lipstick is not the best product to splurge on given that we are all wearing masks out in public. So what other small luxury items are consumers spending their money on?

One industry that has seen growth over the past two quarters is the gaming industry. People are spending more money on video game consoles such as the Nintendo Switch, and are purchasing games to go along with it. Knowing that they will be spending a lot more time at home, consumers are willing to invest in products that will make the next few months more enjoyable.

While people aren’t spending money on lipstick, they are purchasing other beauty products, as the skincare industry and eye makeup industry have both seen growth over the last 2 quarters. A Chinese e-tailer saw eye makeup sales increase by 150% People at home have more time to take care of their skin, and with mandatory face coverings being implemented around the world, consumers are using eye makeup to show their creativity amidst an otherwise covered face. 

The focus on value.

Thirdly, consumers are spending more on exercise apparel, machines, and other workout aids. From yoga mats to kettlebells and resistance bands, consumers are buying it all as they try to stay fit while gyms remain closed throughout the summer and potentially for a while longer.

Some are even purchasing spinning bikes and treadmills, proving that even in an economic downturn, some consumers are willing to spend money on large luxury goods that will bring great value to them as consumers pick up new hobbies. At the same time, at home, we can expect niche purchases like this to continue.

Conscious purchasing.

With coronavirus creating a new normal in the retail space, consumers have become much more conscious of their purchasing habits, and that is not going away anytime soon.

We can expect the consumer to remain considered in their approach to purchasing goods for the foreseeable future, but we can also predict that every now and then they will splurge on something to make them happy, whether it’s a new hobby, a skincare product, or something entirely new to change things up.

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Author: Carina Massana, Scurri, Marketing Intern.

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