Actually, lipstick can tell us a lot about the economy

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Actually, lipstick can tell us a lot about the economy

Designer coats and crystal glasses can be hard sells in a tough economy. But lipstick is another story. At least that's the thinking behind the "lipstick index," termed by Leonard Lauder, chairman emeritus of cosmetics company Estée Lauder, in 2001 to explain the surge in lipstick sales during that recession.

Lately, the lipstick theory hasn't been holding up. Lipstick sales – on the decline since 2007 – continued to fall in 2010, according to the latest data on the product released by market research firm Mintel. That throws lipstick out the window in the hunt for measures of recessionary spending in the Great Recession. I caught up with Lauder today to ask him what gives with the bomb in lipstick sales and whether that upends his theory.

Lauder's response? Nail polish is the new lipstick. And lipstick wasn't really the point. "We have long observed the concept of small luxuries, things that can get you through hard times and good ones. And they become more important during harder times. The biggest surge in movie attendance came during the 1930s during the Depression," says Lauder. That trend is similar to the uptick in lipstick sales during the 2001 recession and other colorful cosmetics like nail polish in this one.

Sales of nail-enhancing goodies like nail polish are up 65% since the first half of 2008, according to market research firm NPD Group. The shift, Lauder surmises, has to do with the glut of lipsticks in women's boudoirs and the pick-me-up associated with donning color. "The idea of a brand new lipstick shade used to excite everyone. Today people have so many, they don't want to try a new one." Women, he says, would rather "shop their closets" for what they already have rather than buying more of the same.
Nail polish is another affordable pick-me-up, but it now offers all kinds of crazy new shades to inspire the recession-prone splurge. "I picked up this signal from my grand daughters. All of a sudden there was nail enamel in these strange colors. That's the way the world is going: Notice me."

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