What's a sure sign of recession? It's not just a decline in GDP, it's also a surge in lipstick sales. Years ago, Leonard Lauder put forth the idea that when times were tough, women would skip high-ticket items in favor of simplier pleasures such as lipsticks.
Now, Kline & Co., with more than 50 years of lipstick sales data on the books, has proved Mr. Lauder right.
Kline’s statistician and manager of econometrics Dr. Noel Lim has examined the past 50 years worth of sales data in the cosmetics market, distilled the data to reflect sales in the lipstick category, and ran statistical tests and regressions against economic indicators such as personal income, gasoline prices, unemployment, and consumer sentiment. Most notably, Lim found that when unemployment rises and consumer sentiment drops, lipstick sales jump.
“If the unemployment rate rises, one would expect demand for all goods and services to decrease, but in fact, the opposite is true for lipstick," Dr. Lim noted. Our data shows that for every 1% increase in the unemployment rate, women buy $25 million more lipstick during the year.”
Moreover, with consumer sentiment down, due in part by the war in the Middle East, lipstick sales should post gains in 2008.“After the Iraq war began in March 2003, the growth rate has been positive-negative-positive-negative,” said Dr. Lim.
He compared Kline’s lipstick sales data against the University of Michigan Consumer Sentiment Index (MCSI). His analysis shows that for every 1 point drop in the consumer sentiment index during the 2003-2006 period, lipstick sales increased by $2 million during the year.
“Wartime is a period of national anxiety, and it appears that during these times, the relationship between consumer sentiment and lipstick sales becomes much, much more pronounced.” Dr. Lim said.
He compared his findings during this period to the other major wartime since 1958, the Vietnam War era. During the 10 years beginning in 1965 (when the U.S. sustained its first significant battle casualties in Vietnam) and ending in 1975 at the fall of Saigon, the very same relationship of the MCSI to lipstick sales was found to hold true, consistent with the Lipstick Theory.
"When people feel down, they buy more lipstick,” Lim said.
Last year, sales of lipstick fell, but as most economists agree, the economy didn't really turn south until late in the year. According to Kline, fourth quarter ad spending for lipstick was up 41% for 2007 compared to the same period a year ago.Although lipstick sales have been down for a number of years, Kline & Co. suggests that the category is poised for a comeback. Now the dilemma for lipstick makers is whether to heed the numbers and shift marketing dollars to lip products to take advantage of the situation.
More info: www.klinegroup.com