Lipstick Effect

lipstick index

The lipstick effect is the theory that when facing an economic crisis consumers will be more willing to buy less costly luxury goods. Instead of buying expensive fur coats, people will buy expensive lipstick. In the time after the 9/11 attacks on the USA lipstick sales rose precipitously.

The underlying assumption is that consumers will buy luxury goods even if there is a crisis. When consumer trust in the economy is dwindling, consumers will buy goods that have less impact on their available funds. Outside the cosmetics market, consumers could be tempted by expensive beer or smaller, less costly gadgets.

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