Looking for a countercyclical stock for bad times? Try make-up.
Bad economic news makes women want to feel pretty.
There’s an old economic indicator known as the “lipstick effect.” Estee Lauder founder, Leonard Lauder, gets credit with the naming the phenomenon that’s been observed since the Great Depression. It works like this: as the economy drops, lipstick sales rise. In fact, demand increases for beauty items in general when the economy starts to turn. The effect benefits quick fixes like make-up and some clothing, but it comes at the expense of more expensive and luxury goods, according to psychologist Nancy Upton.
If you think Lauder was simply pumping his stock during a recession, consider this: new science indicates Lauder was right. What’s more, the phenomenon results from our species’ deepest mating instincts.
A new paper by Sarah E. Hill and others reports the results for four separate studies that confirm Lauder’s observation.
According to the research, recessionary economic signals—real or primed—decrease desirability of most consumer goods. But, among women, the same signals increased the desirability of items thought to increase their attractiveness. The research was reported in Journal of Personality and Social Psychology.
Writing about her study in Scientific American, Hill writes:
Our findings consistently supported the lipstick effect, as college-age women, when primed with news of economic instability, reported an increased desire to buy attractiveness-enhancing goods, along with a decreased desire to purchase goods that do not enhance one’s physical appearance. Our experiments also found that this increased desire for beauty products, clothing and accessories was fully mediated by a heightened preference for mates with resources.
We shouldn’t be surprised, really. We are biological creatures with strong self-preservation instincts. The impulse to beautify makes women more resilient to economic distress. Knowing that the lipstick effect is real should help retailers and manufacturers gauge demand for both beauty-enhancing products like lipstick and goods that do not enhance beauty.
BTW, Estee Lauder’s latest quarter was terrific, so you might want to curtail unnecessary spending.