'Lipstick Effect' Expose the True Face of the Credit Crunch

by VR Sreeraman on  December 25, 2008 at 2:17 PM Lifestyle News   - G J E 4
 'Lipstick Effect' Expose the True Face of the Credit Crunch
The recent global meltdown has seen an upswing in what is known the "lipstick effect", as sales of cosmetics are rising with more women trying to cheer themselves up by spending money in make-up rather than cars, holidays and kitchens.

Economists have said that due to the financial crisis, people are steering away from making extravagant purchases like cars, holidays and kitchens and are instead spending their money on small luxuries like make-up.

And the sales figures from some of the world's big cosmetic companies - LOreal, Beiersdorf and Shiseido-reflect the theory.

In the first half of the year LOreal sales were up 5.3 per cent.

The theory was first identified in the Great Depression, when industrial production in the US halved, but sales of cosmetics rose between 1929 and 1933.

"The evidence shows that when budgets are squeezed people simply substitute large extravagances for small luxuries," the Telegraph quoted RAB Capital analyst Dhaval Joshi as saying.

In fact, during the recessions of 1990 and 2001, the number of people working in the cosmetics industry actually increased as demand for make-up rose in the US.

In Japan, during the long period of stagnation in since 1997, there has been a 10 per cent rise in the sales of on accessories.

After the 9/11 attacks on the US sales of lipstick doubled.

According to the theory, in a crisis or when consumer trust in the economy is low, people will buy goods that have less impact on their available funds.

Thus, women dish out money on lipstick and men spend money on items like gadgets rather than new cars.

Source: ANI

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