Economic lessons in cosmetics
During the Great Depression the cosmetic industry's bucking of the economic doom and gloom led to commentators coining the term The Lipstick Effect.
Sales of cosmetics rose during the late 1920s and early 1930s as women said 'no' to expensive luxury items and 'yes' to new lippie as a relatively inexpensive feel-good spend.
The Lipstick Effect re-emerged after the turn of the century.
In 2001 chair of Estee Lauder, Leonard Lauder, opined lipstick sales were a good way to gauge the economy. In this case, Lauder noticed the company was selling more lipsticks post the September 11 terrorist attacks in the US.
In other words, in tough economic times, lipstick sales boom as women seek to boost their mood.
Although it's hard to find specific data on lipstick sales in New Zealand, or more broadly on cosmetics, there's plenty of anecdotal evidence and economic theory to back the contention cheaper cosmetic items are recession proof.
It's the basic theory that in tough times we still want to spend so we substitute the expensive for cheaper alternatives, in economic parlance - inferior goods.
Can't afford your favourite bottle of French perfume? You hunt out a cheaper alternative you still like.
These inferior goods can be anything from cheap cars to cheap food (witness the burgeoning sales of takeaways and Restaurant Brand's rising KFC figures) through to lipsticks.
Statistics New Zealand figures show chemists' retail sales increased through 2008 after New Zealand entered the recession.
Chemists are large sellers of cosmetics, along with department stores.
In 2008 department stores recorded some steady growth in sales in July and August right after the recession started, before dropping off marginally near the end of the year.
Statistics for chemists' retail are now classified a little differently by the Government statistician but the results are still strong through into 2009 and 2010. There was a 13.7 per cent lift in those figures from June 2009 to June 2010.
Even Google is in on the action.
Searches for the word "lipstick" increased harmoniously with searches for "recession" from late 2007 through 2008, according to market research blog Trendspotting's Lipstick Indicator.
New Zealand Institute of Economic Research economist Shamubeel Eaqub says this inferior goods transfer is happening in New Zealand as the tougher economic times roll on.
"Generally speaking little luxuries are replacing larger luxuries. Some things are considered frivolous, but others are considered just a small treat."
For example Mrs Eaqub loves to buy new nail polish, he says.
"It's a small treat. It's colourful, and it's a very small outlay."
From lips to nails
Nail polish does seem to be the new lipstick on the block.
If asked to recommend any cosmetics purchase this winter it would be nail polish, says Lynda Grant, Smith and Caughey's cosmetic buyer.
The top fashion houses such as Chanel and Dior have released limited edition polishes for several years.
Grant says nail colours are as much of a trend as lipstick colours previously were, and still, are.
"We are seeing that women will go on a waiting list for the new polishes, and when they are released they sell out immediately."
For example, Chanel's Black Pearl polish (it was grey) never made it to the shelves, snapped up by fashion, and budget, conscious women.
Overall, Grant says sales in the iconic Auckland store's cosmetics department have been flat but within the department there are winners and losers.
Fragrance sales are in decline - a fact attributed in no small part to their price tag, Grant believes. A 100 millilitre bottle of Miss Dior fragrance costs about $220, for example.
Contrast this with a limited edition nail polish at about $40 and you can quickly see the appeal.
As Grant says, with the polish you can still own a slice of the luxury and style of the top brands like Chanel but at a run-of-the-mill price.
Cosmetic basics are still selling but even the appeal of those gifts-with-purchases are waning, Grant says, as women buy what they need or simply stick to a new slick of lip gloss to get that shopper's high.
But what of other sections of the cosmetic industry?
Caci founder Jackie Smith says Botox use has boomed at her clinics nation-wide in the recession and the business is continuing to grow.
"People know they can get a result and the price is competitive."
Botox is the process of injecting a toxin into muscles on the face which basically paralyses the muscles - no muscle movement, less wrinkles created, the theory loosely goes.
It's this treatment that Hollywood glamazons like Nicole Kidman seem to have used to great, and occasionally comical, effect as the actresses are left virtually with frozen faces.
Plastic surgeon John Masters agrees the trend is away from invasive procedures using the knife and towards Botox and fillers using the needle.
He, too, has noticed an increase in this kind of work and has gone so far as to ditch breast surgery - yes, the ubiquitous implants - from his services in favour of the face.
While about 2500 cosmetic procedures were performed by New Zealand plastic surgeons in 2009, Masters reckons you could put an extra zero on that number if you looked at Botox and non-invasive treatments.
So what's the cost? It's not in the realm of a nail polish, but it's also nowhere near facelift status which ranges from about $20,000 to $35,000.
Masters says the charge is per unit of Botox used. Depending on the specific Botox product that's about $17 to $23 a unit and could cost around $480 for one treatment. The effect should last for about six months if you top-up regularly, Masters says.
Caci has gone so far as to set up sort-of hire purchase plan for beauty treatments including Botox, fillers (they fill out wrinkles and plump skin making you look younger) and revitalising treatments like peels, just to name a few.
Smith says depending on the programme you need/desire the payments can be as little as $20 a week spread across a year.
So do trends in cosmetics, and the wider beauty industry, mean the Lipstick Effect's days are numbered - long live the nail polish and needle index?
Nothing is likely to knock lipstick off its pedestal, Grant says.
"Dior has a new range, Chanel has a new range. People still want lipsticks, they just want new lipsticks."
For the economic philistines
And if you don't believe dry-old economics would have such a thing as the Lipstick Effect, check out these other off-beat economic measures:
The Men's Underwear Indicator (MUI)
Eaqub says former US Federal Reserve chairman Alan Greenspan was a fan of this measure but he was more than a fan - he allegedly created the MUI while a consultant.
The theory goes that men are predictable when it comes to buying tightey-whiteys so any sales movement can be tracked.
Greenspan noticed that when the economy was booming, mens' underwear sales increased but dropped when it wasn't, as men retain their underwear for longer. In the same vein, Eaqub says shoe-repairers and clothing alterations businesses do well in a recession as people look to get more life out of what they own.
The Hemline Indicator
The shorter the skirt the better the economy.
First noticed in the 1920s the theory says women's skirts rise and fall with the economy. Eaqub says if you look in shop windows at the moment the fashion is following the indicator trend - it's conservative and hemlines are longer.
The Toothbrush Effect
This one can be traced back to toothbrush maker Oral-B in what was probably a quest for self-promotion. It found increased sales of electric toothbrushes meant bad things were happening in the economy. The underpinning thought is that in tough times people look to save money on trips to the dentist by investing in electric toothbrushes.
The Mama Noodles Index
Sales of this inferior good rocketed 15 per cent in Thailand in early 2005 and economists jumped on this as an early sign of weakness in the economy.
"One of the more bizarre economic indicators to emerge in recent years, the noodle index works like this: Tighten your belt, spend less on food. As a cheap eat, instant noodle sales therefore rise exponentially," a Thai newspaper said.
The Big Mac Index
Published by the Economist magazine, prices from country to country of McDonald's big-name burger are used to compare currencies' purchasing power.
For example, in China - long lambasted for interfering with its currency and keeping it at artificially low levels - a Big Mac costs less locally than one bought in the USA.
An overpriced Big Mac means a currency is overvalued.
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