Lipstick Sales During Recession

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LONDON—“Along with the lipstick theory being debunked during this recession, it seems that consumer purchasing and usage of personal care products are also showing surprising shifts,” said Siddika Jaffer, director of consulting for EMEA consumer markets, Datamonitor. The lipstick index was developed by Leonard Lauder, the chairman of Estée Lauder, in the 2001 recession. Sales of lipstick in the U.S. rose by 11 percent in 2001 and cosmetic sales were reported to have increased 25 percent in the period of the Depression in the 1930s.

In contrast, current sales of lipstick in the U.K. are reported to have fallen around 5 percent on last year, while foundation sales are up significantly compared with last year. A similar pattern is emerging in the U.S. Jaffer explained: “The underlying principle behind the lipstick index is the notion that consumers treat themselves to little luxuries during a recession as they cannot afford to spend on the bigger luxuries such as holidays and cars, or indeed on going out.” So, while spending seems to have shifted from lipstick to foundation within the personal care category, the notion of affordable luxury still seems to stand unchallenged.

Research from the Datamonitor Recession and Recovery May 2009 survey shows definitions of what constitute affordable luxury are being rewritten. Some of the observations on how consumer behaviors are changing in the U.K. include:

• 81 percent of respondents are trading down to cheaper and less premium brands, with 18 percent buying cheaper brands all the time and 32 percent most of the time;

• 82 percent are cutting back on treats, with 18 percent having cut them out completely and 34 percent cutting back most of the time;

• 49 percent of respondents in the UK said that they buy private label all or most of the time to save money and a further 37 percent said that they bought private label occasionally, with a similar picture emerging in the U.S. and Canada.

In addition, when respondents were asked about their intentions for spending on premium fragrances and cosmetics during the next three months, only 2 percent of the sample group stated they intended to increase expenditure, while 19 percent said they would maintain expenditure at previous levels and a huge 55 percent said they would significantly cut back on expenditure or not buy at all. This seems to suggest, for most consumers, affordable luxury does not extend to the premium fragrance and cosmetic market.

Looking at mass market brands such as L’Oreal, the aforementioned Datamonitor survey asked respondents in the U.K. whether they used the brand and how their recent consumption of the brand had changed. The survey revealed that 12.5 percent of respondents who used the L’Oreal brand have substituted it with private label offers and a further 8.7 percent were switching to other branded offers, while 14 percent said that they were still loyal to the brand but only bought it on offer.

Private label penetration in the personal care category stood at 17.1 percent in the U.K. in 2007, compared to a 40 percent average for grocery overall, suggesting that the personal care category was relatively well insulated from the growing share of private label sales in the U.K. Recent consumer survey results outlined above indicate an acceleration in the shift to private label in personal care.

Another cause for concern for branded players is the apparent shift to the discounter channel for purchases of personal care products. While 61 percent of all consumers used supermarkets and hypermarkets as their main shopping channel for personal care products, 8 percent of respondents used discounters as their main channel, which was the second highest category penetration score for this channel. In addition, channel switching intentions for personal care products were fairly high, at 14 percent, with 25.5 percent of switchers showing an intention to migrate to the discounters as their main channel.

Jaffer commented: “It seems, then, that the notion of affordable luxuries when it comes to personal care products has the firm emphasis on affordable, in this recession at least.” Branded players in the personal care market are clearly doing all they can to hold on to their levels of penetration and market share. However, it remains to be seen how long they will be able to continue to sell products on promotion and how ready they are for consumers migrating to discount channels.

Jaffer concluded, “The looming fear is that this recession will change the face of the personal care category for a long time to come.”

 

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