Lipstick Effect or not? Six women founders weigh in on retail spending trends

Six women business owners in Australia’s beauty space have weighed in on what they think The Lipstick Effect means for their businesses and consumers across Australia, with skincare remaining a staple part of their customers’ daily routines. 

The Lipstick Effect describes a phenomenon when consumers will still tend to buy small luxury items or less costly luxury goods, even when facing an economic crisis or downturn.

A recent survey of 1,096 respondents by Australian comparison site Finder found that 15 million Aussies are unwilling to part with certain luxuries, despite the current financial challenges.

Founder of Tribe Skincare Kayla Houlihan says when facing tough economic times, people are more likely to save on the ‘big things’ like putting off that big holiday or a new car, and instead, indulging in the ‘little things’ that make them feel good — with makeup and skincare fitting perfectly into the category. 

Tribe skincare founder Kayla houlihan. Source: supplied.

“It’s called ‘The Lipstick Effect’ and it’s proven that when facing tough economic times, they are more likely to spend on affordable indulgences that make them feel good,” says the founder, who recently sold her skincare brand to Vitality Brands. 

“Makeup and skincare products add luxury to people’s daily routine without breaking the bank.”

Founder of Perth startup The Quick Flick Iris Smit told SmartCompany her beauty brand is seeing the Lipstick Effect playing out in its own sales. 

“The idea is that people may cut back on larger discretionary expenses but still treat themselves to small luxury items as a way to boost their mood or feel a sense of normalcy during challenging economic times,” she says. 

The Quick Flick founder Iris Smit. Source: Supplied

“At The Quick Flick, we have seen an increase in purchases of our cosmetic items, and also attribute the success of our Quick Screen lines in Coles, most recently our Quick Screen Travel Pack at $40, as the ‘treat’ shoppers are adding to their weekly grocery shop.”

Perth-based GlowDry Australia founder Fiona Dunne says indulging in small luxuries as part of self-care routines is essential. 

“I personally believe as women we always want to look and feel our best — it’s part of our self-care routine so indulging in small luxury items is essential even during times of economic hardship,” she says.

GlowDry Australia founder Fiona Dunne. Source: Supplied

“Being cash strapped can be stressful and also a little luxurious beauty spend can help forget about financial worries.

The Lipstick Effect is producing interesting results for the beauty brand. 

“What we have noticed is our Afterpay sales have dropped by almost a third in the last 12 months, possibly showing that the more impulse-driven shoppers are watching their cash a little closer,” says Dunne. 

“On the other hand, our sales in Priceline stores’ sunless tanning category have increased by over 10% in the last 6 months — more shoppers are back out heading in-store and enjoying the pick-me-up the shopping experience offers.”

Customers looking for value

Rachael Wilde, co-founder and chief marketing officer of York St Brands and co-founder of tbh skincare, says skincare remains a staple part of people’s routines. 

“I think this is a small self-care luxury that customers are looking to keep as part of their day-to-day,” she says. 

tbh skincare’s co-founder Rachael Wilde. Source: Supplied

“I believe the main thing that has changed is that customers are looking for ways to save money whilst not having to rule things like skincare out of their daily routines altogether. 

“Customers are ‘trading down’ from some of their usual staples that might be more highly-priced and are more actively shopping for more cost-effective options. In amongst the huge cost of living pressures customers still want to keep the daily habits that make them feel good. They’re just getting smarter as to how they do this!

“The tbh skincare community is so strong and given it is a product that helps a lot of consumers treat their skin we have actually seen an uplift in the brand which is proof of the Lipstick Effect.”

Wilde says the original mission with tbh skincare was to get its patented acne treatment into as many people’s hands as possible. 

“This meant that we priced the product as affordably as we could, and when we were looking for retail partners, we ended up going with one that was going to give us the reach we needed to make the products as accessible as possible,” she says. 

“We actually gave our customers a price decrease in February ahead of our Priceline announcement and have seen continuous sellouts in stock and also online.”

Naked Sundays founder Samantha Brett believes, post COVID, consumers are focused on healthy and glowing skin.

“We are definitely seeing evidence of the Lipstick Effect in Australia,” she said, referencing conversations with the brand’s social media following of more than 500,000 people. 

“For so long, people felt they were hiding behind a Zoom screen during Covid or at home wearing nothing but a face mask. But now that we are out and about again, the focus is definitely on healthy, glowing skin and the beauty and wellness sectors are seeing evidence of that.”

Naked Sundays founder Samantha Brett. Source: Supplied

Brett says Naked Sundays has seen an explosion in sales from its medium-priced items, like its SPF50+ Mist and jumbo-sized SPF50 Mineral Primer.

“This month, our hero product, the SPF50 Glow Mist for over makeup, is up 108% from last month,” she says.

“Sales for our high-priced jumbo-sized SPF50 Mineral Primer have also dramatically increased to become our top-selling SKU, while our world-first SPF50 Lip Oils are up 1300% since last month.”

Bangn Body founder Priscilla Hajiantoni believes there are a few factors at play, including that consumers are now more likely to be picking up beauty products that can ‘multitask’, or be used on their faces and the rest of their bodies, for example

“The lipstick effect could be a starting trend, however, I still believe consumers are looking for products that have meaning, provide a solution or generate a feeling,” she said. 

founder Priscilla Hajiantoni. Source: Supplied

“With the current rise in the cost of living, disposable income that consumers could rely on is now minimal and therefore consumers could be looking for cheaper options or ‘dupes’. 

“Our products at Bangn Body are all multi-purpose which I also believe consumers are looking for and our community is very engaged. We have found during this time to have growth in the space online as well as via Brick and Mortar with our national partnership with Sephora.”

“The Lipstick Effect I think comes down to reliability, trust and good quality products that are cost-effective.”