The "lipstick effect" is a term used to describe the phenomenon where consumers tend to purchase small luxury items, such as cosmetics, during times of economic uncertainty or recession.

The theory suggests that when faced with financial insecurity or a downturn in the economy, people may cut back on larger purchases but still indulge in smaller, more affordable luxuries like lipstick.

The concept of the lipstick effect was coined during the Great Depression in the 1930s when it was observed that sales of cosmetics, particularly lipsticks, remained stable or even increased despite the overall economic hardship.

This behavior was attributed to the idea that people sought small indulgences to lift their spirits and maintain a sense of normalcy during challenging times.

There are several reasons why the lipstick effect may occur:

1. Affordable Luxury

Lipstick and other cosmetics are relatively affordable compared to big-ticket items like designer clothing or electronics. They provide a quick and easy way for individuals to treat themselves without breaking the bank.

2. Boosting Confidence

Wearing makeup, including lipstick, can boost confidence and self-esteem. During tough times, people may turn to beauty products as a way to feel better about themselves and enhance their mood.

3. Psychological Comfort

Making a small purchase like lipstick can provide a sense of control and comfort during uncertain times. It's a way for individuals to exert agency over their appearance and self-care routines.

4. Visible Impact

Lipstick is a highly visible cosmetic product that can instantly change one's appearance.

It offers a quick and noticeable transformation, making it a popular choice for those looking to refresh their look without spending a lot.

In short, in times of recession, people's income and expectations for the future are lowered, and the first thing they cut back on is those large purchases, such as buying a house, a car, or traveling abroad.

As a result, there may be more "free money" than in normal times to buy "cheap non-essentials".

Economic policymakers and business decision-makers can make use of this law to adjust their policies and business strategies at the right time to minimize the negative impact of the crisis.

When the economy is in a downturn, the stress of life increases and a heavy life always requires something easy to relax. The lipstick effect highlights the resilience of certain industries, such as cosmetics, and the importance of small indulgences to maintain a sense of well-being during challenging times.