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'Lipstick effect' hits China as economy slows

By Shi Jing in Shanghai  (China Daily)

12:58, May 20, 2013

When the economy declines, some people will start to buy inexpensive lipsticks or makeup that are not high-end items to make themselves feel good. It's a phenomenon known as the "lipstick effect". According to the market research firm Euromonitor International, the entire retail value of the beauty and personal care sector in China grew from 184.1 billion yuan ($30 billion) in 2011 to 202.1 billion yuan in 2012. [Provided to China Daily]

People are more willing to spend on small indulgences such as cosmetics

Fang Jinqi, 32, said the most urgent thing for her at the moment is to develop a more thrifty lifestyle because her job as a property agent business is stagnating.

The big fan of Hermes bags who used to buy a new one almost every two months said she has not done so for at least six months.

To make up for the loss of her hobby, Fang is now turning to cheaper cosmetics, such as lipsticks, which she said "can be easily picked up from chain stores such as Sephora".

Leonard Lauder, chairman of Estee Lauder Companies, said he noticed the sales of lipsticks experienced an usual rise during the economic deflation after the Sept 11 terrorist attacks in the US in 2001. Lauder said when the economy sours people are more willing to spend on smaller indulgences such as lipstick rather than splashing out on expensive luxury bags. It's a phenomenon known as the "lipstick effect" and has been recognized historically.

Professor of sociology Juliet Schor wrote in her book The Over Spent Americans, published in 1999, that anti-wrinkle cream, moisturizers, eye shadow and powders, lipsticks and facial makeup can provide "hope in a bottle" for people, especially women, who are "looking for affordable luxury, the thrill of buying at the expensive department store, indulging in a fantasy of beauty and sexiness".

In short, "Cosmetics are an escape from an otherwise all too drab everyday existence," she wrote.

But is the same thing happening in China?

China's GDP rose 7.8 percent in 2012, the first time that the country's growth rate fell to less than 8 percent since 1999. Its economy grew 7.7 percent in the first quarter of this year.

The country's Purchasing Managers' Index dropped to a nine-month low at 49.2 points in August last year. A figure below 50 indicates a contracting economy. Fan Junlin, an economics researcher at the Agricultural Bank of China, said in an interview with the Xinhua News Agency: "Weak external demand remains the biggest factor dragging down China's economic growth."

But as the industrial and manufacturing sectors declined last year, fast-moving consumer goods and fashion brands soared. According to the market research firm Euromonitor International, the entire retail value of the beauty and personal care sector in China grew from 184.1 billion yuan ($30 billion) in 2011 to 202.1 billion yuan in 2012. L'Oreal Group saw its market share grow 11.2 percent in 2012 from 10.8 percent a year earlier. Shiseido Co and Unilever Group have both seen a 0.1 percent increase in terms of market share.

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