What is the lipstick index and how can we in the beauty industry benefit from it?

The "Lipstick Index" was a term coined by former Charmain of Estée Lauder in early 2000.  In short, it is a reflection of consumer behaviour in tough economic times or financial downturns. Common sense tends to dictate that in tough times, consumers spend less. The idea behind the lipstick index is that in difficult times, consumers may not be able to spend money on expensive luxury items like jewelry or designer handbags, but they still want to treat themselves with a small luxury item that makes them feel good about themselves.

The phenomenon was observed in the economic recession of 2001 fueled by the September 11 attacks where Wall Street reported an 11% increase in lipstick sales. During the financial crises of 2008-2009, which was the worst economic contraction since WWII, cosmetics brands like and it is L'Oréal, Beiersdorf (maker of Nivea) and Shiseido all reported substantial gains. While it is reported that lipstick sales declined during the COVID-19 pandemic, (which makes sense considering covering the wearing of masks was compulsory in many countries and as such one's nose and mouth were covered), perfume sales rose higher, as consumers stayed at home and focused on self-care. In fact, sales of men's fragrances grew 21% in the first six months of 2021 compared to the previous year.

Direct sellers in the beauty industry can potentially benefit from this trend in several ways:

1.            Increased Demand

As more people look for ways to treat themselves without breaking the bank, they may turn to cosmetics and other products. Companies that offer alternatives to very expensive perfume brands with a generic perfume can also do well. As a direct seller, you can tap into a bigger market by offering a small referral gift to your existing customers who give referrals and help you to gain access to new customers.

2.            A new type of customer

Some customers who previously bought more expensive cosmetics and perfumes may be keen to experiment with more affordable options. Be bold and make the most of this customer behaviour by offering free testers to new customers. This approach will build trust in your product and lead to more sales and referrals. It is therefore wise to invest in testers and other special offers that may be available to you as a sales tool from your supplying company.

3.            Cross Gender

Considering the growth in sales of men's fragrances, it may be a good idea to introduce male products to your existing female customers. Customers all have a male friend/father/spouse/partner who may become a new customer. A good way to leverage cross-gender selling is by offering a male/female combo of your products. Example: HIM/HER perfume combo. Alternatively, you can offer your female customers a free “male product” when they buy their product.

4.            Increase brand awareness

With increased demand and more consumers looking towards more affordable luxuries, this can be the ideal time to establish your personal brand to become the expert or go-to source for all beauty products. Research has shown that customers will become more reliant on the advice of experts in a relevant field and building relationships with customers will remain the key to growing your personal brand. 

In summary, direct sellers can benefit from the lipstick index by taking advantage of the increase in demand, and more sales to a different market while establishing their own brand in becoming the beauty expert of choice in their area.

Tips for women who want to start their own small business.

Post Covid, many of us had to look at ways to replace or supplement our income and starting our own businesses seemed a logical next step. But that can be a daunting task and, for women, there can be additional challenges to overcome. Here are some tips for women who want to pursue their passions and start their small businesses.

 

Research & Plan

Take your time and research the industry and the market thoroughly before you start. You might want to start a company manufacturing stickers, but there may not be a demand for the products or there may be too many competitors in the market. Understanding your target market and identifying possible challenges may be the key to your success. Develop a business plan that covers:

 - your goals 

 - strategies for achieving these goals

 - financial projections  

In addition, it is important to understand your strengths and weaknesses. If you are an introvert like me, you may find it difficult to start a company that requires you to do a lot of public speaking. Focus on your strengths and build strategies to overcome weaknesses.

Focus

You cannot be everything to everybody. Many small businesses fall into the trap of offering or adjusting their offerings to keep a customer happy. While it is important to give excellent customer service, you also have to understand that customers are diverse and if you keep on adjusting your product for one customer, you may lose customers that you have identified as your target market.

Support

Starting a business can be a lonely journey, but it doesn't have to be. Many women have to juggle raising children, running a household and a business. Surround yourself with a network of supportive individuals, such as fellow entrepreneurs, mentors, and family members who can offer advice, encouragement, and resources. Joining business organizations or networking groups can also help you connect with like-minded individuals and expand your reach. 

Finances

One of the biggest challenges in any business is managing your finances. It is essential to keep accurate records, track expenses and income, and develop a budget to ensure your business stays financially viable. Having a contingency fund to cover unexpected expenses can make or break your business. 

Promote your business

No matter how great your product or service is, you won’t be successful if no one knows about it. Create a multi-faceted marketing plan that speaks to your target audience. Be brave and try new strategies to see what works for your business.

Adapt or die

The world is constantly changing and it is important to stay informed of new business trends and changes. Be open to new regulations and educate yourself and your team on new technology and best practices to stay competitive. Don’t be afraid to change your business strategy if required and embrace all opportunities to grow.

 

Running your own business can be challenging but very rewarding. With proper planning, support and marketing you can have a successful business and make your dreams a reality.