The 'lipstick effect': Consumers splurging on cosmetics despite tighter budgets

Cost-conscious consumers are trading down when it comes to everyday necessities like groceries as well as in other categories like electronics and apparel.

But one thing they’re not pulling back on: cosmetics.

Adobe released new online shopping data on Wednesday that showed how consumers are in fact splurging on cosmetics, namely fragrances and lipsticks. Economists refer to this trend as the “lipstick effect.”

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This term refers to when people still spend money on small luxury items during an economic downturn or other times when they are cash-strapped for personal reasons.

While they don’t have enough to spend on big ticket items, people were shown to still indulge in small luxuries like premium lipstick.

According to Adobe’s most recent data, online transactions for fragrances rose by 19.4% from January 2024 to May 2024. On an annual basis, the number of transactions rose 9.9%.

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Daily sales of fragrances are up 53% from April to May 2024 compared with January 2024. On an annual basis, daily sales are up 27%.

With lipsticks, online transactions shot up 37.1% between January and May. Meanwhile, transactions rose by 18.1% on an annual basis, the data showed.

In fact, higher-end lipstick was a big driver behind spending online, with daily sales up 49% from April to May 2024 compared with daily sales at the beginning of the year.