The ‘lipstick theory’ – that consumers spend on little luxuries such as lippy during times of recession, has failed to hold true in 2009, according to Datamonitor, although other cosmetics fared better.
Siddika Jaffer, Datamonitor director of consulting for EMEA consumer markets, said falling sales of lipstick was not the only surprise in its latest research, published today.
“Along with the lipstick theory being debunked during this recession, it seems that consumer purchasing and usage of personal care products are also showing surprising shifts,” said Jaffer.
The lipstick index was developed by Leonard Lauder, the chairman of Estée Lauder, in the 2001 recession. Sales of lipstick in the US rose by 11% in 2001 and cosmetic sales were reported to have increased 25% in the period of the Depression in the 1930s.
In contrast, current sales of lipstick in the UK are reported to have fallen around 5% on last year, while foundation sales are up significantly compared with last year. A similar pattern is emerging in the US.
However, Jaffer added, “The underlying principle behind the lipstick index is the notion that consumers treat themselves to little luxuries during a recession as they cannot afford to spend on the bigger luxuries such as holidays and cars, or indeed on going out.”
So, while spending seems to have shifted from lipstick to foundation within the personal care category, the notion of affordable luxury still seems to stand unchallenged.
Research from the Datamonitor Recession and Recovery May 2009 also showed:
81% of respondents are trading down to cheaper and less premium brands, with 18% buying cheaper brands all the time and 32% most of the time;
82% are cutting back on treats, with 18% having cut them out completely and 34% cutting back most of the time;
49% of respondents in the UK said that they buy private label all or most of the time to save money and a further 37% said that they bought private label occasionally, with a similar picture emerging in the US and Canada.
In addition, when respondents were asked about their intentions for spending on premium fragrances and cosmetics during the next three months, only 2% of the sample group stated that they intended to increase expenditure, while 19% said that they would maintain expenditure at previous levels and a huge 55% said that they would significantly cut back on expenditure or not buy at all.
This seems to suggest that, for most consumers, affordable luxury does not extend to the premium fragrance and cosmetic market.
Looking at mass market brands such as L’Oreal, Datamonitor asked respondents in the UK whether they used the brand and how their recent consumption of the brand had changed. The survey revealed that 12.5% of respondents who used the L’Oreal brand have substituted it with private label offers and a further 8.7% were switching to other branded offers, while 14% said that they were still loyal to the brand but only bought it on offer.
Private label penetration in the personal care category stood at 17.1% in the UK in 2007, compared to a 40% average for grocery overall, suggesting that the personal care category was relatively well insulated from the growing share of private label sales in the UK. Recent consumer survey results outlined above indicate an acceleration in the shift to private label in personal care.
Another cause for concern for branded players is the apparent shift to the discounter channel for purchases of personal care products. While 61% of all consumers used supermarkets and hypermarkets as their main shopping channel for personal care products, 8% of respondents used discounters as their main channel, which was the second highest category penetration score for this channel.
In addition, channel switching intentions for personal care products were fairly high, at 14%, with 25.5% of switchers showing an intention to migrate to the discounters as their main channel.
Jaffer concluded, “The looming fear is that this recession will change the face of the personal care category for a long time to come.”
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