Makeup sales bucked a long-held economic trend last year — dipping downward rather than holding steady as they typically do at the onset of a recession. Two Oregon cosmetics makers say it’s been a wild ride.
Paula Hayes first heard of the “lipstick index” when she was getting ready to launch her makeup line in 2008, right after that year’s banking collapse caused the worst global recession in decades.
Leonard Lauder, then chairman emeritus of the Estée Lauder Companies, coined the phrase in 2001 to describe a pattern in consumer behavior: When the economy starts to slow down, consumers tighten their belts, forgoing big luxuries like vacations or new cars.
But people still want to treat themselves even when times are bad, and female consumers, Lauder suggested, will often splurge on small luxuries — like a tube of lipstick.
“When I was thinking about what I wanted to start with — because I obviously couldn't offer my entire catalog of products out the gate — I said, ‘Well, we're in the middle of a recession, and you know, I've been reading and researching about this thing called the lipstick index. Why not start with lipstick?’” says Hayes, president and CEO of Beaverton-based Hue Noir Cosmetics. “I had had those products formulated and ready to go anyway. So I launched my business in the middle of the last recession, with lipsticks, really keeping in mind the whole idea of the lipstick index.”
And, she says, as she started to work events with her products, customers responded enthusiastically.
“There was something that they found exciting about [lipstick]. I said, ‘Well, you know, I think there's something to it],’” Hayes tells Oregon Business.
“I would say that pre-COVID, it definitely held up,” says Urmila Ratnam, CEO of Portland-based Alima Pure cosmetics. “There would be sort of a softening in sales, but you could still count on a core customer activity. I think that’s definitely rooted in some sense of reality.”
But the current recession is far from typical. Nearly 10 million people filed jobless claims last April, and business closures meant they had few places to go. Those who kept their jobs were either working from home or on the frontlines — and mask mandates that kicked in later in the year made lipstick irrelevant to most who normally wear it.
According to a McKinsey & Company analysis reported by Forbes last year, Amazon sales of “lip care and color” declined by 15% in the four weeks leading up to April 11 of 2020 — the steepest decline of any retail segment.
“All the old adages of things like the lipstick index really haven't held up in this particular recession,” Hayes says. “Of course, that's because this is not a typical recession. This is because of a major pandemic.”
“This pandemic is unlike anything else that we’ve experienced in our lifetimes, at least,” Ratnam says.
Another complicating factor has been what economists have described as the pandemic-driven “she-cession” — wherein far more women than men have left the workforce, largely due to lack of child care or other caregiving concerns. And according to local and national data, women of color have been particularly hard hit by job losses related to COVID.
That creates yet another wrinkle for Hue Noir and Alima, which both offer shades of foundation suitable for people of color, with Hue Noir in particular marketing itself as a makeup line for Black women.
“My consumers were just not in a place where they were really looking for those sorts of products,” Hayes says.
Ratnam says she isn’t sure whether the recession’s effect on women of color has affected sales. But she does note that impact on Alima’s sales shifted throughout 2020 as the virus spread, in what she calls a “rolling impact” due to the fact that the company’s products are distributed internationally.
Oregon state economist Josh Lehner says his office does not track makeup sales specifically. But he notes that mall operators told him in 2009 that Victoria’s Secret locations were their best-performing stores.
“So maybe that speaks to the dynamic a bit,” Lehner says. “Splurge on something personal, and cut back on everything else.”
Lehner also notes that during a typical economic downturn, the volume of liquor sold tends to stay about the same, but consumers buy cheaper brands. (As OBM reported earlier this month, Oregon’s craft-beer industry suffered an overall drop in sales in 2020, though Oregon distilleries did not suffer to the same degree, suggesting bar closures had a bigger impact.)
Alima’s products are available in Oregon boutiques like Echo Natural Beauty, which is in the Pearl not far from Alima’s headquarters, but also in several European countries as well as Singapore, Hong Kong, South Korea and Canada.
“When things got really bad [in one market], sales started to pick up elsewhere,” Ratnam says.
Hayes — whose products are available at small boutiques across the country as well as Costco — says things started to change as last year’s holiday season hit. She suspects sales picked up among people who wanted to buy gifts for loved ones whom they knew liked makeup but hadn’t bought any for themselves in a while — and were likely higher income earners to begin with.
And as mask mandates have lifted, Hayes says, sales have increased. And both Ratnam and Hayes say e-commerce has been a massive boon to their businesses. But the market is still unpredictable.
“It’s not that we anticipated this or that we were being prepared,” Ratnam says. “Our business model really turned out to be a boon and kept us going.”