Although the economy is poor in times of an economic crisis, the cosmetic industry has an increase of consumers during these times. The Lipstick Effect theory explains how business booms for these retailers, even after production ceases. The theory explains how during an economic crisis, people are still willing to buy luxury goods, just at a lesser price. Because of this, consumers turn to more affordable products, such as cosmetics. There is evidence of this theory taking place in other economic crises, but I would like to primarily focus on the current COVID-19 pandemic. Even though this is a health crisis and not specifically an economic crisis, the shutdown of many countries has turned it into somewhat of an economic crisis. Since everyone is impacted by this recession, it is apparent that the cosmetic industry is no exception which is what will be focused on throughout the project. The goal of this research is to determine if the Lipstick Effect applies to the current pandemic through the means of consumption and production of luxury items and cosmetics.

Since so many people were instructed to stay home during the second half of March until the beginning of June for some places, it is apparent that “Consumers are increasingly turning to self-care and home based beauty treatments like at-home manicures to improve wellbeing and boost their mood” (Valentine). The Lipstick Effect theory states how consumers will buy less expensive luxury items, which is shown through a surge of nail products right before the shutdown of production. This is best explained when it was written how “Figures from NPD Group show that online UK sales of premium nail products jumped by 12% in the week beginning 16 March – when the public were asked to stay home” (Valentine). The NPD Group, which keeps track of consumer purchase data, divulged that there was a heavy increase of purchasing nail products from the first week of quarantine. This shows a clear spike in purchasing cosmetic goods, which is not consistent throughout the current virus; however, there was an increase in other areas of production.

When researching the sales from the most popular nail polish manufacturers during the pandemic, it is evident that the production of cosmetics had to be ceased. The top three sellers in the first week of the pandemic were Chanel, Dior, and Yves Saint Laurent. For example, the production of Chanel products is based in France, Italy and Spain (Services.chanel.com). Since production was shut down during the pandemic, CHANEL manufacturers in Paris are producing hospital gowns and face masks to donate (chanel.com). Another company that saw a spike in nail polish sales was Dior, which is based in Italy, France, Switzerland, and Japan (dior.com). Upon researching, it is known that one of the Baby Dior workshops has reopened in Redon, Brittany to make masks (Chiuri). If the companies are only open to make masks, then all other production is put on hold. Lastly, Yves Saint Laurent “Production is mainly divided between Italy and France, where its original workshop still manufactures ready-to-wear garments” (kering.com). Although Yves Saint Laurent agreed to make surgical masks, the parent company, Kering, imported them from China and donated to The Institut Pasteur biomedical research institute. (BBC.com).

Since all of these companies have stopped production of their normal products, it is apparent that their employees have been suffering as well. Throughout researching the employees, it was revealed that in the United States “Most of the companies also had to cut down the workforce or had to send their employees [for] work from home leading to a decline in production rate” (GlobeNewswire.com). This did not only impact the United States, but other countries within the European region. Through producing these masks and other products to ensure the safety of people, it seems to be the only way that stores can remain open. To clarify, “Most fashion companies are in the business of nonessential stuff — frocks and handbags and chinos. But manufacturing face masks of all types are more likely to be viewed as essential businesses” (Stone). This ensures that brands, both small and large, can still keep producing and gaining revenue even when everything else is closed. This loophole allows for some workers to keep their jobs, therefore lessening the impact on the workforce as well.

According to the sources, the overall revenue made from these companies has declined throughout the pandemic. In terms of the luxury brands listed, the production of handbags and leather goods were stopped, while production remained open for healthcare essentials. Clearly, there is also an increase in the production, and therefore consumption, of other products that can help protect people during the pandemic. Due to the production of masks and other health care necessities, I wonder will the cosmetics industry fully return to normal? And if so, when? Will these luxury brands become more affordable to consumers? And if so, will these brands diversify and become more “human”? Since consumers are interested in at home care, will the beauty industry see a loss in revenue? How will they make up for the lack of customers? These are the kinds of questions that linger after researching the impact of this virus.

In general, the sales in each company have declined over time but the sales of cosmetics have increased. During the first week before closure there was a large influx of purchases made in the cosmetic industry, especially nail polish. The revenue in general was down because all production of normal products stopped and for some companies the masks were donated but compared to the normal sale of cosmetics during the week last year, the revenue was very high. In this case, the Lipstick Effect was not shown throughout the research data, but it can be explained through the making of masks and other essential items. Since these large businesses, among many smaller ones, are producing items to help the healthcare industry, there is a clear source of revenue present among these companies. Because of the fact that handmade masks and cloth masks are the ones being manufactured, the Lipstick Effect explains how people will buy more expensive masks but not necessarily luxury goods.