The Recession-Proof Industry

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The beauty industry has historically proven to be resilient and often "recession-proof" because it offers affordable luxuries that provide an immediate, positive psychological boost during stressful and uncertain times. While major economic downturns may cause consumers to cut back on big-ticket luxury items like cars or vacations, they often continue to purchase smaller, feel-good beauty products.

The Lipstick Effect

The lipstick effect is an economic theory that consumer spending on small, affordable luxury items, such as lipstick, increases during economic downturns. The underlying principle is that consumers substitute expensive "big-ticket" purchases (like a new dress or a vacation) with less costly indulgences to maintain morale and a sense of normalcy or to enhance their social or professional prospects. Investopedia: (https://www.investopedia.com/terms/l/lipstick-effect.asp#:~:text=The%20lipstick%20effect%20is%20when,based%20on%20the%20lipstick%20effect.)

Economists call the lipstick effect an outcome of the income effect – the income effect in microeconomics is the resultant change in demand for a good or service caused by an increase or decrease in a consumer's purchasing power or real income. Investopedia: (https://www.investopedia.com/terms/i/incomeeffect.asp). Therefore, as consumers' incomes rise, so does the demand for normal goods. There is a vice-versa effect on inferior

Despite growing concerns about another recession, the beauty industry is looking at significant growth. The market shows a growing need for cosmetologists in the hair, makeup and beauty sectors in the United States alone. An article by Evergreen Beauty College (https://www.ebc.edu/blog/why-the-beauty-industry-is-recession-proof-2/) states that the accumulation of treating oneself through small acts of beauty, like manicures, pedicures, lashes and hair products, as a means of boosting confidence accounts for the key component of the beauty industry's growth in times of economic uncertainty. Coupled with the fact that most beauty rituals have to be outsourced and renewed on a consistent basis, requiring the consumer to see an aesthetician regularly.

Digital Culture and The Fading Lipstick Effect

However, Isobel Bruce writes about how contemporary internet culture has caused the dwindling down of the “Lipstick Effect” in an article titled The Lipstick Effect Is Fading—Here’s How Beauty Brands Can Stay Recession-Proof. Bruce states that most consumer choices now are predetermined and shaped by influencers and social media personalities. Market research (Navigating the U.S. Gen Z Market: Opportunities and Challenges) into the spending habits of Gen Z and millennials indicates that most of them follow internet personalities for the purpose of being introduced to new brands as well as products in the health and beauty sectors.

Bruce goes on to state that beauty brands are underperforming in creative execution, with only 31% ad spend being allocated toward fully optimised creative. Cost Per Completed View (CPCV) for beauty brands is a critical advertising metric, with data indicating that a 10 percentage point increase in Creative Quality Score (CQS) can lead to a 5.3% reduction in CPCV. In the beauty industry, focusing on high-quality, engaging video content, such as user-generated content (UGC) that showcases product application within the first 3-6 seconds, is key to maximising engagement and reducing costs.

Recession Core Trends

Rise In Dupes

low‑cost products that mimic the look, feel, or performance of high‑end brands. During recessions, consumers become more sceptical of premium pricing and more willing to experiment with budget alternatives. Social media platforms amplify this trend, with influencers showcasing “dupes” as savvy hacks rather than compromises. The rise of dupes demonstrates a trade‑down effect: consumers are unwilling to abandon beauty altogether, but they are actively seeking substitutes that deliver similar results at a fraction of the cost. This undermines sales growth for prestige brands while boosting mass‑market and private‑label lines.

DIY Kits

When consumers face economic pressure, they often cut back on professional services such as salon treatments, facials, or nail appointments. Instead, they turn to at‑home alternatives—hair dye kits, manicure sets, facial masks, or even microneedling tools. This shift reflects a broader pattern of cost‑conscious substitution, where people still want the benefits of beauty care but seek cheaper, self‑managed solutions. The popularity of DIY kits signals that discretionary spending is tightening, and consumers are prioritising affordability over luxury experiences.

Drugstore Makeup

When economic conditions tighten, consumers often trade down from prestige and luxury brands to more affordable alternatives. Drugstore makeup, sold through mass retailers and pharmacy chains, offers accessible price points while still delivering quality that many consumers find sufficient. This shift doesn’t mean people stop buying beauty products altogether; rather, it reflects a reprioritisation of spending, where self‑expression and personal care remain important but are pursued in more cost‑conscious ways.

The increase in drugstore sales also signals a 'lipstick effect' in action: during recessions, consumers may cut back on big-ticket items but continue to indulge in small luxuries like cosmetics. Drugstore makeup becomes the “affordable indulgence", allowing people to maintain routines and a sense of normalcy without the financial strain of high-end purchases.

In-House Brand Sales

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Retailers such as Woolworths (W Beauty) and Clicks (Clicks Skin Care Collection and Sorbet), as well as recently Bash (Colours Limited), have seen that they can capitalise by leaning into private labels and affordable ranges to capture demand as shoppers pull back elsewhere. This resilience in certain categories is itself an indicator of recession: consumers are trading down from prestige products to more affordable alternatives, showing both the persistence of demand and the shift in spending priorities. ‘Lipstick effect’ powers SA’s beauty arms race (https://www.moneyweb.co.za/news/south-africa/south-africas-booming-4bn-beauty-market-a-key-battleground-for-retailers/?utm_source=copilot.com)

Image taken from WomenStuff.co.za

Though market research has indicated the 'lipstick effect' has made the beauty industry ‘recession-proof’, the beauty industry’s ability to anticipate what the consumer will want and be willing to spend money on has ensured that it is an ever-growing economic sector which is only slightly disrupted by new forms of marketing in the digital and online landscape.