Lipstick Effect

AAA

DEFINITION of 'Lipstick Effect'

A theory that states that during periods of recession or economic downturn, consumers will eschew purchases of big-ticket luxury items and seek material solace in smaller indulgences, such as premium lipstick.

Also known as the "leading lipstick indicator".

INVESTOPEDIA EXPLAINS 'Lipstick Effect'

The lipstick effect is one of the reasons that the restaurant and entertainment industries typically do well amid recessions. Cash-strapped consumers want to treat themselves to something that will allow them to forget their financial problems, but they cannot afford to escape to Bermuda. Therefore, they often settle for dining out and going to a movie.

RELATED TERMS
  1. Consumer Goods

    Products that are purchased for consumption by the average consumer. ...
  2. Consumer Discretionary

    A sector of the economy that consists of businesses that sell ...
  3. Consumer Spending

    The amount of money spent by households in an economy. The spending ...
  4. Consumer Staples

    Essential products such as food, beverages, tobacco and household ...
  5. Leading Lipstick Indicator

    An indicator based on the theory that a consumer turns to less ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
Related Articles
  1. Hidden Costs Of Product Rebates
    Personal Finance

    Hidden Costs Of Product Rebates

  2. 5 Ways To Control Emotional Spending
    Budgeting

    5 Ways To Control Emotional Spending

  3. 8 Tips To Help You Control Holiday Spending
    Budgeting

    8 Tips To Help You Control Holiday Spending

  4. Understanding The Consumer Confidence ...
    Economics

    Understanding The Consumer Confidence ...

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center