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 Debt

    Debts that are owed as a result of purchasing goods that are ...
  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. Personal Finance

    Hidden Costs Of Product Rebates

    These cash incentives lure in consumers, who are often unable to collect on the deal.
  2. Budgeting

    5 Ways To Control Emotional Spending

    Follow these five simple steps to keep your spending under control.
  3. Budgeting

    8 Tips To Help You Control Holiday Spending

    These tips will have you singing "Joy to the World" well into the New Year.
  4. Economics

    Understanding The Consumer Confidence Index

    We look at this closely watched economic indicator to see what it means and how it's calculated.
  5. Retirement

    Consumer Confidence: A Killer Statistic

    The consumer confidence is key to any market economy, so investors need to learn the measures and how to analyze them.
  6. Fundamental Analysis

    Lipstick And The Stock Market: Connection?

    We test the theory that lipstick sales thrive during an economic downturn.
  7. Credit & Loans

    How Interest Rate Cuts Affect Consumers

    Traders rejoice when the Fed drops the rate, but is it good news for all? Find out here.
  8. Personal Finance

    Smart Resumes For The Fashion Industry

    Here's what your need to know to tailor your resume to the fashion job you want.
  9. Economics

    What's Expansionary Policy?

    Expansionary policy is a macroeconomics concept that focuses on expanding the economy to counteract cyclical downturns. Expansionary policy can be implemented in one of two ways, or a combination ...
  10. Economics

    What's a Producer Surplus?

    In economics, producer surplus is the difference between the price at which the producer actually sells a product and the minimum price the producer would have accepted for the product. The surplus ...

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center