The “Lipstick Effect” and What It Means for Ecommerce in a Recession

Bratz and Gentle Monster bring Y2K nostalgia to life with bold, foldable frames — each set comes with a special edition Bratz doll. Source: https://www.instagram.com/gentlemonster

Disposable income is squeezed and consumers are trading down to cheaper, smaller products to splurge on

In uncertain economic times, consumer behavior shifts but that doesn’t always mean spending stops. One surprisingly reliable recession indicator is the “lipstick effect,” a principle rooted in behavioral economics. The idea is simple: when consumers can’t afford high-ticket luxury items during a downturn, they seek out small, affordable luxuries to feel a sense of comfort and control. Originally observed through rising lipstick sales during dips in GDP, this effect has also been seen with products like coffee, jewelry, and accessories. And now? We’re seeing it manifest through fashion’s latest obsession: cute, nostalgia-driven micro-collections.

Acne Studios channels Scandinavian and Japanese nostalgia with a 16-piece Moomins capsule — iconic characters appear on denim, knits, and accessories. Source: https://www.highsnobiety.com/p/acne-studios-moomins

So what does this mean for Ecommerce brands?

1. Offer Lower Price Point Alternatives
   If your brand sells premium or luxury goods, consider introducing smaller or more affordable SKUs. For example, instead of a $500 designer handbag, think keychains, bag charms, or travel-size versions of bestsellers. These offer customers a “feel good” purchase without the financial guilt.

2. Lean Into Emotional Marketing
   Consumers aren’t just buying a product, they’re buying comfort, a sense of normalcy, and control. Make sure your messaging reflects that. Use language that emphasizes self-care, small joys, and everyday luxury.

3. Upsell With Purpose
   Use bundles or cart add-ons that hit that lower price point. Think: “Add this for just $10 more” or “Complete the look with this matching piece.” It creates a moment of indulgence within a budget.

4. Focus on Accessibility Without Diluting Brand Value
   You don’t need to compromise your brand’s value to be accessible. Instead, reinforce that even your most affordable pieces are high-quality, thoughtful, and reflect your brand ethos.

5. Track Consumer Behavior
   Pay attention to shifts in purchasing patterns. Are people buying more of your smaller items or entry-level products? Let that guide your merchandising, ads, and product development.

Conclusion

During an economic turbulence, consumers still want to buy. They just want to buy differently. By understanding the lipstick effect and adjusting your strategy accordingly, your brand can remain not only resilient but relevant.

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