Which products and services should you sell during an economic downturn?
You might have stumbled on the term “the lipstick effect” in recent months, as the dark clouds of recession rolled in and enveloped the global economy. The term refers to the upturn purveyors of certain products and services experience whenever general economic conditions take a nose dive.
Specifically, the theory refers to the trend of women forgoing high-end purchases like fur coats and fat-carat jewellery in favour of lower-end retail indulgences… like lipstick. In the period following the September 11 terrorist attacks in the US, lipstick sales doubled while the overall economy flirted with recession.
The current economic crisis, felt earliest and most acutely in the US, UK and Japan, has seen the real estate, luxury car and fine dining sectors feel the pinch, while sales of bicycles, fast food and, yes, lipstick, have proved incongruously resilient.
What does this mean for Aussie businesses? While the real economy hasn’t bitten just yet, confidence is shaken and the 2009 forecasts aren’t rosy. Yet businesses with a diverse range of commercial offerings, at varying price points, are positioned remarkably well. Martin Hosking of Australian-based online art community website RedBubble says Christmas sales were up threefold on the preceding year, thanks largely to a surge in revenue from lower priced user-generated products, such as greeting cards and calendars. According to Hosking, the key to surviving tough economic times is to offer indispensable products or services, or “affordable luxury with a feel good factor”.
It’s advice worth considering in the weeks and months ahead. Do you have a “lipstick” in your suite of offerings that could ease the squeeze in ’09?
Photo: anyaka (Flickr)