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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)
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View Comments
Stephen Langsford
February 9th, 2009 at 4:32 pm
Hi Paul,
Thanks for your article and at online DVD rental company Quickflix, we are seeing the “lipstick effect” with growing demand in subscriptions from consumers seeking good value entertainment. Another expression you’ve probably heard of is the “cocooning effect”– where in a downturn consumers spend more time at home and internet based services stand to benefit from this. As an at home service, with free delivery consumers Quickflix can choose online DVD rental to other alternatives including late fees, fuel and parking costs associated with video stores. Not only that but consumers will also rationalise their expenditure at home perhaps opting for simple pay as you go services (again like Quickflix) over paytv style contracts which seek to lock in the consumer for a year or more.
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Danielle Stein Fairhurst
February 9th, 2009 at 7:34 pm
Yes, at Plum Solutions we launched a new online Financial Modelling course last week which I am hoping will be a “lipstick” product! At only $99, people can upskill in the comfort of their own home, which is invaluable if they are not given time off work to undertake professional development courses. Employees who are also finding their companies reluctant to pay for their training or have been recently made redundant can afford to pay for their own training to improve their skills and marketability.
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