Consumer ‘lipstick effect’ set to impact start-ups

Start-ups looking to break into the fashion industry have been told to be aware of the ‘lipstick effect’ sweeping through the retail sector.

The lipstick effect typically occurs during times of economic uncertainty, when women purchase beauty items instead of clothing.

The term was coined by Leonard Lauder, chairman of cosmetics company Estee Lauder, after the surge in lipstick sales following the September 11 terrorist attacks.

According to Lisa Tartaglia, research analyst at the Australian Centre for Retail Studies, female shoppers in Australia are increasingly turning to cosmetics and accessories for their retail fix.

Tartaglia says many women purchase these items because they’re cheaper than clothes but still give them a “buy high”.

“For many women, shopping is a bit of a pick-me-up if they’ve had a down day. They like to get out of the house and go to a shopping centre, even if they only ending up purchasing a pair of earrings,” Tartaglia says.

She says the growth and success of accessory chains Diva and eQUIP is evidence of the lipstick effect, and has seen other retailers follow suit.

Fast-fashion retailer Sportsgirl is set to open 15 standalone accessory stores nationally over the next two years, adding to their four existing accessories boutiques in Melbourne and Sydney.

Coles also appears to be cashing in on the trend, revamping its health and beauty aisle and offering a larger range of cosmetic brands.

Tartaglia believes the lipstick effect is likely to continue in women’s retail as the cosmetics and accessories industries respond to the trend with more competitive prices.

“Consumer confidence is increasing, but now consumers expect things to always be on sale. They’re still going to indulge but they’ll always return to cosmetics and accessories because they’re smaller purchases,” she says.

Tartaglia says start-ups in the fashion sector can emulate large retailers like Sportsgirl by offering add-on products as an alternative to clothing.

“Consumers want range but you don’t want to overwhelm them with choice. Be careful as to what items you choose to sell – look at what’s selling and what’s not,” she says.

National Retailers Association spokesperson Michael Lonie says the trend is evident in other sectors as well, including homewares and electronics.

“There’s no doubt that large items within homewares are really in the doldrums, but smaller items like pillows and lampshades are selling quite well,” he says.

Lonie says start-ups can benefit from the trend by tapping into a niche market and offering specialised products.

“If I walk into a major electrical store, I only have one or two options. A lot of smaller stores can offer a wider range of add-on items in terms of speakers, docking stations, etc.”