What’s the best selling item during an economic downturn? Lipstick!

 

There exists an interesting economic phenomenon known as the “Lipstick Effect". This observation describes the rise in lipstick sales during periods of financial distress. The origins of the “Lipstick Effect” can be traced back to the Great Depression in the 1930s; every industry was struggling to survive but unexpectedly, sales of lipstick were on the rise. After almost a hundred years, this phenomenon made a comeback. For example, during the financial crisis of 2008, cosmetics giant L’Oreal’s lipsticks grew by 5.3%. 

 

The less money you have, the more lipstick you’ll buy?

 

During recessions, humans often worry about their financial security and thus reduce their spending. What many do not realise, however, is that recessions often leave individuals with more “free capital” than usual. Our desire to spend still holds strong regardless of economic conditions; when we can’t buy extravagant luxuries, consumers turn to small, affordable luxuries such as lipsticks for psychological comfort. Lipstick is one of those comforts that are “cheap yet unnecessary.” Hence, many people turn to spending money to make themselves happy and comfort their souls during hard times. Who can resist the feeling of soft lipstick touching your lips; amazing isn’t it? 

 

 

The Un-Lipstick Effect in COVID Economy

 

Due to the COVID19 pandemic, masks have become indispensable in our daily lives. However, as masks cover two-thirds of our faces, there is little value in wearing lipstick. For the first time ever, lipstick has lost its "counter-effect" aura. McKinsey’s research data showed that on Amazon, the sales of  "lip care and lip gloss" products were poorer than other cosmetics products, declining by 15% compared to the same period last year. 

 

On the other hand, we are seeing the rise of other beauty phenomena during COVID-19: the "nail polish effect" and the "hair dye effect". Nielsen's survey data showed that U.S. sales of Madison Reed hair dye kits grew 10-fold in April, while sales of Revlon nail polish was also boosted by 10 times. On Amazon, nail care sales surged 218% and hair dye sales jumped 172%.

 

 

Emotion-Driven Shopping Behavior

 

Our emotions often influence our consumption behavior. When we are happy, we tend to buy things to reward ourselves. When we are unhappy, of course, we tend to buy things to comfort ourselves. We know we have fallen into the spiral of retail therapy that we can't get out of.

 

As a smart investor, our emotions are affected by different market information and we are bound to have ups and downs. When it comes to investment, it is not wise to be affected by our own emotions.

 

AQUMON, a robo advisor, removes the volatility of human emotions and rationally makes investment decisions based on market conditions, helping you swim upstream against the current!

 

 

 

 

About us

As a leading startup in the FinTech space, AQUMON aims to make sophisticated investment advice cost-effective, transparent and accessible to both institutional and retail markets, via the adoptions of scalable technology platforms and automated investment algorithms.

AQUMON’s parent company Magnum Research Limited is licensed with Type 1, 4 and 9 under the Securities and Futures Commission of Hong Kong. In 2017, AQUMON became the first independent Robo Advisor to be accredited by the SFC.

AQUMON’s investors include Alibaba Entrepreneurs Fund, Bank of China International and HKUST.

 

Learn more in AQUMON APP

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