No More Lipstick Effect. Drastic Changes in the Luxury Goods Market

When the world is plunged into crisis and everyday life becomes increasingly difficult, the "lipstick effect" coined by Leonard Lauder appears. It is a psychological and economic phenomenon in which even in worse economic moments in history, women will always find money for a bit of luxury, such as a good brand of lipstick . For decades, this trend seemed to be the litmus test of the luxury goods market. However, something began to go wrong.

The data is merciless. Coty , the owner of brands like Max Factor, Rimmel and CoverGirl , reported a 6 percent drop in revenue in the first quarter of 2025. L'Oréal , while still afloat, can boast a mere 3.5 percent increase in sales - a fraction of what the company achieved in recent years. Problems are also affecting giants like Estée Lauder and Shiseido . Even chains like Sephora and Douglas , previously considered "temples" of affordable luxury, are starting to feel reduced demand.

Where does this drop in mood come from?

When Coty CEO Sue Nabi assures investors that “the industry has always been resilient to business cycles,” it’s hard to resist the impression that some of that is wishful thinking. Because this time, the crisis isn’t just affecting wallets—it’s hitting the heart of our habits, aspirations, and lifestyles.

Experts from Business of Fashion and the Pitchbook analytics firm point to several key changes. First, satiety . The market has been flooded with a wave of luxury novelties – expensive elixirs of youth, limited edition fragrances, high-end cosmetic lines signed by celebrities. The problem is that consumers increasingly rarely see the point in reaching for these exclusive products. The crisis encourages caution, and the need for a “reward” in the form of lipstick is losing its significance.

Secondly, market fragmentation . Large corporations no longer have a monopoly on attention. New, niche brands with a mission and an authentic message are springing up on TikTok and Instagram. Young consumers prefer to support an eco-friendly brand created in a home factory than reach for the next global hit.

Underconsumption – the new luxury?

The phenomenon of "underconsumption" - or consciously limiting purchases - is gaining more and more supporters, especially among the younger generations. For them, less is more. Luxury is not necessarily a new lipstick, but rather a free weekend without scrolling through Instagram or a morning coffee drunk without rushing.

It's not just about the fashion for minimalism . It's also a defensive reaction to the bombardment of ads, influencers and the next "must haves". In a world where you can buy everything - the ability to say "no" becomes a value.

What's next for the "lipstick effect"?

Does this mean the end of luxury cosmetics? No. But perhaps their place in our lives is changing. Instead of acting as a "small reward" for difficult times, they are becoming one of many elements of a lifestyle - conscious, thoughtful and often less impulsive than before.

It’s possible that the “lipstick effect” won’t disappear completely. But if it does return, it will be in a different guise – perhaps more ecological, more inclusive, with an emphasis on quality and authenticity, not just on the shine of packaging. Because even though the world is changing, one thing remains certain: every one of us needs a little luxury from time to time. Except that today, that little bit looks different than it did a decade ago.