The time-honored tale of Beauty and the Beast

If the economy’s been a beast so far this year (not in the good way), its bright spot seems to be beauty. According to recently released data from the NPD Group, an organization that tracks 14 categories of discretionary retail spending, “beauty” was the only one with rising unit sales in the first half of 2022.

💄📈 A deeper dive… Consumer sentiment has fallen this year, overall. But as it’s done so, lipstick sales volume has climbed – a phenomenon known as the “lipstick index.” The term was first coined by Leonard Lauder, chairman of Estée Lauder, to explain rising sales of cosmetics during the recession in the early 2000s… which happened during the ‘08 recession, too.

And like past downturns, this year’s increase in beauty spending goes beyond just lipstick.

• Overall makeup sales, which include lipstick, are up 20%
• Fragrance is up 15%
• Skincare is up 12%, while hair care is up 28%

… plus, all of these categories are growing in units, as well as dollars.

🤑 Driving the data: When NPD overlayed lipstick sales volume and consumer sentiment trends, they discovered an opposite correlation, which the group says indicates indulgent spending. Or in plain English, people seem to be increasingly buying beauty products while cutting back in other areas.

Much of this growth is being driven by households earning $100,000+ per year, a demographic representing 47% of the beauty shopper base. It’s also the only income group currently growing, having increased by 3 share points over 2020 and five share points over 2019 – which means big box retailers, like Target and Walmart, are trying to cash-in.

• Target began opening hundreds of in-store Ulta Beauty shops last year, and eventually plans to have them at ~40% of its US stores.
• Walmart has signed exclusive deals with D2C cosmetic brands like Bubble, a skincare brand with colorful packaging and focus on Gen Z and young millennial customers.