The ‘lipstick index’ and the strength of beauty retail amid inflation

At Calgary’s Southcentre Mall, Paulette Harder stopped in at Sephora and emerged with a skincare set for herself and a face cream for her mom. 

Harder has lately cut back on clothes shopping but said skincare is one area of spending that’s tougher to quit.

“I don’t like to admit it, but I come once a month,” she said. 

Harder’s shopping philosophy falls in line with the so-called “lipstick index.” 

The term, popularized by former Estée Lauder chairman Leonard Lauder, suggests cosmetics sales stay strong amid tough economic times as shoppers substitute lipsticks and other small indulgences for higher-ticket items like clothing and handbags. 

Some have disputed the idea, but economists at California State University demonstrated evidence in support of the concept after crunching the numbers from the 2008 recession. 

WATCH | Shoppers weigh in on the ‘lipstick index’:

The journey from $500 to 7 figures with Cheekbone Beauty

Featured VideoJenn Harper, the founder and CEO of Cheekbone Beauty, talks about how she hopes her success convinces investors to support other Indigenous entrepreneurs.

Women spent more on cosmetics and less on clothing during this period, the researchers found, lending support to the idea that consumers were opting for small luxuries instead of larger purchases. The team also dismissed other theories that have been floated to explain the lipstick index, such as that women wear more makeup during economic downturns to attract a mate or to be more appealing on the job market.

‘Beauty is an outlier’

As the economy teeters on the verge of a possible recession, Canadian beauty sales have gone up 18 per cent this year, according to the analytics firm Circana. In comparison, apparel sales grew by four per cent while footwear sales declined by two per cent.

“Beauty is really an outlier,” said analyst Alecsandra Hancas with Circana.

“Even though [shoppers] may be pulling back on those bigger commodities, they’re definitely still treating themselves to those little luxuries and beauty plays a nice part in that.”

Cosmetics have also become a reliable driver of business for pharmacy and drugstore retailers. 

Pedestrians walk past a Shoppers Drug Mart on King Street and Peter Street in Toronto.
Loblaw, which owns Shoppers Drug Mart, says its earnings have been driven in part by the ongoing strength of its beauty retail. (Michael Wilson/CBC)

Loblaw, which owns Shoppers Drug Mart, has repeatedly said its healthy earnings aren’t because the grocer is taking advantage of food inflation but are instead due in part to sales growth in high-margin areas like cosmetics. 

“Beauty continued to outperform” in the most recent quarter, Loblaw chair Galen Weston said on the company’s latest earnings call

“It continues to be resilient and we would expect that to remain the case for the foreseeable future,” he said. 

At London Drugs, a pharmacy retailer that serves Western Canada, cosmetics — which include fragrances and skincare — have become an increasingly important part of the business with particularly strong growth in the last two years. 

“Last year, it was our highest sales we’ve ever had, and this year will eclipse last year’s sales,” said cosmetics business unit manager Mike Cummings. He noted that not only are customers buying more products, but prices for cosmetics are also on the rise amid inflation., an online drugstore headquartered in Guelph, Ont., also counts beauty as one of its fastest-growing categories. 

A woman with a black jacket, blue top and medium-length brown hair is pictured in front of a warehouse shelf stocked with makeup.
Erin Young, CMO of, says shoppers are willing to spend on small ‘indulgences’ like beauty products even when the economy slows. (Paula Duhatschek/CBC)

“People are willing to indulge in those little things,” said Erin Young, chief marketing and merchandising officer, during the opening of the company’s new western distribution centre in Calgary.   

“They may be cutting them back in other areas … but they are willing to treat themselves with innovation and newness.”

TikTok, wellness trends drive growth

The continued strength in beauty sales isn’t just a function of customers trading designer handbags for relatively inexpensive skin creams. 

TikTok has become a “huge” driver of growth for the industry, said Circana’s Hancas. A product that takes off in a review — whether it’s an $800 hair dryer or a $14 mascara — can lead to a frenzy of interest and a scramble to keep it in stock. 

“The beauty industry is predicated on what the next viral TikTok will be,” said Cummings. “We’re heavily invested in understanding who is doing what and watching carefully.”

Beauty is also riding the wave of an overall trend toward “wellness,” according to a recent McKinsey report on the state of the beauty industry. It’s a slippery category that can include anything from supplements to sleep aids to lotions and is currently pegged at about $1.5 trillion dollars worldwide, the report said.

Boxes of cosmetics are pictured on a shelf in a distribution centre for
A shelf with two popular brow products is pictured during the opening of’s new 115,000 square-foot warehouse facility in Calgary. Beauty products have been one of the online retailer’s fastest-growing sellers. (Paula Duhatschek/CBC)

“The melding of wellness and beauty is only expected to become more pronounced, with McKinsey expecting compound annual growth of 10 per cent to 2027 for the wellness industry,” said the report from the global consulting firm. 

To that point, much of the growth in Canadian beauty sales hasn’t necessarily been in traditional makeup like lipsticks, but rather in products that invoke some feeling of self-care, like eau de parfum, face cream and face serum, according to Circana’s figures. 

At a global level, skincare currently represents about half the sector’s market value, according to McKinsey.

Still, there are limits to what customers are willing to spend even on small indulgences. Circana predicts this holiday season will be softer than last year’s and that sales in the beauty sector will decelerate in 2024. 

That shift has also been on display at London Drugs. While beauty sales continue to grow, they have started to slow down somewhat, Cummings said. 

“You have to … pivot a lot in order to maintain the increases,” he said, pointing to an artificial intelligence skincare program the retailer is developing as one example of how it hopes to continue bringing customers in. 

A woman with blonde hair and a blazer is pictured holding a red shopping bag.
Leigh Kormos, shopping at Southcentre Mall, says she’s willing to spend a bit extra on certain skincare products. (Paula Duhatschek/CBC)

Back at Southcentre mall, shopper Leigh Kormos said she’s already minimized parts of her makeup and skincare routine, but added there’s only so much she’s willing to cut. 

“There still [are] certain products that I will go after because they make me feel good and they work,” she said. 

“I’m willing to spend an extra little bit on those.”

Leave a Reply

Your email address will not be published. Required fields are marked *