Buying Cosmetics in the Recession:

The interesting thing about a recession is that this is the time you learn what really matters to people, where they'll spend the few dollars they have left, when they'll make a major purchase, and how they view their prospects. Some people have stopped buying anything except essentials. But what exactly is an essential varies from person to person. Take cosmetics, for example. Can the ladies really get by without a new lipstick or face powder or eyeliner? And what about hand cream or a favorite fragrance? According to the so-called "lipstick index," a term from former recessions, women never give up on basic cosmetic purchases, no matter how big a dive the economy takes.

Beauty products manufacturers, including major players like Paris-based L'Oreal and New York City companies Estee Lauder, Revlon, and Max Factor, have noted a significant slowing in sales over the last few months. Generally speaking, department stores and drug store outlets are destocking, that is, not ordering additional new items because current inventories remain very high due to the unexpectedly sharp and sudden fall-off in demand. Lower priced products are doing somewhat better than the specialty and high-end skin-care, hair-care, and perfume commodities. The usual marketing ploys continue, with pharmacy chains and discount stores featuring sales to entice customers and department stores continuing to offer free items when a certain amount has been purchased.

L'Oreal, one of the top cosmetics companies in the world, is perhaps best known for its hair-coloring products, usually advertised with the tag line, "because you're worth it," a phrase soon to be heard from newly designated spokeswoman, the actress Elizabeth Banks. Although the company's Lancome luxury items are not selling well at the present moment, its mass-market name-brand Maybelline is apparently thriving. Switzerland-based food industry giant Nestle has a large stake in L'Oreal; later this spring Nestle will determine whether to sell or divest its interests in the French concern whose other large shareholder is the Bettancourt family. L'Oreal's recent decision to pull advertising from the Academy Awards broadcast may be related to declining profits or may be, as some industry observers believe, strictly based on targeted marketing concerns.

Estee Lauder, producer of Clinique makeup items which have undergone stringent allergy testing and of the Origins brand which focuses on all-natural ingredients, continues to research, manufacture, and market new items, such as the TurboLash mascara wand, but also looks to cutting costs and jobs while waiting out the business downturn. Its fragrance "Beautiful" remains popular in department store across the U.S.

Max Factor, owned by household products conglomerate Procter & Gamble, celebrates its centenary this year. Its current spokesperson is supermodel Gisele Bundchen. Academy-award winner Jennifer Connelly is the latest spokesperson signed by rival cosmetics manufacturer Revlon. Revlon's signature products remain its line of nail colors and manicure items.

A big question mark for these companies is when customers will return to spending freely on personal beautification. Or could it be that cosmetic goods once thought essential will begin to seem frivolous in the light of a continuing recessionary environment?

"Lip Reading: Cosmetics in the Downturn", The Economist
Christine Haughney, "Even in Tough Times, It Seems, a Person Needs Mascara", New York Times
Scheherazade Daneshkhu and Jenny Wiggins, "Declining luxury sales weigh on L'Oréal", Financial Times
"Estee Lauder profit falls, to cut about 2,000 jobs", Reuters
Marianne Paskowski, "L'Oreal Tells Oscars: You're Not Worth It", TV Week Blog
"Max Factor Celebrates 100 Years of Beauty", PR Newswire
"Jennifer Connelly's Latest Role: Revlon Spokesmodel", StyleWatch/People.com