'Lipstick effect': Spending on beauty aids picks up - East Valley Tribune: Business

'Lipstick effect': Spending on beauty aids picks up

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Posted: Monday, April 18, 2011 4:50 pm

When the recession hit, pharmacist Joelle Blasig made a trade-off. She would cut back on eating out but wouldn't give up her $65 hair treatments at the Progressions Salon at the Mall of America in Bloomington, Minn.

"I started going gray at 16 and ... this is something I'd rather spend my money on than going to eat out," said Blasig, of Eagan, Minn., as stylist Sandra Bethke dabbed Aveda Spicy Walnut hair dye onto her roots.

Stories like Blasig's make up the sturdy pillars that support the $50 billion U.S. beauty industry, which is once again growing after some difficult years.

Today, Minnesota's Aveda stores and salons, Regis Salons and hundreds of other beauty firms report stronger-than-expected sales, despite three years of economic turmoil.

The Professional Beauty Association says the beauty retail industry is on schedule to reach $59 billion in 2012 (the association wouldn't share current-year data). That's up from $43 billion in 2006, the last full year before the recession hit.

Economists call it "the lipstick effect." The phenomenon occurred throughout the Great Depression of the 1930s and during every recession since. Financially hobbled shoppers may not buy cars or diamonds, but they still indulge in small guilty pleasures -- lotions, makeup, hair dyes, gels and cuts, colognes and manicures.

During the downturn and lackluster recovery, budget-conscious customers like Blasig traded down. They bought smaller, cheaper products, hit salons less often or gave up movies and restaurants in order to stick with beloved beauty brands and habits. As a result, beauty companies are recovering quickly from the downturn.

"It's counterintuitive," said Ken Goldstein, economist for the Conference Board, which publishes the U.S. Consumer Confidence Index. "In some cases, things are so bad and so tough that the consumer can't go on vacation. She can't buy a dress. ... But at least she can buy some lipstick."

At the Progressions Salon, customer Shelley Raebel heartily agreed. She was getting two-tone highlights with foils for more than $100. "People will give you the once-over. As a woman, you need to be presentable. That won't ever change," insisted Raebel.

Dave Hopkins, a marketing professor at the University of Minnesota's Carlson School of Management, said women and men find ways to splurge.

"It's like the coffee thing," he said, noting that java junkies cut back on $4 lattes during the recession. "People will sacrifice on other things to still maintain that sense of luxury," Hopkins said. "They still want that indulgence."

The lipstick effect exists for men, too, Hopkins said. But it's usually much more tame, with purchases tied to hair dyes, cuts or even Botox for aging baby boomers.

Men represent less than 25 percent of the U.S. beauty industry, according to estimates. Their recessionary splurges often included briefcases, rings and cufflinks and small electronic gadgets, Hopkins said. As a result, the beauty industry mostly looks to women for a strong comeback.

Customer loyalty has proved crucial to the industry as unemployment topped 10 percent in 2009 before falling gradually to 8.8 percent in March. During the downturn, industry revenue "was almost flat, but it's been on the rise," said Brad Masterson, spokesman for the Professional Beauty Association. A recent survey of 750 U.S. salons and barbershops found customer traffic up for the fifth consecutive quarter.

In a separate study, market research firm NPD Group found that sales of spendy department store creams, makeup and fragrances jumped 4 percent to $8.4 billion last year.

Two key trends prevented disaster. Baby boomers are getting older. And desperate job seekers are determined to look their best so they can land full-time jobs and pay the rent. As a result, "non-essentials" like lipstick became essential, said economist Goldstein.

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