Sweet things – confectionary providing treats to counter economic stress

For at least the last six years, sales of most consumer goods items in the UK have been impacted by sustained volume decline, a consequence of rising prices, falling real incomes and changing shopper behaviour. Surprisingly, however, one of the major exceptions to this trend has been confectionery: between 2006 and 2011, confectionery prices rose by 42% ¹ and yet over the same period at-home consumption rose by 9% ².

There are many possible reasons for the durability of confectionery sales in the face of rising prices, which appears to defy the usual law of demand. Improved display, increased marketing spend, product innovation and other factors may all play a part, but psychological drivers may also be important.

For many shoppers, confectionery delivers emotional, as well as nutritional benefits – it delivers an affordable, accessible ’boost’ ... precisely the sort of treat that shoppers might reach for at times of economic stress.

The ‘lipstick effect’ – people turn to cosmetics in tough times

Confectionery is not the only product to see a sales uplift during periods of economic pressure. Anecdotal evidence suggests that sales of some cosmetic items see uplifts at times of national stress – the so-called ’lipstick effect’ ³. The ‘lipstick effect’ - if it can be isolated from changes in the market for cosmetics – may reflect a desire for an inexpensive personal indulgence when times are hard, but some researchers suggest that more complex psychology is at work.

A paper published in the US in 2012 by the Journal of Personality and Social Psychology explored the ’lipstick effect’ experimentally and found, for the first time, good evidence for it ⁴. In tests, young women reading gloomy economic news indicated an increased desire to purchase beauty-enhancing goods (i.e. form-fitting dresses and cosmetics), while desire to purchase other goods was reduced. No such change was detected in young men. Further tests demonstrated that increased interest in beauty-enhancing goods was directed towards high-priced items rather than cheaper equivalents.

These changes in preference appear to be counterintuitive. Boffins believed this behaviour to be associated with increased urgency and importance around mate selection during difficult economic conditions, though this may not be registered consciously by the buyer.   If the function of cosmetics is to improve appearance and better-looking women have more chance of attracting a mate with large financial resources, then spending on cosmetics during recession periods ceases to be an indulgence and becomes an investment.  

This fascinating research does, however raise a number of questions:

• As women become more economically powerful, will young men begin to display a similar ’lipstick effect’, investing in their attractiveness in the hope of winning a partner with plentiful resources?
• How do women behave once they have a permanent partner? Does spending decline or do they continue to invest in order to retain their desirable mate?
• If purchase of cosmetics, clothing and other beauty-enhancing items is an investment in mating success, how do women gauge the effectiveness of this investment?

The value of beauty

It is not just in mating that physical attractiveness can create economic advantage. Many studies have demonstrated that beauty can deliver a financial ’edge’ in the workplace. Measuring beauty in scientific terms is not easy, but several methods are available, mostly using panels of ’judges’ to score or rank individuals.

A 2011 study by Professor D Hammermesh – one of the pioneers of ’pulchrinomics’, the economics of beauty - aims to place a value on good looks ⁵. Men with above-average looks enjoy a 17% pay differential versus those with merely average looks. For women, the ’beauty premium’ is 12%; more homely individuals suffer a ’beauty penalty’. Over a lifetime at work, the cumulative impact of these differences is considerable.

Other aspects of physical appearance – above average height ⁶, healthy weight ⁷ and even number of teeth ⁸ – have also been associated with more favourable workplace outcomes, for men and women. (Note that all of the studies quoted in this article are very recent and come from nations with well-developed anti-discrimination law). Although it is not always clear what mechanism is operating, the implication is very clear: for both men and women, expenditure on improving personal appearance may be seen as an investment rather than an indulgence.

Beauty in-store  

So, there is good reason to believe that beauty ranges can continue to deliver growth for retailers, even in a period of recession or economic downturn.

With this in mind, UK retailers continue to invest in developing attractive stores and compelling ranges. Good examples can be seen at Asda in Worcester, Tesco Extra in Woolwich and Waitrose at Canary Wharf.

Improved store designs encourage shoppers to linger and browse, while design cues taken from specialist retailers (e.g. department store concessions) express expertise and add credibility to ranges. Retailers are also investing in developing product ranges, often using exclusive brands such as Les Cosmetiques (Carrefour) and Treacle Moon (Tesco). These brands have been launched with their own look and feel, creating distance from the host retailers; they are not positioned as cheap alternatives to leading brands.

This is important since the research by Hill et al suggests that price is not necessarily a key driver of the ’lipstick effect’ – the main force at work is the assumed effectiveness of the products in enhancing beauty and, ultimately, in improving access to resources. For the owners of established cosmetic brands, the emergence of retailer-owned alternatives represents a direct competitive challenge. At the same time, however, retailers offer an increasingly important route-to-market in that shoppers continue to visit food and consumer goods stores even during times of economic difficulty, when they might steer clear of other general merchandisers. Also, food retailers have proven successful in taking share of a wide range of non-core markets including, critically, clothing. If consumer goods retailers can be credible, popular and successful fashion retailers then there is surely no reason why they cannot sell cosmetics effectively, especially as they develop their online presence.

For cosmetic brand owners, it is hard to imagine any future which does not involve a close, progressive relationship with food and consumer goods retailers.

James Walton,

IGD’s chief economist

Sources:

1. Retail Price Index, ONS, measure DOAW, change for Jan 2006 to Dec 2011
2. Family Food Survey, DEFRA, measure 350355, change for 2006 to 2011
3. Seattle Times, 09^th Sep 2010
4. Hill SE, Rodeheffer CD, Griskevicus V, Durante K & White AE (May 2012). Boosting Beauty In An Economic Decline: Mating, Spending And The Lipstick Effect. Journal Of Personality And Social Psychology
5. Hammermesh D (August 2011). Beauty Pays: Why Attractive People Are More Successful. Princeton University Press
6. Case A, Paxson C (May 2006). Stature And Status: Height, Ability And Labor Market Outcomes. NBER Working Paper 12466
7. Lundborg P, Nystedt P, Rooth DO (February 2010). No Country For Fat Men: Obesity, Earnings, Skills And Health Amongst 45,000 Swedish Men. IZA
8. Glied S, Neidell M. The Economic Value Of Teeth. NBER Working Paper 13879