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HomeminewsThe Impact of the Lipstick Factor and Trading Down

The Impact of the Lipstick Factor and Trading Down

As the recession started to bite in the U.S. early last year, lipstick sales went through the roof. Wall Street kept a close eye on ‘the Lipstick Factor’ as it is one of the indicators of hard times.

Subsequently, the fact sales at L’Oréal were AUD$5.7 billion in the first quarter of 2008, well ahead of the same period the year before, wasn’t surprising.

This reflects the ideology that in potentially difficult times, women still want to look good in order to feel better about themselves, and to feel better about life in general. During a recession, women and men have a tendency to spend money on a product that brightens their life, improves their condition or lightens their load. This might be a small thing like lipstick for women or a bottle of wine for men. In fact, it applies to any size or price product if it makes us feel good. Hence the concept of ‘retail therapy’.

For what it is, good quality lipstick is expensive. Admittedly, it’s a lot cheaper than a Louis Vuitton handbag or a new outfit from David Jones. A product such as lipstick provides a woman with an instant ‘feel-good factor’.

When the market is down, and the mood is gloomy, people need a pick me up. Most of us aren’t going to let the problems of the world rob us of simple pleasures like lipstick … or eyewear.

Sunshades Sales Record

As the recession sets in locally, one of Australia’s leading eyewear companies, Sunshades Eyewear, roars ahead and is about to post a record year.

Managing Director, Rodney Grunseit says it has a lot to do with the impact of ‘the lipstick factor’.

“Our eyewear sells across the board. We don’t only stock premium eyewear or only sunglasses or only budget specs. We manufacture and distribute eyewear at all price points to 12 industry channels across the board; not just the optometry industry, but to retailers, surf shops, clothing stores and next year, pharmacies.

“This year we’re heading towards our most successful year on record.

“Look at this … in 1991 our sales were at AUD$2m p.a., they jumped around for a number of years and today … this year, we’re about to post AUD$25m in sales. We have thrived during this time because people are still buying eyewear … and this doesn’t include the Cancer Council range or Polaroid. They won’t hit the market until July this year. We expect these sales to take the company’s turnover to AUD$35m.

“Consumers are not buying eyewear from the premium end, they’re buying affordable eyewear. Oroton is going through the roof,” says Grunseit.

Trading Down

The success of Sunshades during the recession also reflects the growing trend of consumers worldwide to “trade down” to lower priced products from retailers that consumers perceive to provide greater value.

In the U.S., Wal-Mart, the world’s largest retailer, in the first quarter of this year, reported a 17 per cent growth in store traffic from new customers, whose total shopping trip was 40 per cent higher than the Wal-Mart average.

In Australia, consumers are exhibiting the same behaviour, with Big W seeing a rise of 6.7 per cent in sales in the first quarter of 2009, compared to the same time last year; while the high-end retailer David Jones saw a drop of 10.8 per cent during the same period.

This year, Sunshades value and mid-range eyewear has been walking out the door with retailers. At clothing retailer General Pants Co., their Le Specs range is the number one seller.

Economists predict the trend of “trading down” to continue for the next 12 months. This bodes well for manufacturers like Sunshades.

“Our target for the next three years is double digit growth and we think we can do it.

Everyone in the team is on board and I don’t make a secret of our turnover with the staff,” says Grunseit.

“This is a time of great opportunity. We have increased our staff numbers enormously. We’ve put on more customer service staff, more designers, more sales reps … up to 15 people to cover pharmacies. Next year is going to be an enormous year for Sunshades.

“Customers can rely on us. While other companies are cutting costs and pulling back on instore point of sale material, we’re going forward. We’re focusing on instore promotions and providing optometrists with light boxes and good point of sale material.”