Ragged Riches

As a person who presents female, there are few things that tickle me as much as a nicely arranged makeup stand at the local mall. It’s a beautiful thing, really. All those nice little lipsticks and eyeshadows, just ready to be picked up and used as war paint…

You might be wondering why I’m prattling on about lipstick. It’s simple: lipstick holds a massive little secret. Innocuous as those cute little shiny tubes of lipstick are, they offer insight that could shock you.

Lipstick purchases are an economic predictor that every single content creator should be watching.

Let’s talk about it.

What is the Lipstick Index?

If you’ve taken an economics course, you’ve likely heard about the Lipstick Index. If you haven’t, let me clue you in. Actually, I’m going to just snag this excerpt from J.P Morgan’s site to do it for me:

“The lipstick index posits that during economic downturns, sales for “affordable luxury” items such as lipstick, nail polish and perfume increase.

This phenomenon is a theoretical financial indicator used to forecast bear markets and recessions. The theory goes that in a gloomy economy consumers will curb discretionary spending but continue to buy lipstick, perfume and other small, affordable luxury goods. If sales of lipstick are growing, investors can, according to the theory, expect an economic downturn.

With inflation still high, buying a home, purchasing a new car or going on vacation has become cost-prohibitive for countless American households – but buying a $30 Dior lip plumper hasn’t. Plus, affordable luxury purchases can have a positive psychological impact during stressful times – they can make you feel and look better in a period marked with stress and anxiety.”

Simply put, lipsticks and other similar cosmetics have a certain air of “affordable luxury” that make them a nice splurge for women. The idea is that women will splurge on smaller treats when they can’t afford the bigger ones—and that their spending habits can potentially predict an economic downturn.

Officially, the Lipstick Index has not been proven. Groups have been saying it’s become increasingly unreliable, especially since the way that lipsticks have become an increasingly pricey splurge since the Lipstick Index was first posited.

A luxury lipstick in the 1980s might have cost $20, despite inflation making that buying power equal to roughly $55. What most people forget is that our wages are roughly the same from that era.

$55 is no longer an “easy, affordable luxury,” is it? Well, most lipsticks are between $7 to $25 a pop, even today. And those are far more affordable. I ought to know. I bought a bunch for my upcoming photo shoots.

Though most economists are claiming that the Lipstick Index is dead due to a lack of “affordable luxury splurges,” I’m not so sure. You see, the Lipstick Index might matter now more than ever before.

We’ve been looking at the Lipstick Index the wrong way.

The Lipstick Index was always used as a way to measure a chance of an economic downturn, but that’s not what it’s really showing. When shit really hits the fan, you don’t see people snapping up nail polish and lipstick. You see them saving money!

But the Lipstick Index is a reliable display of how much spending money peple have. This is important because most small businesses, including content creators, are making their empires through the sale of affordable luxuries. Think about it:

• Most paid subscriptions to content sites run from $1 a month to $15 a month, including streaming services.
• Most peoples’ budgets are fairly tight as a result of the tariffs, but we don’t really know much about how the average American is handling things.
• It’s easier to sell small-ticket items (like $5 a pop) than it is to sell things at $500 a pop.

Whether you realize it or not, if you’re a content creator or a small business owner, you’re likely just a different “type of lipstick” in the eyes of the economy. Your product is a small treat, in one way or another.

We’re all vying for the extra spending money in the pool. The Lipstick Index is a good gauge as to how much people can afford to splurge on things they don’t necessarily need.

If you have a product around the same price as a lipstick, the Lipstick Index can show you how ripe your market is.

That’s my theory, anyway.

But how does your product measure up against lipstick?

So, here’s my theory: the more similar to lipstick your product or service is, the more reliable the Lipstick Index is. And no, I’m not just talking about makeup.

The Lipstick Index can be a good indicator of your potential pool of splurging clients if…

• Your product or service offers them a “boost” that doesn’t quite count as necessary in the eyes of mainstream America. That “boost” can be entertainment, a boost in self-esteem, convenience, or a feeling of being trendy. With lipstick and other similar products, you get a “boost” in your self-esteem.
• A small section of the country can call it a tax write-off due to its benefits. For lipstick, this would be models and makeup artists. For something like a paid content service, it could be for researchers, journalists, other content creators, etc. Basically, this measures how useful your product is. The more useful (yet splurgy) a product is, the more likely it is that people will find an excuse to keep a small budget for it on a monthly basis.
• It’s under $100 in price. I notice that the $100 mark tends to change how people view their purchases. In very cash-strapped markets, I’d drop this to under $50 in price.

The Lipstick Index’s classical prediction stopped working because real estate and other major purchases ballooned in price, to the point that many simply wrote off buying a home altogether. However, we forgot something about humanity.

Those people still buy little things to make them happy.

For example, Millennials are struggling to buy homes. But you know what? They still buy bougie $20 avocado toast meals at fancy cafes because it makes them feel like life is tolerable, even when they have to write off the idea of owning a house.

So rather than view the Lipstick Index as a warning sign of impending doom, maybe we better see it as an uplifting sign. It’s a sign there’s gold in them thar hills!