Практика Shadowing: Why Small Luxuries Thrive During Recessions (The Lipstick Effect) - Изучайте разговорный английский по видео

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Today we're diving into the concept of the lipstick effect.
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So, what exactly does the lipstick effect mean?
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In simple terms, the lipstick effect refers to how consumers still spend money on small indulgences, like premium lipstick, even during tough times,
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such as recessions or personal financial struggles.
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It's the idea that while people may not be able to afford big luxury items, they still find a way to treat themselves to smaller affordable luxuries.
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But why does this happen?
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It's rooted in something economists call the income effect.
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When times are hard and incomes fall, people often forego purchasing expensive goods, but they're still willing to buy little things that make them feel good,
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even if they can't splurge on bigger purchases.
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So, instead of buying a luxury car or vacation, they might buy a new lipstick, a coffee, or go out for a cheap night at the movies.
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For businesses, especially those selling these small luxury items, the lipstick effect can be a great thing.
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Brands like Estee Lauder or even fast casual restaurants can do relatively well in economic downturns
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because people still find the cash to indulge in these small treats.
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It's about creating a sense of normalcy and escape, even if it's just for a moment.
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The lipstick effect also applies to things like cosmetics, which can help people feel more confident.
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People may spend more on these goods to enhance their appearance, hoping it gives them an edge in securing or keeping a job.
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However, it's not all perfect.
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While the lipstick effect makes sense as an economic indicator, it has its drawbacks.
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For one, tracking sales data for small luxury items like lipstick on a regular basis is challenging.
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The US Bureau of Economic Analysis only releases quarterly data, which makes it difficult to use the lipstick effect for predicting economic downturns in real time.
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Additionally, if the economic downturn is severe enough, even small indulgences may be cut from budgets.
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When people are struggling more than usual, they might give up even their usual luxuries like lipstick or coffee. So
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when did the lipstick effect become a recognized economic theory it
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was first described by economist juliette shaw in 1998 in her
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book the overspent america she observed this trend during past recessions and identified
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that an example of the lipstick effect is easy to spot
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during tough times people might still purchase lipstick a cup of coffee
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or even movie tickets these purchases allow them to maintain some sense of normalcy and self-care, even when things aren't going well financially.
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In the end, the lipstick effect highlights how small luxury items maintain their demand, and if the economic situation gets really bad,
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people might stop spending altogether, rendering the lipstick effect less predictable.

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