Just a little bit of luxury – This is how trade profits from the desire of the citizens

The so-called lipstick effect is a well-established term for retail professionals.

Just a little bit of luxury – This is how trade profits from the desire of the citizens

The so-called lipstick effect is a well-established term for retail professionals. He describes, somewhat pointedly, the phenomenon that decorative cosmetics always sell particularly well when crises are approaching their darkest point. The industry wisdom is currently being confirmed impressively. "The lipstick effect works reliably in crisis situations, even now," said Jörg Simon, head of the teleshopping channel 1-2-3.tv, to WELT. "Many customers say to themselves: there's less money in my wallet, but I'll treat myself to something more," he knows from experience.

Men are also affected by this “now more than ever” attitude when it comes to beauty and body care, albeit apparently not with the same intensity. The total turnover of five dozen providers under the umbrella of the cosmetics association VKE increased by a total of 0.4 percent to almost two billion euros in the crisis year 2021. "The result is above the original expectations," says the VKE.

Not only lipsticks were responsible, but above all perfumes, which always account for more than half of the industry turnover. However, the sales revenue for men's fragrances increased more moderately at plus 1.4 percent than for women's fragrances with a comparatively brilliant plus of four percent. VKE was also surprisingly optimistic about the near future, forecasting strong growth in industry sales of around five percent for 2022.

And that despite the fact that there is hardly a more effective sales brake imaginable in the decorative cosmetics sector than the face mask: Whether medical or FFP2, beautiful lips remain hidden. The pandemic stoppers were still mandatory in many places in the first third of the year and could become so again as soon as autumn comes.

But the need to do something good before the crisis hits even harder seems to run deep. "I buy this lipstick simply because it's good for me," Simon interprets the mood of his customers: "The same also applies to accessories, for a nice scarf, the long-coveted purse, the attractive handbag." The man has the overview, because the sales channel 1-2-3.tv from Grünwald near Munich does a large part of its business with cosmetics, fashion and home furnishings.

It has already been shown in the past that bad economic times encourage rather than dampen the need to be perceived as a well-groomed appearance. In the crisis year 2009, for example, the body care and cosmetics industry was surprisingly able to maintain its business level in the general downturn, while decorative cosmetics even grew by five percent. Only 16 percent of women wanted to save on cosmetics, the marketing magazine “Horizont” reported at the time. A few months earlier, the Lehman crash had shaken currencies and brought financial markets worldwide to the brink of collapse.

But the psychological effect of the debacle was similar to today. "Particularly in economically difficult times, caring for the body and using make-up are small luxuries that people continue to allow themselves," said the cosmetics group L'Oréal more than ten years ago - and sounded almost exactly the same as many Market experts today in a situation in which the Nuremberg Society for Consumer Research (GfK) had to report a historic low in its consumer climate index in June with minus 26.2 index points.

But GfK also distills signs of a penchant for small, individual luxuries in the sea of ​​economic gloom from its data. In the case of fully automatic coffee machines, for example, it is said in Nuremberg that April saw a decline in inexpensive entry-level machines. Higher-priced devices, on the other hand, are in greater demand.

According to GfK, the average sales price of the latte and cappuccino robots in April was even eight percent higher than the previous year's level. It is not presumptuous to assume that in this case men played the main role rather than consumers. "Devices over 600 euros recorded a significant increase in sales and device quantity," report the data dissectors.

Such results seem to contradict the appearance that Schmalhans is generally the master chef for consumers in times of crisis. Market analysts from the US company Nielsen have taken a closer look at the customer groups and provide an explanation for the apparent discrepancy. You see an “economic polarization of buyers” as a result of the current crisis.

They divide consumers into four large groups: those who were already economically restricted before the outbreak of the crisis. Those who have recently had to limit themselves. Furthermore, particularly cautious buyers. And finally a relatively large group that does not have to accept any restrictions. This should include the entire civil service and civil service sector, but also many employees of large corporations. According to the January Nielsen study, members of the latter two groups are willing to “pay more for higher quality”.

The Grünwalder sales channel also benefits from an economically comparatively stable audience. "Most of our customers are baby boomers," says Jörg Simon: "Because of the increase in pensions, their reluctance to buy doesn't seem to be as great as it is among younger people."

Pension payments will be increased in July by 5.35 percent in the West and a good 6 percent in the East. Nevertheless, 1-2-3.tv senses the tension in the buyers: food, cleaning supplies and beauty products are selling "continuously at a high level", but future purchasing behavior in the other sectors is now difficult to assess.

This is partly an advantage for the sales channel, since its daily changing offers allow it to react more flexibly to fluctuating shopping behavior than larger chain stores. "We are currently daring to leave gaps instead of stocking up on goods," said Simon.

For the months of September to December, the company has a substantial budget ready to take over clothing from conventional chain stores that has not been sold. "I assume that there are currently very large surpluses of unsold goods in the warehouses," said Simon. He gets "constant offers". "Here we can jump in and help other providers as a sales channel," he announced.

The listed US company iMedia recently took over the Bavarian teleshopping broadcaster with around 120 employees. The German company is of particular interest to the Americans because of its sophisticated technology for actively involving viewers in the sales process by auctioning products.

iMedia boss Tim Peterman spoke to WELT about a "gamification" of the sales process: "The technology of 1-2-3.tv made the gamification of teleshopping possible in the first place. We will use them in several ways in the US,” he announced. So the introduction of websites is planned through which customers are to be activated to bid for hotel rooms, flight tickets or entrance tickets. iMedia is thus in direct competition with industry giants such as booking.com and Expedia. For the time being, however, the offer is only planned for the USA.

The economic crisis in Europe does not upset the American, despite the financial commitment in Germany. "The current situation is challenging, but not unique," he told WELT. In general, sales television, its professional and economic homeland, has always been predicted to end soon: "When I started in the industry 20 years ago, it was said: television is dead and your business model will die with it".

But that "apparently did not happen". In fact: For the year 2021, the German Association of Private Media assumes total sales of a good 2.3 billion euros. Ten years ago it was almost a billion less.

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