By now you probably would’ve heard from economists and Josh Frydenberg (when he isn’t coughing up a lung) that Australia’s economy has taken a big hit thanks to COVID-19 and it’ll take a long time for it to recover. It sounds pretty bad – and it honestly is – but there’s a small silver lining for Australia’s ragged economy after COVID-19 and it’s thanks to a weird little phenomenon called the ‘lipstick effect’.
Speaking of how COVID-19 has affected Australia’s economy, the GOAT team talk about life after lockdown on ‘It’s Been A Big Day For…’ below:
Okay, so what the hell is this ‘lipstick effect’ and how has it affected Australia during all this COVID-19 stuff?
Well the ‘lipstick’ effect is a theory that consumers are more willing to buy less expensive luxury goods when there’s an economic crisis, not unlike what’s happening with COVID-19 right now, since they can’t afford the more expensive stuff.
The theory throws up the idea that while people are less willing to splash out on big, flashy purchases like cars or expensive clothes, they’re more keen to buy smaller, cheaper “luxury” purchases to make up for it.
It is assumed that people will still want to buy nice things during a recession for various reasons like making themselves feel better during tough times. The only difference is that they’ll be spending less money on smaller luxury items, like lipstick.
There’s no real scientific basis to the ‘lipstick effect’ and studies haven’t found a clear correlation between economic recessions and the desire to buy beauty products. Hell, the theory doesn’t necessarily even revolve around lipstick itself and it can be applied to any number of smaller luxury goods, like expensive beer.
So how is this weird theory meant to be saving Australia’s economy after COVID-19? Well saving is perhaps a too optimistic outlook but there are signs that some form of ‘lipstick effect’ is helping to keep certain areas of our economy afloat.
While spending on the whole has dropped dramatically, purchases of sheet masks and sanitiser have reportedly shot up, as well as a big spike on online shopping for beauty products. It could be the ‘lipstick effect’ in action – or it could just mean people in isolation now have more time to really take care of their skin.
It’s not just sheet masks and online shopping either as demand for video game consoles have skyrocketed in Australia when the lockdown rules were implemented. Nintendo Switches were reportedly sold out in most JB Hi-Fi and EB Games stores, and demand only grew higher when Animal Crossing: New Horizons dropped in April.
Speaking of ‘Animal Crossing’, the GOAT team talk about how it’s the biggest thing on Nintendo Switch on ‘It’s Been A Big Day For…’ below:
This demand for sheet masks and video game consoles aren’t going to single-handedly save Australia’s economy after COVID-19 nor does it confirm that the ‘lipstick effect’ is something more than just a theory.
But it does show that people are willing to spend money during these tough times and that’s a promising sign for more economic growth when stores open back up and spending slowly inches its way back to the pre-COVID-19 days.
We’ll have to wait and see how Australia’s economy will ultimately bounce back from this but here’s hoping it’ll start with a fine shade of red lipstick.
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