Fragrance emerges as new “lipstick effect” in treat-driven economy

Consumers are shifting away from the traditional “lipstick effect” and toward fragrance, boosting their moods with scents as budgets tighten. 

The lipstick effect, also known as treatonomics, is an economic indicator describing how consumers cut back on major purchases while increasing spending on small indulgences during periods of economic uncertainty. When prices rise, shoppers spend more money on goods that make them feel good, especially cosmetics. 

“Today’s environment is shaped by treatonomics. Consumers seek small, meaningful pick-me-ups, and that is where little luxuries like beauty shine,” Amaury de Vallois, Coty’s executive VP for the UK, US, Canada, and Australia, tells Personal Care Insights.

“Over the past years, we have seen a clear evolution of the traditional lipstick effect into a fragrance effect: people choosing scents as their go-to emotional lift. Fragrance delivers the strongest return on mood for a manageable spend.”

People turn to beauty

The term lipstick effect was conceptualized by Leonard Lauder of Estée Lauder in 2008, after observing sales spikes of lipstick following the 2001 terrorist attacks in the US. However, it can be traced back to the Great Depression of the 1930s, when cosmetic sales also increased.

Beauty remains a strong category even during uncertain economic times, as consumers continue to seek personal indulgence during difficult periods.

Earlier this year, Personal Care Insights reported that despite global economic turmoil, the cosmetics industry is delivering strong financial results.

“Across our markets, it’s clear that beauty, particularly fragrance, remains highly resilient because it plays both an emotional and functional role in consumers’ lives,” says de Vallois.

He believes Coty’s olfactive experience and patented technologies position the company well for today’s “treat-driven” economy.

Feel-good fragrance and cosmetics

De Vallois explains that since the COVID-19 pandemic, fragrance has been Coty’s most resilient category, driven by consumer desire for high-impact, comforting, and mood-boosting scents.

“In uncertain moments, people gravitate to trusted brands that offer quality and emotional uplift.”

Coty said its fragrance collection for Adidas last year is scientifically proven to elicit positive emotions. Last year, Coty launched a fragrance collection for Adidas, and said it is scientifically proven to elicit positive emotions. 

Coty’s fragrance portfolio spans price points from US$5 to US$500, positioning the company to meet a wide range of consumers’ demands.

He also highlights that maintaining versatility during macroeconomic pressures allows the company to launch “high impact” products.

“Treatonomics tells us that consumers reach for small luxuries, so we prioritize formats and price points that deliver a premium sensory experience. Today, that means leaning into fragrance and scenting, dialing up long-lasting performance and emotional payoff, and making sure there is a compelling way in for every consumer.”

“We see consumers are increasingly turning to fragrance as their primary mood-boosting category. Scent delivers an immediate emotional shift, which is especially relevant in today’s environment.”

Skin care and color cosmetics are also benefiting, driven by a desire for comfort, routine, and feel-good moments, he says.

From an industry perspective, Coty is focusing on delivering premium value. “Consumers still want to trade up, but they expect proof that the premium price is worth it,” says de Vallois.

“We protect the aspiration of our brands while offering smart entry points. To predict these trends, we rely on our proprietary, first-party consumer insights and our AI-powered Coty Trend Compass, which connects millions of social, cultural, and retail signals.”

This allows Coty to gain early visibility into shifting behaviors, to adjust its product assortment, and meet consumers’ needs.