What is the "lipstick effect" in the beauty industry?

The lipstick effect refers to consumers' tendency to continue purchasing small luxury items like lipstick even during economic downturns. This phenomenon gives beauty and personal care companies a degree of recession resistance, as people often maintain their self-care routines even when cutting back on larger expenses. This is why beauty stocks often show resilience during challenging economic periods.

How does social media impact beauty companies' success?

Social media platforms—especially TikTok and Instagram—can create overnight demand for beauty products through viral content and influencer recommendations. When a product "goes viral," companies can experience sudden sales surges and brand awareness that traditional marketing could never achieve at the same cost. Beauty companies that effectively leverage social media trends and build digital communities often see accelerated growth and customer acquisition.

What is "clean beauty" and why is it important for investors?

Clean beauty refers to products formulated without ingredients considered potentially harmful to health or the environment, while emphasizing sustainability and ethical practices. This growing movement reflects changing consumer preferences, with many shoppers willing to pay premium prices for transparent ingredient lists, cruelty-free testing, and eco-friendly packaging. For investors, brands positioned in the clean beauty space often capture higher margins and attract loyal customers, potentially leading to stronger long-term growth.

What does "brand loyalty" mean in the beauty industry?

Brand loyalty in beauty refers to consumers' tendency to repeatedly purchase products from brands they trust rather than switching between alternatives. Once customers find products that work for their skin or appearance, they often become reluctant to experiment with alternatives, creating reliable, recurring revenue streams for companies. This loyalty is particularly strong in categories like skincare, where results build over time, and fragrance, where scents become part of personal identity.

15 handpicked stocks

Self-Care & Confidence

Invest in the companies behind the powerful daily rituals that millions can't live without. These carefully selected beauty and skincare stocks blend established global leaders with innovative disruptors, all benefiting from famously loyal customers who drive consistent, recurring revenue.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17