By Vana Antonopoulou, Director of Content & Community, RLC Global Forum
Leonard Lauder once claimed that when the world gets ugly, lipstick sales go up—and beauty saves the day. It was 2001, post-9/11, and while the markets tanked, beauty counters were booming. Thus, the Lipstick Index was born; a glossy little theory that said when we can’t afford the big stuff, we’ll splurge on small luxuries.
Fast-forward to 2025: inflation’s still lingering, tariffs are threatening to hike prices on everything from foundation to fragrance, and dupe culture has made $8 products look just as good as $80. So, one must ask: Can beauty keep its recession-proof crown?
Too much gloss, not enough cash
Let’s start with the state of the aisle. Walk into any Sephora or scroll through TikTok, and you’re bombarded with celebrity brands, influencer serums, and the latest “dupe” du jour.
In a climate, however, of rising prices and economic anxiety, shoppers are thinking twice before tossing another $60 powder compact into their cart—be it digital or literal.
According to McKinsey, price sensitivity remains high as consumers continue to trade down and chase value. What does that mean for beauty? Prestige is no longer protected. In fact, 84% of European consumers said they’d stick with private label products even if their purchasing power increased. That’s definitely a clear warning shot for high-end beauty banking on loyalty to weather the storm.
Not so recession-proof anymore
Historically, beauty has been the little luxury that thrives when bigger splurges don’t. But the Kearney Q1 2025 Consumer Stress Index challenges that old truism. Consumers may feel slightly less anxious about affording essentials, but not because life is getting cheaper. They’ve already cut back, switched brands, and learned to live with less.
Now, new worries are setting in. Concern over trade tariffs surged from 36% in Q3 2024 to 54% in Q1 2025—a 50% jump. If beauty products are next in line for higher import costs, those little luxuries may start to look like unnecessary indulgences.
And let’s not forget: many of those $42 mascaras come in tubes made in China and applicators shipped from Taiwan. If costs go up, brands will have to choose between shrinking their margins or testing just how much we’re really willing to pay for longer lashes.
Growth, but make it fragile
Yet, it’s not all doom and gloom. Despite economic headwinds, the global beauty industry saw 7.3% year-over-year value growth in 2024, with mature markets like North America and Western Europe posting solid gains of +7.8% and +7.7%, respectively.
But behind the scenes, unit sales are plateauing. Much of the current bump in revenue comes from inflation-driven price increases, not from shoppers buying more. That’s a shaky foundation to build on. And one that casts doubt on how long this momentum can last.
Major beauty brands are experiencing varied performances:
- Estée Lauder reported a 4% decrease in net sales for Q1 fiscal year 2025, with organic net sales down 5%, primarily due to weakened consumer sentiment in China and challenges in Asia travel retail. Still, the company noted strong performance in EMEA and China’s prestige skincare segment, led by La Mer. “We continue to expect the ongoing normalization of growth in prestige beauty, most notably in North America,” stated Fabrizio Freda, President and CEO of the company, citing near-term slowdown in China while attempting to reaccelerate through U.S. retail and Amazon’s premium beauty channel.
- L’Oréal achieved a 3.5% like-for-like sales increase in Q1 2025, totaling €11.73 billion. Growth was driven by strong demand in Europe, especially for high-end fragrances and makeup, offsetting a 3.8% decline in North America.
- Sephora, under LVMH, continued to grow in Q1 2025, even as LVMH’s overall perfumes and cosmetics sales dipped 1% year-over-year. Sephora’s resilience highlights the strength of its in-store business and expanding retail network.
Meanwhile, independent beauty brands are making significant strides:
- Rare Beauty, founded by Selena Gomez, crossed $400 million in net sales in the 12 months ending February 2024. The brand is valued at over $2 billion and is among Sephora’s best-selling brands.
- Rhode, Hailey Bieber’s skincare brand, reportedly generated nearly $200 million in annual revenue within two years of its 2022 launch and has just been sold to e.l.f. Beauty for $1 billion.
These mixed results suggest that the beauty industry may be resilient, but it’s no longer untouchable. Growth now favors brands that are agile, digitally savvy, and tuned to value-conscious consumers.
Where beauty might win
Interestingly enough, resale platforms are emerging as beauty’s quiet side hustle. While it started with fashion, resale of slightly used luxury cosmetics, like fragrances or unopened sets, has grown, giving thrifty beauty lovers another, more sensible way to indulge. Similarly, private-label beauty (once mocked as generic) is becoming a star, mimicking luxury at a fraction of the price.
In addition, digital beauty tech and AI-powered personalization are creating new growth opportunities. Brands like Sephora and Ulta have doubled down on loyalty apps and AR try-ons to keep consumers engaged without pushing them to spend blindly.
And let’s not forget Gen Z, who approach beauty as both identity and activism. While they’re cost-conscious, they’re also ethics-driven, seeking clean ingredients, refillables, and brands that share their philosophy.
Is the Lipstick Index still relevant?
Maybe. But it’s less about lipstick and more about smart, feel-good spending. In 2001, a red lip was an act of economic defiance. In 2025, it’s a choice loaded with questions: Will this last? Is it refillable? Is it actually a smart dupe or just a fad?
The beauty sector can still flex, but its “recession-proof” status is under review. The truth is that beauty has become recession-responsive; it survives not by standing still, but by moving faster, leaning into value, and speaking directly to a savvier, more demanding customer. Consumers aren’t here for empty promises or glossy lip service. They demand ROI: real, tangible value that aligns with their ethics and their wallets. Ignore that at your peril.
