In times of economic downturns, inflation, recession, and financial uncertainty, we usually cut down spending on extravagant purchases like vacations, real estate, tech, and cars. Interestingly enough, while these high-cost expenses decline, beauty sales often remain steady—or even rise—during recessions.
This phenomenon is called the Lipstick Effect—coined by Juliet Schor, an economist and sociology professor at Boston College, in her book The Overspent American: Why We Want What We Don’t Need. She found that during financial hardships, women tend to splurge on lipsticks—small luxuries that offer a taste of indulgence without breaking the bank. Beyond affordability, lipstick also serves as a visible status symbol, easily reapplied in public to subtly signal one’s taste and aspirations.
Today, with the rise of social media, this signaling has gone digital. From “get ready with me” videos to casual storytime clips, reapplying lip products on camera has become second nature—an effortless way to showcase not just a beauty routine, but a curated lifestyle.
These days, it’s impossible to ignore how tight money has become—rising food costs, uncertainty surrounding U.S. trade policies, China’s worsening youth unemployment due to economic downturns, and wages struggling to keep up with inflation have all added to the financial strain. Given these challenges, you’d expect the Lipstick Effect to be in full swing. Yet, some of the world’s biggest beauty conglomerates—Estée Lauder, Shiseido, and Coty—have reported drops in their sales over the past year.
So, is lipstick not as recession-proof as we once thought? What’s behind these companies’ lackluster sales, and how are they responding to the global beauty slowdown? Here, we’ll explore these questions and assess whether these declines are just a temporary dip—or a warning sign that beauty giants can’t afford to ignore.
The Slowdown in Sales
Estée Lauder, which owns beauty brands like MAC Cosmetics, Clinique, Tom Ford Beauty, and its namesake Estée Lauder, plans to cut up to 7,000 employees after reporting a drop in sales in the second quarter of the 2025 fiscal year. They report that revenue has dropped 6 percent from $4.3 billion at the same time last year to $4 billion in the second quarter. Its sales in skincare, makeup, and hair categories all sank by 12 percent, 1 percent, and 8 percent respectively, with only its fragrance category having a 1 percent gain in sales.
Estée Lauder’s losses, coupled with the withdrawal of its financial forecasts, have caused its shares to tank from around $350 a share in 2022 to around $75 a share today. Regionally, Estée Lauder’s sales declined in the Americas by 2 percent, in Europe, the Middle East, and Africa (EMEA) by 6 percent, and Asia-Pacific by a shocking 11 percent—where a sharp downturn in China is frequently cited as a key contributor to the slump.
Estée Lauder isn’t the only major beauty conglomerate to report dismal sales. Coty, which carries brands like CoverGirl, Kylie Cosmetics, Rimmel, and Max Factor, reported a 3 percent decline in its second quarter. Like Estée Lauder, its sales in China dropped by 11 percent in Q2. Meanwhile, its U.S. sales, which make up 40 percent of the company’s total sales, have dropped 7 percent, with its sales in EMEA being the only one to increase by 2 percent.
Both Coty’s prestige and consumer brands were down by 1 percent and 4 percent, respectively. The company’s prestige portfolio accounts for 67 percent of its total sales, and it attributes the decline in sales to the downturn in Asia-Pacific and the sale of the Lacoste fragrance license back to Lacoste. As for its consumer brands, Coty blames the decline in sales on a slump in demand for color cosmetics.
Similar to Estée Lauder, only Coty’s fragrance category grew in sales. “Fragrances of all price points continue to outperform most other beauty categories, which strongly benefits Coty’s business as fragrance accounts for over 60 percent of our revenues and an even bigger portion of our profits,” said Sue Nabi, Coty’s CEO.
Japanese beauty conglomerate Shiseido, which owns brands like NARS, Drunk Elephant, Anessa, and its namesake Shiseido, reported an annual profit plunge of 73 percent, with its operating profit totaling $49.9 million in December 2024, compared to its previous year’s profit at $188 million. While the company experienced an increase in sales in Japan by 10 percent, its sales in China have dropped by 4.6 percent. Its shares are also down by 34.74 percent from last year, with its February 2023 stock at $28.16 now down to $18.31 today.
While L’Oréal, which carries brands like CeraVe, La-Roche Posay, L’Oréal Paris, and Maybelline, experienced a 2.5 percent rise in fourth-quarter sales, it missed analyst expectations of 3.9 percent growth, causing its shares to drop by 4.43 percent from January 2025 to February 2025. The rise in fourth-quarter sales was also a slowdown from its third-quarter sales, which rose by 3.4 percent.
Decoding the Dip
A combination of lagging innovation, disproportionate research and development (R&D) spending, and a weakening Asia-Pacific market—particularly in China—has contributed to the recent decline in sales among major beauty conglomerates.
In fiscal year 2024, Estée Lauder allocated approximately $360 million to R&D, while allocating $3.6 billion to advertising. But while marketing remains a key driver in the beauty industry, evolving shopping behaviors have introduced new challenges. Shoppers are increasingly mixing luxury and affordable products and prioritizing value over prestige.
Despite its significant advertising efforts, Estée Lauder did not rank among the top 10 beauty brands in media impact value (MIV)—a metric that measures the monetary value of social media engagement. On the upside, M.A.C Cosmetics, one of its flagship brands, secured the No. 3 spot, demonstrating the company’s continued strength in digital influence.
China’s Spending Shift
All four major beauty conglomerates—Estée Lauder, Coty, Shiseido, and L’Oréal—have pointed to weak demand in China and a struggling travel retail sector as key reasons for declining sales. Historically, China has been a critical growth market for beauty, fueled by a growing female population, widespread exposure to international brands, and highly brand-conscious consumers.
Young consumers—who were once aspirational luxury shoppers—are now less willing to splurge on beauty products, opting for more practical and cost-conscious choices instead.
But economic pressures have changed consumer behavior. China’s ongoing housing crisis—driven by speculative investments, rising home prices, and a mounting debt crisis—has caused many young consumers to reassess their spending habits. Homeownership is deeply tied to marriage and financial security in Chinese culture, and with property ownership becoming increasingly unattainable, many are prioritizing financial stability over discretionary spending. This has led to a slowdown in luxury beauty purchases, as consumers become more discerning.
China’s youth unemployment rate, which covers people 16 to 24 years of age, has also reached a staggering 21.3 percent. Many young people are also considered to be underemployed, where educated citizens, often with master’s degrees, are unable to find work that meets their experience and have no choice but to take low-paying jobs. As a result, young consumers—who were once aspirational luxury shoppers—are now less willing to splurge on beauty products, opting for more practical and cost-conscious choices instead.
The Crackdown on Resellers
Another significant factor in China’s beauty market slowdown is the government’s crackdown on daigou or professional resellers who buy luxury goods abroad and sell them in China at lower prices.
Luxury beauty sales in Europe are heavily reliant on Chinese tourists. China’s duty-free limit for overseas goods is $700, but customs and border control had been lax up until recently. Not only were tourists able to spend beyond the limit for their personal makeup stash but professional resellers were also able to buy popular beauty products and resell them in China for less than the normal retail price.
But in 2023, China’s General Administration of Customs ramped up enforcement by increasing personnel, implementing random luggage searches, and using data analysis to track suspicious shopping patterns. As a result, daigou resellers now face greater difficulty moving products across borders, contributing to lower sales for beauty brands that once benefited from this secondary market.
The Chinese government has also encouraged domestic tourism as an alternative to international shopping sprees. Hainan, an island province in southern China, has been positioned as a duty-free shopping destination, allowing domestic travelers to claim tax refunds on luxury goods with a duty-free limit of $14,000. Here, too, the government has cracked down on the daigou. In 2024, visitors to Hainan had increased by 8 percent, yet sales have dropped by 29.3 percent. This signifies the success that the government has had in discouraging professional resellers from operating under the table.
While Estée Lauder and L’Oréal support the Chinese government’s crackdown on daigou, they have dealt with the slump in sales as a result of these stricter customs measures. According to the Luxury Tribune, Estée Lauder has estimated that 40 percent of its sales in China come from daigou. Luxury group LVMH, which houses brands like Guerlain and Benefit Cosmetics, has also shown support for the daigou crackdown, even if it meant a 3 percent decrease in net profit from its cosmetics and perfume in 2022. Despite these drops in sales, these brands are aware and understand that this crackdown will better preserve their brands’ integrity.
The 2025 Forecast
After a challenging 2024, major beauty conglomerates are rolling out recovery strategies to drive sales. Estée Lauder hopes to restore growth with their ‘Beauty Reimagined’ strategy, where the first step is to restructure the company to increase agility and drive faster product development.
Coty is banking on its fragrance division to drive sales growth, with its CEO saying, “The strong sell-out growth of our fragrances brands gives us confidence that these headwinds are temporary and we should return to stronger sales growth as we enter fiscal 2026.” Currently, Coty has new product launches in its plans, with brand licenses from Swarovski, Marni, Etro, and Marc Jacobs.
L’Oréal, skeptical about China and Asia’s travel retail market, is shifting focus to the U.S. and acquisitions. “We are in a conquest mode,” says L’Oréal CFO Christophe Babule. “There are plenty of acquisitions that are today being worked on and looked at.”
Lastly, Shiseido announced in November 2024 that they will be enacting their two-year plan to drive sales growth, focusing on eight brands: Shiseido, Clé de Peau Beauté, NARS, Anessa, Drunk Elephant, Issey Miyake, Narciso Rodriguez, and Elixir. The plan includes making a 30 billion yen ($200 million) marketing investment in these brands to become strong players in their main markets. Shiseido also plans to accelerate growth in the Americas, EMEA, and Asia-Pacific while not setting overly ambitious goals for China and travel retail.
Local Beauty Boom—or Bust?
While global beauty giants struggle with declining sales, the Philippine market remains resilient, adapting to shifting consumer preferences and digital trends. In fact, the beauty industry is expected to grow at an annual rate of 2.86 percent from 2025 to 2030, driven by e-commerce, a rising demand for skincare products among young consumers, and influencer-driven trends. Local entrepreneurs are also reshaping beauty perceptions, contributing to the industry’s expansion and positioning the Philippines as Asia’s rising beauty industry wildcard.
Estée Lauder, L’Oréal, and Shiseido have also established strong footholds in the local landscape, engaging a diverse and growing consumer base through targeted marketing and locally tailored product offerings.
That said, whether the global slowdown will eventually take its toll remains to be seen. For now, the industry continues to thrive—but only time will tell if it can sustain its momentum amid shifting global dynamics.
ADDITIONAL REPORTING BY ELAINE NATIVIDAD REYES.
