Is retail therapy during a cost-of-living crisis bad?
By
- Replies 0
The cost of living is a big burden for Aussies these days—but if you were to ask for advice, you'd likely get the same response every time: Look after your finances and don't let yourself frivolously spend.
It sounds sensible—but it's not always so easy in practice. When the going gets tough, some may want to indulge in a bit of 'retail therapy'—and surprisingly, that might not be the wrong call.
They call it retail therapy for a reason—and not just because it's a clever marketer's catchphrase.
According to economist Jessica Rozen in her opinion piece in The Guardian, anecdotal evidence has long suggested that women seem to spend more on cosmetics during economic depression.
A behavioural trend observed in the US in the Global Financial Crisis (GFC) between 2007 and 2009 found that incomes that dropped by 10 per cent saw spending on lipstick drop by just 0.5 per cent.
In comparison, incomes that dropped by 10 per cent pre-recession saw lipstick purchases dip by 3.1 per cent.
Data from illion, a credit risk company, indicates that during the 2020 COVID-19 recession, weekly sales of cosmetics were 1.5 times higher than they had been in January of 2019—peaking at a whopping 203 per cent of January 2019 levels in July 2020.
Rozen said this strange phenomenon suggests people are doing what some describe as 'girl maths': doing extreme mental gymnastics to justify spending.
‘Girl maths’ is a term coined recently to explain things like spending an extra $20 to get free shipping instead of spending less and forking out an $8 shipping fee, or reasoning out that a half-price bargain is money saved rather than money spent.
Despite the name, this process of rationalisation has no actual ties to gender. People rely on purchasing heuristics to make our lives easier, and men also make similar choices, based on this odd logic.
Men also spend on other non-essential things like—gaming and drinks, which also rose during COVID-19, and the numbers haven't come back down since.
What could be more likely is that in times of economic hardship, people turn to small luxuries to feel good.
After all, the bigger things they might typically splurge on, like holidays and nice suits, have become out of reach due to changing income levels.
Marketers refer to this as the 'Lipstick Effect': While not able to afford the big, lavish experiences they normally would, people might find a great deal of pleasure and solace in buying items that won't stretch the budget too much, such as fancy linen sheets, avocados on toast—or yes, even designer lipstick.
The fact that these items don't really cost much when compared to the level of pleasure they bring? Well, it's enough to make it all feel like a slice of heaven, according to Rozen.
Interestingly enough, in terms of cosmetics, there might be more to spending during cost-of-living crises than meets the eye. A study conducted in Shanghai suggests that these beauty products may also improve women's chances of professional advancement during tough times.
This means that spending a small sum of money—say, the $50 spent on a tube of luxury lipstick—might just be a sensible economic decision in the face of changing income levels.
After all, these purchases may not only help put your mind at ease during trying times, they could also offer you something valuable in return: increased earning power in the future.
At the end of the day, Rozen stressed that there's no doubt that industry manipulation might be afoot when it comes to spending, and savvy shoppers don’t always need to ‘buy into the hype’.
While some truly bizarre mental gymnastics do go on in the expenditure habits of consumers, it's just as likely that what we might consider 'irrational' spending could actually be entirely rational behaviour: purchasing something inexpensive for the sake of it making you feel good—without breaking the bank—and potentially even offering future financial gain.
If you're over-spending on things you don't actually want, need or value, it's worth taking a look at the numbers and thinking twice before forking out the cash.
On the flip side though, if you're in a position where you have all bases covered—rent, utilities, and the like—and you can afford to stretch the budget by spending a small sum of money on something that truly lifts your spirits—well, it's money well spent after all.
What do you think of this story? Let us know in the comments below!
It sounds sensible—but it's not always so easy in practice. When the going gets tough, some may want to indulge in a bit of 'retail therapy'—and surprisingly, that might not be the wrong call.
They call it retail therapy for a reason—and not just because it's a clever marketer's catchphrase.
According to economist Jessica Rozen in her opinion piece in The Guardian, anecdotal evidence has long suggested that women seem to spend more on cosmetics during economic depression.
A behavioural trend observed in the US in the Global Financial Crisis (GFC) between 2007 and 2009 found that incomes that dropped by 10 per cent saw spending on lipstick drop by just 0.5 per cent.
In comparison, incomes that dropped by 10 per cent pre-recession saw lipstick purchases dip by 3.1 per cent.
Data from illion, a credit risk company, indicates that during the 2020 COVID-19 recession, weekly sales of cosmetics were 1.5 times higher than they had been in January of 2019—peaking at a whopping 203 per cent of January 2019 levels in July 2020.
Rozen said this strange phenomenon suggests people are doing what some describe as 'girl maths': doing extreme mental gymnastics to justify spending.
‘Girl maths’ is a term coined recently to explain things like spending an extra $20 to get free shipping instead of spending less and forking out an $8 shipping fee, or reasoning out that a half-price bargain is money saved rather than money spent.
Despite the name, this process of rationalisation has no actual ties to gender. People rely on purchasing heuristics to make our lives easier, and men also make similar choices, based on this odd logic.
Men also spend on other non-essential things like—gaming and drinks, which also rose during COVID-19, and the numbers haven't come back down since.
What could be more likely is that in times of economic hardship, people turn to small luxuries to feel good.
After all, the bigger things they might typically splurge on, like holidays and nice suits, have become out of reach due to changing income levels.
Marketers refer to this as the 'Lipstick Effect': While not able to afford the big, lavish experiences they normally would, people might find a great deal of pleasure and solace in buying items that won't stretch the budget too much, such as fancy linen sheets, avocados on toast—or yes, even designer lipstick.
The fact that these items don't really cost much when compared to the level of pleasure they bring? Well, it's enough to make it all feel like a slice of heaven, according to Rozen.
Interestingly enough, in terms of cosmetics, there might be more to spending during cost-of-living crises than meets the eye. A study conducted in Shanghai suggests that these beauty products may also improve women's chances of professional advancement during tough times.
This means that spending a small sum of money—say, the $50 spent on a tube of luxury lipstick—might just be a sensible economic decision in the face of changing income levels.
After all, these purchases may not only help put your mind at ease during trying times, they could also offer you something valuable in return: increased earning power in the future.
At the end of the day, Rozen stressed that there's no doubt that industry manipulation might be afoot when it comes to spending, and savvy shoppers don’t always need to ‘buy into the hype’.
While some truly bizarre mental gymnastics do go on in the expenditure habits of consumers, it's just as likely that what we might consider 'irrational' spending could actually be entirely rational behaviour: purchasing something inexpensive for the sake of it making you feel good—without breaking the bank—and potentially even offering future financial gain.
If you're over-spending on things you don't actually want, need or value, it's worth taking a look at the numbers and thinking twice before forking out the cash.
On the flip side though, if you're in a position where you have all bases covered—rent, utilities, and the like—and you can afford to stretch the budget by spending a small sum of money on something that truly lifts your spirits—well, it's money well spent after all.
Key Takeaways
- Despite economic hardship and cost-of-living crises, consumers continue to spend money on what may seem like irrational purchases, including non-essential items.
- Anecdotal evidence shows that women tend to spend more on cosmetics during economic downturns, a phenomenon known as the lipstick effect; during the COVID-19 recession, cosmetic sales in Australia were consistently 1.5 times higher than they were in January 2019.
- This spending behaviour can be considered rational economic decision-making, as small indulgences can substantially boost a person's mood, especially during tough times.
- While some spending behaviours may still appear frivolous or wasteful, once all essential bills and costs are covered, the author suggests that indulging in a little luxury can be worth it for personal happiness.
What do you think of this story? Let us know in the comments below!