Luxury Items

Natasha InnesDan Petrie, The Courier Mail, 28 June 2022

No matter how high the cost of living gets, experts say consumers won’t let go of these two luxury items. Could they save us from a recession?

Queensland retailers are hoping a surge in spending at cafes and on cosmetics in 2021 is repeated to ward off inflation fears in the coming 12 months.

According to data compiled by the Australian Bureau of statistics, cosmetics within the toiletries and pharmaceutical category topped $4.5 billion last year, while cafes, restaurants and takeaway food services made $9.6 billion.

Queensland cosmetic industry surges, according to data compiled by the Australian Bureau of Statistics. Graph generated by News Corp data analysis Dan Petrie.
Queensland cosmetic industry surges, according to data compiled by the Australian Bureau of Statistics. Graph generated by News Corp data analysis Dan Petrie.

 

QUT consumer behaviour expert Gary Mortimer said there were two behavioural trends keeping the cafe and cosmetic industry elevated and strong.

The first was the lipstick effect.

“When times are tough, we’re concerned about the cost of living, we’re concerned about fuel prices and energy prices going up, we tend to want to reward ourselves,” Mr Mortimer said.

“So a lipstick, nail polish, and possibly even going out and getting a manicure or a pedicure, just a small cost helps us feel better about ourselves in life.”

Mr Mortimer said the second behavioural trend is habitual purchasing.

“We tend to seek normality and routine when things appear to be out of our control like when you can’t control your energy bill, or the increases in energy costs, fuel price increases, but you can make that decision to have a cup of coffee,” Mr Mortimer said.

“It’s just that routine and regularity that tends to make us feel good.”

Queensland cafe industry surges, according to data compiled by the Australian Bureau of statistics. Graph generated by News Corp data analysis Dan Petrie.
Queensland cafe industry surges, according to data compiled by the Australian Bureau of statistics. Graph generated by News Corp data analysis Dan Petrie.

“The rise of social media, TikTok and also people doing their Zoom meetings could be a factor in this,” Mr Tunny said.

“I think the drivers of demand for coffee and for cosmetics are different, but they both may be resilient to the downturn.

“What you tend to see is that it’s expenditure on those larger items, what economists call ‘consumer durables’, fluctuate a lot within the business cycle.”

Mr Tunny said more-expensive purchases such as a fridge or a TV might be put off, whereas affordable luxuries or more affordable pleasures like coffee and lipstick did not change.

National Retail Association CEO Dominique Lamb said although the cafe and retail industry remain elevated and strong due to the lipstick effect, she did expect many people to tighten their belts.

“Advice to shoppers out there is to make sure that you are budgeting and that you are living within your means, but also remember to shop with those small businesses,” Ms Lamb said.

“Make sure you’re shopping with those Australian retailers because we want them to continue… we’ve got to keep the industry going.”