Beauty business hit by drab economy

The beauty industry has always considered itself recession-proof. In the Depression, cosmetic executives will tell you, a woman would buy a lipstick when she couldn't afford a new dress. Even in recent recessions, cosmetic companies thrived. But lipstick prices go up and times change.

"In 1974, the beauty industry was recession-proof," said Allan Mottus, a marketing consultant to the health-care and beauty industries. "In 1981, it was recession-resistant. It's been downhill ever since. The industry has been in recession for a good year."


Department stores selling premium brands are feeling the pinch the most. Among the reasons are a lowering of consumers' disposable income and price increases of as much as 10 percent a year on cosmetics.

Another factor, Mottus and other analysts said, was the proliferation of discount cosmetics stores, which took business away from department stores. Women rebelled against paying $10 or more for a lipstick when they could buy the same brand for less in a discount store or a cheaper brand in a drugstore.


"Vendors had to raise their prices too quickly in department stores in the 80s," he said, "because they had to do their own staffing, their own promotions and advertising. The highest-price department store brands have been hit harder than the low-to-medium-price brands."

The biggest of the drugstore brands, Cover Girl, had its best year in 1990. Although executives would not quote figures, people in the industry estimate Cover Girl's share of the mass cosmetics market at 23 percent. Maybelline is the runner-up, with 17 percent.

But the $11.5 billion beauty industry is far from dead, he added, saying: "A shake-up is a healthy thing. It tells the industry what the consumer wants." And that, it seems, is a cheaper lipstick.


Women who frequent the beauty salons in department stores are also shopping for bargains, said a spokeswoman for the Regis Corp., which operates more than 3,200 salons in stores in seven countries.

Business has remained stable, the spokeswoman said, but there has been a shift from salons in the most expensive stores to those in less expensive stores, like Sears.