The lipstick index, a term famously coined by Estée Lauder's Leonard Lauder, is the theory that sales of affordable luxuries tend rise during economic downturns.
However, instead of lipsticks, the South Korean fashion, beauty, and lifestyle retailer believes that luxury niche fragrances were the new barometer of consumer demand.
"Instead of lipsticks, which sold well during recessions, niche perfumes are now taking their place. Niche perfumes have a high repurchase rate and as the economic downturn is expected to continue for a longer period of time, the demand for them is expected to increase.”
According to Statistics Korea, the retail sales index (RSI) in December 2022 decreased by 2.5% year on year (YoY). In January 2023, the consumer price index increased by 5.2% YoY.
Consumption in South Korea has been affected by the looming dread of a recession and inflation, said the retailer.
However, Shinsegae observed that niche perfume sales were bucking the trend, growing by 43% YoY from February 1 to 13.
During the same period, Memo Paris recorded a sales increase of 78.6%. Ex Nihilo, which sells fragrances that cost up to KRW640,000 (USD491), also saw sales soar by 122%.
“Sales of expensive niche fragrances have increased due to consumers who are willing to open their wallets for small luxuries that provide psychological satisfaction,” it said.
Younger consumers drive niche perfume sales
In addition to the aforementioned niche brands, Shinsegae also imports and distributes labels such as Byredo, Diptyque, D.S. & Durga, and Santa Maria Novella.
It reported that 80% of buyers were younger consumers from the millennial and generation Z demographic and were the driving force of sales growth.
“These generations, aged between 20 to 40, are passionate about niche fragrances, which are affordable luxury products that allow them to feel luxurious at a relatively reasonable cost.”
This demographic was seeking out gender-neutral fragrances, such as Santal Calling by Ex Nihilo, which combines a delicate milky accord with musk and woody sandalwood to create an androgynous scent.
The retailer noted that it was not just perfumes that were flying off the shelves. Other fragrance products such as car air fresheners, diffusers, candles, as well as body lotion and washes offer the same popular scents have also been well-received.
For instance, Memo Paris’ Inlé hair perfume, a counterpart to its best-selling eau de parfum, was also up significantly. As it is less expensive, many consumers purchase it as a gift, hence increasing sales.
Shinsegae also noted an increasing appetite for limited edition variants as consumers appreciate them as “excellent gifts and collectables”.