Why lipstick imports increase

Reuters, Representative picture

Prices are spiraling and inflation is hitting a record high. In fact, it has broken the records of over a decade and stands at over 9.5 per cent in the first quarter of the current financial year. That means in a matter of a year people’s spending has gone up by nine and half per cent. Over the past three months, food inflation has exceeded 12 per cent. While spending has increased, income hasn’t. Consumers are having to cut down on their purchases.

The import of raw material in the industrial sector has dropped in this time of economic crisis. That is only natural. But contrary to this trend the import and use of one particular item has gone up and that is lipstick. The import of lipstick has set off warning bells for the economy. This is basically due to the western ‘lipstick effect’ theory. Researchers say that though this has coincided with the economic slowdown, there is really nothing to worry about.

The ‘lipstick effect’ theory came to the fore in 2001 during the recession in the US. Generally speaking, there is a slump in sales during any recession. But at that time, the chairman of the cosmetics company Estee Lauder, Leonard Lauder, declared that lipstick sales had increased in the recession. He was the first to use the term, ‘The Lipstick Effect’. The theory became hugely popular. There are two strong explanations behind this.

The demand for luxury goods falls with the decrease of people’s incomes. But interest grows in lesser costly luxury items. Another explanation is that, during financially difficult times, people try to spruce themselves up to feel better and forget their woes. That’s why lipstick sales go up in times of economic downturn. That is why American economists keep an eye on lipstick sales to determine if there are apprehensions of a recession.

There are no records available of item-wise retail sales in Bangladesh. But an idea of whether the sale of lipstick has gone up or not can be got from import records. According to the National Board of Revenue’s records, over the past four months from July to October of the current fiscal, 40,775 kg of lipstick and lip related products have been imported. In the 2022-23 fiscal this was 26,853 kg in the corresponding period. So according to official records, lipstick import has gone up by 52 per cent.

If the import or sales of lipstick increases, one can’t say that this is an indication of recession in Bangladesh. But it does indicate a slowdown of the economy
Khandakar Moazzem, director, Centre for Policy Dialogue

The import of lipstick has also gone up in terms of import costs. For example, in the first quarter of the current fiscal the duty costs on lipstick import was Tk 52.3 million (Tk 5 crore 23 lakh). In the corresponding period last fiscal this was Tk 33.7 million (Tk 3 crore 37 lakh). This indicates a 55 per cent increase in lipstick import. The government has raked in an additional revenue of Tk 25 million( Tk 2.5 crore) by means of this increased import in lipstick.

Increase in imports mean the demand for lipstick has increased in the country. However, former president of Bangladesh Cosmetics and Toiletries Importers Association, Md Kabir Bhuiyan, speaking to Prothom Alo, said the demand for luxury products like cosmetics fall when people’s purchasing power decreases. Cosmetics sales have decreased comparatively. They do not have any separate figures on whether the demand for lipstick has increased or not. It is hard to figure out within a matter of four months whether sales have increased along with increased import. It will be possible to determine this at the year end.

Bangladesh’s cosmetics market depends on imports and production. While lipstick and such products in the market do come in through illegal ‘luggage’ consignments, this is not much in volume, said Kabir Bhuiyan. Retailers say that while the manufacture of all sorts of cosmetic and toiletries has increased in the country, lipstick is mostly dependent on imports.

The price of lipstick is relatively affordable among luxury items. It is a popular makeup item, quick and ready for use. As in the US, women in Bangladesh commonly use lipstick. But researchers are uncertain as to how far the western ‘lipstick effect’ theory will apply to Bangladesh, though they do believe that people turn to lesser luxury items in order to manage their expenses.

Speaking to Prothom Alo, director of the Centre for Policy Dialogue (CPD), Khandakar Moazzem, said that when a sort of instability appears in the economy, there is a propensity for people to save on luxury products. Among cosmetics, lipstick is available at relatively cheaper cost. In such circumstances, the availability and use of products like lipstick increase. He said, if the import or sales of lipstick increases, one can’t say that this is an indication of recession in Bangladesh. But it does indicate a slowdown of the economy.

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