How the “Lipstick Index” Helped Ulta Beauty Hit Record-Breaking Sales

There’s no need to pretend - everyone in America has heard the word “recession” cropping up over the last few months. With news of layoffs and financial crises being delivered to email inboxes every morning, it’s hard to ignore the state of the world. Whether government officials want to admit it or not, times are tough for everyone. Despite this, Ulta Beauty hit record-breaking sales for the 2022 year - to the tune of $10.2 billion. So how did the beauty giant find the light at the end of the financial tunnel we’re all stuck in? It all comes down to knowing their audience, great social media presence - and the lipstick index. 

What is the “Lipstick Index?”

During the recession of the early 2000s, cosmetic sales continued to increase, while big-ticket purchases such as homes and cars dropped significantly. Estee Lauder chairman Leonard Lauder coined the term “lipstick index” to describe the phenomenon occurring across the brand. Though economists attempted to discredit Lauder’s claim, citing the rise of cosmetic sales during periods of increased economic activity, the theme has continued to arise. In the 2010s, people began to refer to it as the “nail polish index,” in reference to the rise in popularity of nail art in the US and Japan. During the COVID-19 pandemic and the use of masks, eye makeup sales increased dramatically, leading to some renaming it the “mascara index.”

Regardless of what some may call it, Lauder’s claim seems to ring true over two decades later. Individuals are indulging themselves in smaller, more affordable treats in order to save money, and Ulta Beauty is the perfect environment for them to do just that. One of Ulta’s major appeals is the availability of both affordable and high-end products (more often known as mass and prestige products) and the constant deals and sales that run throughout the year. 

Avoiding the Deinfluencing Trend

If you’re on any form of social media, especially TikTok, you’ve probably heard of “deinfluencing.” Creators are posting one of two kinds of content: 

  1. A reminder that you don’t need to impulse purchase what you’ve seen for a variety of reasons. It doesn’t work as described, the viewer won’t actually use it, etc etc. Or…
  2. Buy this, not that. This involves showing viewers more affordable swaps or dupes for trending - and expensive - beauty products that traditional influencers are often gifted with.

Ulta Beauty has managed to stay ultamately unbothered by this trend, and with ease. While other companies are partnering with big-name influencers, Ulta has focused on building a tight-knit community of micro-influencers (social media creators with between 1,000 and 100,000 followers.) This is a fantastic move for the company, as micro-influencers tend to be more authentic, and therefore more trustworthy in the eyes of their viewers. Not to mention, engagement rates for posts tend to be much higher than those with 1 million or more followers on most platforms. 

Digital Marketing is Key

If you don’t know, now you know. A great social media presence is key these days - and it’s so much more than posting pretty pictures to the feed. There’s Instagram, TikTok, Meta, email marketing, paid media, organic media - the list goes on forever. Luckily, Ulta’s social media team has cracked the code for the brand’s success. From a marketing standpoint, it all comes down to diversity. Ulta Beauty is known for its core value of diversity, represented in its employees, board, and brands, so it makes sense the company has a media presence to match. 

Take a look at the Ulta Beauty Instagram Account, and you’ll see what I mean. In the first 30 seconds of scrolling, you’ll notice that 90% of Ulta’s feed is UGC - user-generated content. The rise of Instagram Reels has certainly helped, as “Get Ready With Me” and “Shop With Me” videos featuring a variety of affordable brands are the most popular kinds of content featured. The content Ulta shares comes from a wide variety of creators, including customers, employees, and micro-influencers, which makes the company’s feed feel less like a business page, and more like a friend’s. The company also uses social media to keep customers up-to-date with special events and sales, like the famous 21 Days of Beauty happening now through April 1st. 

So Back to the Index…

Ulta Beauty knows its strengths and knows its customer base even better. Despite the recent launch of the luxury beauty category, the company hasn’t shifted its focus from its 40 million Ultamate Rewards Members. In fact, the company is digging deeper into supporting customers’ beauty decisions during this period of financial uncertainty. There’s been more than a few point multipliers rolled out over the last year, featuring categories like fragrance, BIPOC-owned brands, hair care, and more. By activating these offers online or in the app, members can earn anywhere from 2-5x the points (or more for those in the habit of offer stacking.) These points translate to money off that can be redeemed on future purchases, which is always a great bonus. Add these multipliers to the coupons that are consistently sent to members via email, mailer, or in-app offer, and it makes perfect sense as to why people are choosing to buy their little *affordable* luxuries from the company.

Whether the lipstick index is truly an economic indicator is still up for debate, but it’s hard to argue against it with numbers like these. Ulta is able to truly keep to its philosophy of beauty being for everyone, not just those who can afford to spend hundreds of dollars each month.