When the economy takes a turn for the worse, consumers choose affordable treats such as cosmetics. That’s been the wisdom since the 2001 recession, when Leonard Lauder, then chairman of Estée Lauder Cos, coined the “Lipstick Index.”

The theory would suggest an uptick in women reaching for beauty products once more, as China’s recovery stutters and fears of a US recession resurface. But the phenomenon may not be so pronounced this time round.

Years of blockbuster growth in the beauty industry means there may be less need to stock up. Women did indeed buy more lipstick, as well as fragrance and pricey hair serums, when inflation surged and incomes came under pressure. Shares in Charlotte Tilbury owner Puig Brands SA have fallen about 5 percent since their debut in May, and independent names including Selena Gomez’s Rare Beauty and Makeup by Mario have recently been exploring exits. It’s hard not to think we’ve reached peak beauty.

Sales of skincare, cosmetics and scents have been on a tear for the past five years. Pandemic lockdowns sent everyone reaching for face masks and moisturisers. We rediscovered perfume as a way to lift our moods. And haircare became more like skincare, with more offerings of treatments, oils and mousse — all to help those Dyson Airwrap curls last longer. Then, as economies reopened and masks came off, attention turned to color cosmetics, including lip tints and blush.

Analysts at Jefferies estimate that the global beauty market expanded by 6 percent to 8 percent between 2021 and 2023. But there are increasing signs that demand is moderating.

For a start, Chinese consumers are cutting back and also turning to local brands, which are perceived as better value than the international names, according to LookLook, an insights company, which regularly surveys its panel of 100 high spending Chinese women.

So far, the US and Europe have been picking up the beauty baton. But this is becoming more difficult.

With such a strong expansion in Western markets over the preceding three years, it was inevitable sales would eventually retreat. This has been exacerbated by inflation and high borrowing costs pressuring lower and middle-income shoppers.

There are also signs that some of the micro TikTok trends, from Clean Girl to Office Siren, are running out of steam. There hasn’t been a major new “core” style since Mob Wife at the turn of the year, notes retail intelligence company EDITED. In fact, one of the notable TikTok trends to emerge has been “Underconsumption,” which encourages people to buy less.

Ulta Beauty Inc. said in early April that it had seen both the mass-market and luxury segments slow. In June, L’Oreal SA downgraded its forecast of global beauty market sales growth to 4.5-5 percent this year, from 5 percent previously. Even its new projection might be optimistic.

Demand has softened since January, according to a survey conducted by Lindsay Dutch, analyst at Bloomberg Intelligence.

Although more than 40 percent of the 650 respondents to the June survey said they would cut back on other purchases before reducing spending on beauty and personal care items this year, this is 10 percentage points below January’s result — the lowest since the survey began two years ago.

Sales of both the most upmarket and mass-market products are slowing. When it comes to prestige products, sales still rose 8 percent in the US in the first half of this year,  according to data provider Circana, although that’s a deceleration from double digit growth in each of  the preceding two years, mainly driven by weakness in makeup. The mass market was flat in the first half, although Elf Beauty Inc., with its affordable prices and savvy Gen-Z marketing, is outperforming.

Not all sectors are moving in tandem. Pricey fragrance and haircare are holding up although even here some younger consumers are trading down to mini sizes of scent and body mists priced below $25, to deliver what Larissa Jensen, global beauty industry adviser at Circana describes as “elevated value.” Dermatological beauty, which bridges the gap between cosmetics and specialist skin treatments, is another bright spot. This explains why L’Oreal this week acquired a 10 percent stake in Galderma Group AG, which makes products to treat a range of skin conditions, as well as injectable fillers.

The acquisition raised eyebrows, as L’Oréal previously owned a 50 percent stake in Galderma, which it sold to Nestle SA in a complex deal in 2014.

Yet the global aesthetic injectables market could be worth $9 billion to $15 billion according to Bloomberg Intelligence. That’s a fraction of the overall beauty market, which generated sales of about $570 billion in 2023, according to Euromonitor International. But if consumers are diverting money from traditional skincare to such categories, then L’Oréal must be present.

The two companies will form a strategic partnership, and it’s not hard to see the lines blurring between products that are applied to the skin, such as topical creams, and those that go into the skin, such as fillers. L’Oréal could take aesthetic treatments mainstream, as it did with anti-aging ingredients such hyaluronic acid and hair oils. Future possibilities could include at-home injectables, permanent makeup or effective lip pumping creams.

The move also underlines that, as the world’s biggest beauty group, L’Oréal has the flexibility to pivot into adjacent categories. Right now that puts it ahead of other rivals, such as Estée Lauder. The US company has embarked on a turnaround plan to become leaner and more profitable so that it can react more nimbly to just these sort of developments.

Still, even the strongest will have to put their best face forward if beauty sales don’t get a glow-up from a downturn.

By Andrea Felsted