What can we learn about cheap lipstick & the economy?!

Stock Explore

Sep 21, 2022

Communication is key - elf Communicated price increases directly with customers through social media, not through any other outlets. They kept prices low on traditional items and launched higher-end items. (Lipstick remained $3)
Behavioral Finance - People noticed low prices and round numbers more than numbers that end in 0.99! ELF’s round numbers make price increases more noticeable.
COVID Beauty - When you are stuck in a house, are you going to buy the $3 makeup or the $300 makeup? ELF stock increased 65.9% Y/Y from May ‘20/to May ‘21 because they knew their target market and remained cheap
Source: WSJ
Network - What does elf have that other low-cost providers lack? Like Costco, Mcdonald's, and Dollar Tree, who have struggled to fight inflation…Elf has a better social media network with 6.1M followers on Instagram, an organized feed and DTC (direct to customer) marketing strategies/campaigns. McDonald’s has 4.4M, no organized brand feed. Costco has 1.1M followers, and Dollar Tree has 613K. elf has a larger network on social media.
The Lipstick Effect: “consumers will invest in small luxuries that increase their confidence and perceived attractiveness during periods of uncertainty," said Jennie Liu, lecturer and executive director at the Yale Center for Customer Insights.
Beauty is a diverse universe: Over 1/3 of beauty items did see price increases in April 2022. This is much higher than the 3% increase in April 2021! - Karthik Bettadapura, CEO of DataWeave. “We will continue to watch the Beauty sector closely, as it may serve as a bellwether for inflationary trends across the retail value chain.”