The Fragmentation of Indulgence

Analysing the Transformation of the 'Lipstick Effect' in the 2025 Beauty Economy

Executive Summary: The Fragility of Indulgence

The analysis of the 2025 performance data from leading prestige beauty retailers, specifically LVMH’s Selective Retailing division (i.e., Sephora) and the Douglas Group, alongside broader consumer spending shifts, confirms that the traditional “Lipstick Effect” is not defunct. Still, it has undergone a fundamental and irreversible fragmentation. The effect’s predictability has diminished in its classic form—a broad spending impulse on colour cosmetics—and has been replaced by the Affordable Indulgence Matrix.

The overall vitality of the global beauty market, which continues to thrive despite economic and geopolitical headwinds ¹, prevents a complete declaration of the Lipstick Effect’s death. Specifically, Sephora’s accelerated Q3 2025 organic growth of +7% ² and the explosive, industry-wide performance of the fragrance category (Mass fragrance up 17% in H1 2025) ⁴ demonstrate the enduring consumer appetite for attainable luxury.

However, the localised struggles of Douglas AG in key European markets, reporting a Q2 sales decline of 2% amid severely softening customer sentiment in France and Germany ⁵, alongside the measurable trade-down and deceleration in prestige skincare (-1% H1 2025) ⁷, confirm that discretionary spending is now acutely selective. Consumers are demonstrating heightened price sensitivity and are demanding that products offer tangible, functional efficacy and a connection to the self-care/wellness movement.¹

The core conclusion is that for the Affordable Indulgence impulse to translate into prestige sales volume in 2025, it must be either functional (Fragrance/Wellness) or digitally amplified (Viral Lip products). The era of impulse spending on luxury based solely on brand heritage or ephemeral status is drawing to a close, replaced by a mandate for elevated value and performance validation.