Recent reports indicate that nearly half of UK consumers, in a bid to lift their spirits amid tighter budgets, are purchasing small luxuries like cosmetics and sweets—a phenomenon known as the "Lipstick Effect." According to data from Barclays Bank credit cards, spending on health and beauty products has increased by 7.3% year-on-year, the highest surge since the beginning of 2023.
While the shadow of the cost-of-living crisis still looms over UK consumers and businesses, this pressure has somewhat eased. Despite the fastest growth in real wages in nearly three years, it has not yet reached previous peak levels.
The report notes that shrinkflation has affected many best-selling products in the UK, such as Bisto gravy granules, Colgate triple-action toothpaste, and Lurpak butter. Prices for these products have remained the same or slightly increased, but their packaging has been reduced. With easing cost pressures, businesses may reduce the use of such strategies. Last year, food inflation in the UK dropped from double digits to 1.4%, and major global central banks have been gradually lowering interest rates.
Karen Johnson, Head of Retail at Barclays Bank, stated that consumers are increasingly inclined to improve their mood through shopping, reflecting their preference for memorable experiences within tight budgets, such as purchasing tickets for next year's Oasis tour.
Additionally, data from Barclays Bank and the British Retail Consortium indicate that retail growth in August was mainly driven by barbecue and "picnic weather." Barclays Bank reported a 1% year-on-year increase in credit card spending in August, ending two consecutive months of decline. Simultaneously, the British Retail Consortium (BRC) noted that overall retail sales grew by 1% as consumers took advantage of the fine weather to purchase food, marking the best performance since March.
BRC CEO Helen Dickinson commented, "Sales growth accelerated in August, particularly for food sales, as people gathered for barbecues and picnics with family and friends. Meanwhile, sales of summer clothing and health and beauty products also increased, reflecting a trend of preparing for outings and social activities."
