WEBVTT - Are Current Beauty Trends Recession Indicators? It’s Complicated.

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>If you're looking for a gut check on the health

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<v Speaker 2>of the US economy, you could call up an economist,

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<v Speaker 2>or you could ask a hairdresser.

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<v Speaker 3>Do you feel like the economy is good right now?

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<v Speaker 4>I'm nervous, honestly, I'm nervous for what's going to happen

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<v Speaker 4>in the industry specifically.

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<v Speaker 2>That's Sydney Jackson Green. She's a cosmetology student who works

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<v Speaker 2>at a salon in Springfield, Pennsylvania. She met her colleague

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<v Speaker 2>Ben Steverman at a beauty industry trade show in New

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<v Speaker 2>York earlier this spring and told him that recently business

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<v Speaker 2>has been slowing down.

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<v Speaker 4>You know, I'm very young, and a lot of my

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<v Speaker 4>clients Sele is young as well, so some of these

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<v Speaker 4>outrageous prices is effecting business.

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<v Speaker 3>She does a lot of braiding and the supplies you

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<v Speaker 3>need for braiding hair. The prices have gone up significantly.

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<v Speaker 4>Braiding hair has gone up probably at least like three

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<v Speaker 4>dollars since I started doing hair. Now, if you need

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<v Speaker 4>four or five packs for your hair now, it just

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<v Speaker 4>went up twelve to twenty dollars depending on how much

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<v Speaker 4>air you.

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<v Speaker 3>Ad Also, hair coloring, hair dye, those have gone up.

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<v Speaker 4>People still want their hair done, but now people are

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<v Speaker 4>learning how to do it at home. I've had a

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<v Speaker 4>bunch of at home disasters.

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<v Speaker 3>Her clients will call her because they've done something at home,

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<v Speaker 3>like they've dyed their own hair and it just looks terrible,

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<v Speaker 3>So then she has to fix it.

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<v Speaker 4>When it comes down to shampoo's conditioners, they're also increasing

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<v Speaker 4>their pricing. So now when our client needs a deep conditioner,

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<v Speaker 4>she's like, hey, can I get it next time? But

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<v Speaker 4>that's your hair needs it this time.

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<v Speaker 2>To Ben Sydney's story felt eerily familiar. People trying to

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<v Speaker 2>save money by skipping trips to the salon experimenting with

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<v Speaker 2>DIY styles. If that brings up memories of the COVID

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<v Speaker 2>nineteen pandemic, think back even further to the aftermath of

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<v Speaker 2>the two thousand and eight financial crisis.

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<v Speaker 3>There was a hairstyle momana called recession hair. Supposedly, there's

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<v Speaker 3>a trend of people getting lower maintenance cuts in the

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<v Speaker 3>financial crisis.

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<v Speaker 2>Official economic data can be slow to reflect the actual

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<v Speaker 2>state of the economy, and though Trump's tariff policies and

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<v Speaker 2>the reaction to them have stoked fears of another coming recession.

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<v Speaker 2>So far, key economic indicators are stable. The stock market

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<v Speaker 2>has mostly rebounded from its dive of last month, unemployment

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<v Speaker 2>hasn't gone up, and an April inflation rose by less

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<v Speaker 2>than forecasted. The strongest warnings have appeared in data that

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<v Speaker 2>reflect how consumers and companies are feeling about the economy.

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<v Speaker 2>A University of Michigan survey with data going back to

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<v Speaker 2>the seventies found that in May, US consumer sentiment hit

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<v Speaker 2>its second lowest level on record. Last week, Walmart warned

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<v Speaker 2>it might soon have to raise prices, and this week,

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<v Speaker 2>when Target released its first quarter earnings, it revealed sales

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<v Speaker 2>have been slowing. In times like these, people hung for

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<v Speaker 2>more real time color can get creative and turned to

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<v Speaker 2>unofficial sources of economic data too. Like beauty industry trends.

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<v Speaker 3>The first thing you cut down on in a slowdown

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<v Speaker 3>might be that facial or that massage.

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<v Speaker 2>Or that haircut. Today on the show, what beauty spending

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<v Speaker 2>can tell us about the health of the US economy

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<v Speaker 2>and what shifts in behavior at home and at the

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<v Speaker 2>salon are signaling about where it's headed next. This is

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<v Speaker 2>the big take from Bloomberg News. I'm Sarah Holder. Back

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<v Speaker 2>in March, Ben Steverman went to a beauty show and

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<v Speaker 2>cosmetics conference where he hoped to check the pulse of

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<v Speaker 2>the US economy. Thirty two thousand spa technicians, hairstylists, colorists,

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<v Speaker 2>and makeup artists were there too.

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<v Speaker 3>It was two giant rooms connected by a tunnel, and

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<v Speaker 3>on one side with all the spa stuff, and on

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<v Speaker 3>the other side was all the hair stuff. And you

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<v Speaker 3>would go buy these boots, and some of them were

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<v Speaker 3>quite elaborate. They would have demonstrations going on where where

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<v Speaker 3>they're putting goop on people's faces or they're cutting hair

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<v Speaker 3>as a demonstration. It was one hundreds thousands of different

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<v Speaker 3>products being sold and it was fun.

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<v Speaker 2>What kind of mood were you picking up there? Was

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<v Speaker 2>it jubilant? Was it anxious?

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<v Speaker 3>It wasn't that they were in a bad mood. It

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<v Speaker 3>was only when I asked them about how's business that

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<v Speaker 3>they told me things that were a little troubling.

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<v Speaker 2>Ben met a woman who does eyelash extensions and hair

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<v Speaker 2>coloring in Brewer, Maine.

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<v Speaker 4>I used to have a lot of like bleaching tones,

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<v Speaker 4>whereas now they're kind of going for that lived in

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<v Speaker 4>moment so they can go longer between our appointments.

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<v Speaker 2>The more natural the hair color, the less obvious it

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<v Speaker 2>is if you haven't had your hair dyed in a while.

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<v Speaker 2>Ben also talked to an executive at a New Jersey

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<v Speaker 2>based skincare company that's recently launched mini versions of its products.

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<v Speaker 3>The price point was better, So I think having that

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<v Speaker 3>as an option for people, they can still be entered

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<v Speaker 3>into our product line without having to spend xt amounts

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<v Speaker 3>of money.

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<v Speaker 2>So and he met a massage therapist in Northern Virginia

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<v Speaker 2>with a lot of federal government workers as clients.

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<v Speaker 4>It's feeling on like two thousand and eight with the

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<v Speaker 4>market crash and everybody not knowing what to do, and

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<v Speaker 4>so they don't want to spend that access money.

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<v Speaker 3>I was hearing this from Okay, here's this person in Manhattan,

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<v Speaker 3>and here's this person in rural New Hampshire, and they're

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<v Speaker 3>saying the same thing. That was really interesting. The people

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<v Speaker 3>who'd been doing this for decades, they were the ones

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<v Speaker 3>who said, this feels like other slowdowns I've been through

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<v Speaker 3>in my career, and I'm worried.

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<v Speaker 2>In spas and salons across America, beauty professionals are noticing

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<v Speaker 2>clients cutting back and shifting their spending in the age

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<v Speaker 2>of teriff related uncertainty, and beauty companies are noticing too.

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<v Speaker 1>There's some indication that the major cosmetics companies expect at

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<v Speaker 1>least a little bit of a slowdown in the coming year.

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<v Speaker 2>That's Newman, a reporter on Bloomberg's Consumer team. She writes

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<v Speaker 2>about the beauty and cosmetics industry, an industry that's experienced

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<v Speaker 2>a massive surge and growth worldwide in recent years. Between

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<v Speaker 2>twenty twenty one and twenty twenty three, industry analysts estimate

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<v Speaker 2>that the global beauty market grew by up to eight percent,

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<v Speaker 2>but that trajectory could be changing.

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<v Speaker 1>The CEO of Looreal so one of the biggest beauty

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<v Speaker 1>companies in the world, he said last month, so in April,

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<v Speaker 1>that expects the beauty category to grow globally like four

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<v Speaker 1>to four point five percent, and that was on the

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<v Speaker 1>slightly lower end of what they had been expecting. I mean,

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<v Speaker 1>this is not just lorel this is globally, So that

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<v Speaker 1>just gives you a sense, like four to four point

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<v Speaker 1>five percent, it's still really really good.

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<v Speaker 2>Growth, but it's a slowdown in that growth exactly.

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<v Speaker 1>It's a slow down in that growth.

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<v Speaker 2>The Lorel CEO said that this year his growth prediction

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<v Speaker 2>was on the lower end because of a slower than

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<v Speaker 2>expected American market, and he said it didn't even account

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<v Speaker 2>for how quote inter national turmoil and tariff wars could

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<v Speaker 2>make things worse. Even though Trump has pumped the brakes

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<v Speaker 2>on some of his most aggressive tariffs on China for now,

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<v Speaker 2>reciprocal tariffs are still set to take effect in July,

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<v Speaker 2>and there's concern those levees could make everything from manufacturing

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<v Speaker 2>to packaging more expensive, driving up prices across the beauty

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<v Speaker 2>market and pushing customers to be more selective.

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<v Speaker 1>What they're really more worried about is that consumers seeing

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<v Speaker 1>all of this talk of tariffs, concerns about higher prices,

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<v Speaker 1>concerns about a potential recession in the US, will pull

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<v Speaker 1>back on their spending.

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<v Speaker 2>Over the past few years, highly involved multi step multi products,

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<v Speaker 2>skincare and makeup routines have been on the rise. It

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<v Speaker 2>all started during the pandemic, when people were stuck at

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<v Speaker 2>home with time on their hands, sharing beauty tips on

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<v Speaker 2>TikTok How I do my barely there glowy MAKEOVERROUTEAE. This

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<v Speaker 2>is quite twenty nine years and you just pack it

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<v Speaker 2>into your skin.

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<v Speaker 3>Now most people use one prima I use.

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<v Speaker 2>Three, but Jeannett says there are signs that trend could

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<v Speaker 2>be moderating.

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<v Speaker 1>So, for example, setting sprays have been declining in the

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<v Speaker 1>past couple months, and some of the analysts I spoke

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<v Speaker 1>with think that that is in part because people are

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<v Speaker 1>starting to kind of cut some of these steps out

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<v Speaker 1>of their of their routines.

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<v Speaker 2>Certain products could be more vulnerable to getting cut than others.

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<v Speaker 1>There's some incipient signs that we're seeing that people can

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<v Speaker 1>prioritize their spending on kind of better and fewer products.

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<v Speaker 1>Loloreal reported their earnings recently and their higher end offering

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<v Speaker 1>actually did really well, better than their mass market products.

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<v Speaker 1>And that can also be like I'm cutting back on,

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<v Speaker 1>you know, step twelve or eleven of my beauty routine,

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<v Speaker 1>or i could be cutting back several steps and I

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<v Speaker 1>decide that I'm actually going to buy that really expensive

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<v Speaker 1>lotion because I think that it, you know, works better,

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<v Speaker 1>it's worth it. I'm going to focus on that and

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<v Speaker 1>put my money towards that. So I'm buying a more

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<v Speaker 1>expensive lotion because I'm not buying the setting spray. I'm

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<v Speaker 1>not buying three or four different serums.

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<v Speaker 2>And while some people are choosing to invest more in

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<v Speaker 2>the products they do keep buying, others are willing to downgrade.

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<v Speaker 2>According to data from a beauty industry research group called

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<v Speaker 2>h Intelligence.

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<v Speaker 1>What we've been seeing recently is that kind of less

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<v Speaker 1>expensive versions of fragrance are becoming more popular, and this

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<v Speaker 1>is potentially in reaction to just consumers saying, hey, I'm

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<v Speaker 1>worried about potential recession, higher prices, I'm going to watch

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<v Speaker 1>my wallet. So things like roller balls, which are cheaper

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<v Speaker 1>versions of fragrance dupes, have continued to go from strength

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<v Speaker 1>to strength.

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<v Speaker 2>So it could be mid tier products that suffer the

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<v Speaker 2>most as people continue to buy the higher end stuff

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<v Speaker 2>and cheaper dupes or knockoffs. This is something Ben realized

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<v Speaker 2>at the trade show too, that even in hard times,

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<v Speaker 2>it's unusual for people to stop moisturizing entirely or go

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<v Speaker 2>gray instead. Big beauty brands and solo stylists alike are

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<v Speaker 2>noticing consumers making shifts, spacing out their appointments, buying smaller bottles,

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<v Speaker 2>and finding less expensive alternatives after the break who the

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<v Speaker 2>beneficiaries of these beauty industry shifts could.

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<v Speaker 1>Be beauty is discretionary, but I think to a lot

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<v Speaker 1>of us it feels a little bit less discretionary than

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<v Speaker 1>some of these other categories.

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<v Speaker 2>That's Janette Newman again.

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<v Speaker 1>We're talking about discretionary spending, meaning things that you don't

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<v Speaker 1>have to buy, but the lotion that you might use

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<v Speaker 1>every night feels a little bit more like a have

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<v Speaker 1>to buy than a piece of a skirt or a

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<v Speaker 1>T shirt. So that's one reason that it's actually quite

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<v Speaker 1>a resilient category in times of downturn.

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<v Speaker 2>So beauty spending is discretionary, especially when it comes to

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<v Speaker 2>services like massages and spa treatments, but it's also resilient

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<v Speaker 2>to economic shocks, and some products and services are more

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<v Speaker 2>resilient than others. Ben Steveerman says it's a dynamic that

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<v Speaker 2>showed up in paws downturns during the post nine to

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<v Speaker 2>eleven recession. Leonard Lauder Than, the chairman of the board

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<v Speaker 2>of Estay. Lauder famously shared that lipstick sales had spiked.

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<v Speaker 2>People kept buying cosmetics through the Great Recession too. Journalists

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<v Speaker 2>and economists have a name for the phenomenon. They call

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<v Speaker 2>it the lipstick effect.

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<v Speaker 3>The idea is that there are certain luxuries that people

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<v Speaker 3>stick with because it makes them happy and it's something

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<v Speaker 3>that is a relatively inexpensive way to have something that

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<v Speaker 3>gives you some pleasure. Just because we're in a slow

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<v Speaker 3>down doesn't mean everything slows down.

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<v Speaker 2>Lipstick wasn't exactly a COVID era winner, remember all the masks,

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<v Speaker 2>but the pandemic's economic disruptions made people invest in other

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<v Speaker 2>small self care luxuries like skincare, and now in our

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<v Speaker 2>current era of economic uncertainty, Janette says, data from Dash

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<v Speaker 2>Intelligence shows that a different set of beauty products are

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<v Speaker 2>having their own sort of lipstick effect, seeing their sales

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<v Speaker 2>increase as other slow down at home salon replacements.

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<v Speaker 1>Artificial nail sales are up about thirteen percent in March

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<v Speaker 1>versus February, and the growth has also been incredibly strong

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<v Speaker 1>year over year, and we're also seeing strong increases in

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<v Speaker 1>sales of color and bleach. So some signs that people

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<v Speaker 1>are doing some of these things at home rather than

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<v Speaker 1>going to salons with the same frequency.

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<v Speaker 2>And some of the people who've continued going to the

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<v Speaker 2>salon are choosing lower maintenance treatments. Industry analysts say when

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<v Speaker 2>it comes to hair dye, for instance, they're expecting to

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<v Speaker 2>see more natural roots, warmer hues, and fewer blondes.

0:12:40.720 --> 0:12:43.400
<v Speaker 1>There's a term called procession blonde, which I think is

0:12:43.520 --> 0:12:47.080
<v Speaker 1>maybe a TikTok term that people can kind of shift

0:12:47.280 --> 0:12:50.560
<v Speaker 1>the coloring of their hair to make it easier to

0:12:50.600 --> 0:12:52.840
<v Speaker 1>take care of. So if your roots start to come in,

0:12:52.880 --> 0:12:54.680
<v Speaker 1>you don't have to go to the salon within like

0:12:54.720 --> 0:12:56.880
<v Speaker 1>a week. You could wait a little bit longer, and

0:12:56.920 --> 0:12:59.600
<v Speaker 1>so that keeps your costs down. And these are different

0:12:59.679 --> 0:13:02.320
<v Speaker 1>theory that are kind of I think fun to debate.

0:13:02.400 --> 0:13:05.079
<v Speaker 1>Are these economic trends or just beauty trends?

0:13:05.160 --> 0:13:05.280
<v Speaker 3>Right?

0:13:05.280 --> 0:13:07.559
<v Speaker 1>Beauty trends kind of come and go. Are some of

0:13:07.600 --> 0:13:10.280
<v Speaker 1>the things that we're seeing because trends are just shifting

0:13:10.400 --> 0:13:12.600
<v Speaker 1>or is it that they're pushed kind of by the economy?

0:13:12.840 --> 0:13:13.160
<v Speaker 4>Right?

0:13:13.400 --> 0:13:16.840
<v Speaker 2>The at home nail kits might be cool and trending

0:13:16.840 --> 0:13:19.439
<v Speaker 2>on TikTok et cetera, in part because they're a little cheaper.

0:13:19.840 --> 0:13:24.960
<v Speaker 2>Exactly exactly, So, does a rise and do it yourself

0:13:25.000 --> 0:13:28.400
<v Speaker 2>manicures mean the market's about to crash? Does more at

0:13:28.440 --> 0:13:32.400
<v Speaker 2>home bleach mean recession hair is officially back? Well? Ben

0:13:32.440 --> 0:13:35.000
<v Speaker 2>and Jinette didn't go that far, but they both said

0:13:35.000 --> 0:13:39.319
<v Speaker 2>that in corporate earnings reports, conversations with sources, and cultural trends,

0:13:39.720 --> 0:13:43.440
<v Speaker 2>they are seeing recession indicators. And while none of these

0:13:43.480 --> 0:13:47.920
<v Speaker 2>consumer behavior shifts alone can predict the US's economic trajectory,

0:13:48.440 --> 0:13:50.880
<v Speaker 2>they do offer hints at what parts of the beauty

0:13:50.920 --> 0:13:54.960
<v Speaker 2>industry are best positioned to get through a downturn. Like

0:13:55.280 --> 0:14:00.200
<v Speaker 2>large multinational companies that operate several different brands, companies like

0:14:00.240 --> 0:14:02.320
<v Speaker 2>Lareel and Esta Lauder.

0:14:02.160 --> 0:14:05.280
<v Speaker 1>They have a lot of leverage to work with their

0:14:05.320 --> 0:14:08.480
<v Speaker 1>suppliers and for example, on their higher end products to

0:14:08.640 --> 0:14:09.360
<v Speaker 1>raise prices.

0:14:09.679 --> 0:14:12.480
<v Speaker 2>It could be tougher for smaller players, like some of

0:14:12.520 --> 0:14:15.960
<v Speaker 2>the people been met at the Beauty Convention, those salons

0:14:16.000 --> 0:14:18.959
<v Speaker 2>and companies that are less able to quickly rework their

0:14:18.960 --> 0:14:22.040
<v Speaker 2>supply chains to deal with new tariffs or adapt their

0:14:22.080 --> 0:14:25.800
<v Speaker 2>product offerings or scales of production based on consumer spending.

0:14:25.920 --> 0:14:28.240
<v Speaker 3>This is an industry that has been growing pretty strongly

0:14:28.320 --> 0:14:31.040
<v Speaker 3>coming out of COVID, and so you hope that some

0:14:31.080 --> 0:14:33.480
<v Speaker 3>of these businesses that started up, and there's hundreds and

0:14:33.480 --> 0:14:36.320
<v Speaker 3>thousands of new businesses have started up in this area,

0:14:36.520 --> 0:14:37.760
<v Speaker 3>you hope that they can survive it.

0:14:38.240 --> 0:14:41.760
<v Speaker 2>Bloomberg Intelligence has been running a survey of American consumers

0:14:41.800 --> 0:14:45.160
<v Speaker 2>over the past few years, and this January, almost half

0:14:45.200 --> 0:14:47.720
<v Speaker 2>of the one thousand respondents said they'd cut back on

0:14:47.880 --> 0:14:52.000
<v Speaker 2>other purchases before scaling back on beauty and personal care spending.

0:14:52.920 --> 0:14:55.720
<v Speaker 2>But that's actually lower than the number of respondents who

0:14:55.760 --> 0:15:00.160
<v Speaker 2>prioritize beauty spending in twenty twenty four and twenty twenty three.

0:15:00.440 --> 0:15:04.480
<v Speaker 2>In other words, after so many years of pandemic fueled growth,

0:15:04.960 --> 0:15:11.760
<v Speaker 2>peak beauty just might be behind us. Resilient but still discretionary.

0:15:14.000 --> 0:15:16.840
<v Speaker 2>This is the Big Take from Bloomberg News. I'm Sarah Holder.

0:15:17.120 --> 0:15:20.040
<v Speaker 2>This episode was produced by Julia Press. It was edited

0:15:20.040 --> 0:15:23.360
<v Speaker 2>by Tracy Samuelson and Tanya Garcia. It was fact checked

0:15:23.360 --> 0:15:26.080
<v Speaker 2>by our editorial team and mixed and sound designed by

0:15:26.080 --> 0:15:30.400
<v Speaker 2>Alex Sugiura. Special thanks to Lindsay Dutch. Our senior producer

0:15:30.440 --> 0:15:33.800
<v Speaker 2>is Naomi Shaven. Our senior editor is Elizabeth Ponso. Our

0:15:33.800 --> 0:15:37.840
<v Speaker 2>deputy executive producer is Julia Weaver. Our executive producer is

0:15:37.920 --> 0:15:41.880
<v Speaker 2>Nicole Beamster. Bar Sage Bauman is Bloomberg's head of Podcasts.

0:15:42.360 --> 0:15:45.000
<v Speaker 2>If you liked this episode, make sure to subscribe and

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<v Speaker 2>review The Big Take wherever you listen to podcasts. It

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<v Speaker 2>helps people find the show. Thanks for listening. We'll be

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<v Speaker 2>back next week.