We’ve mentioned the “lipstick effect” before, but we may be experiencing it literally in 2023. The lipstick effect is a trend that can occur during economic downturns in which consumers indulge in less expensive luxury items like lipstick. As they treat themselves to small pleasures, consumers may cut back on more expensive purchases. To learn even more about this principle, we analyzed recent foot traffic in the beauty and cosmetics industry from January 2022 to January 2023. Many Americans are concerned about the economy, but are people still shopping at Ulta locations and other popular beauty destinations?

We analyzed foot traffic to Ulta, Sephora, CVS, and Walgreens. Between January of 2022 and January of this year, Ulta saw the largest decrease in foot traffic. At a negative 9.1% change in year-over-year foot traffic, Ulta was the worst performer in this category while Sephora performed the best. Sephora saw a 3.3% increase in year-over-year foot traffic for this time period. CVS and Walgreens both experienced decreases of 8.4% and 8.6%, respectively. This means Sephora was the only brand we analyzed to see an increase in foot traffic year-over-year.

Throughout the year, there have been some common foot traffic trends among all four companies. For example, foot traffic declined across the board last February, but for most of the year, Ulta and Sephora followed similar foot traffic trends. CVS and Walgreens shared similar patterns of their own. 

Through the ebbs and flows in foot traffic that Ulta and Sephora experienced, Sephora was better able to sustain and increase its foot traffic, compared to Ulta. In July 2022, Sephora saw a significant spike in foot traffic, increasing 88.3%, compared to January 2022. Meanwhile, Ulta saw a much more modest spike, increasing only 2.5% from January 2022. During this time, Sephora was holding its much-anticipated, annual 4th of July sale, likely contributing to its substantial increase in foot traffic that month.

Meanwhile, Walgreens and CVS followed different foot traffic patterns, with a relatively consistent level of foot traffic throughout the year in comparison to the more volatile trends of Ulta and Sephora. This could be due to the fact that drugstores offer a wider range of products beyond beauty products, which may have encouraged more consistent shopping behavior from customers.

At the beginning of 2023, all four companies were in the midst of a foot traffic downturn, but will that continue throughout the year?

In 2023, retailers may increase their focus on enhancing the customer experience in-store to attract new and return visitors. One of Sephora’s advantages over Ulta is its elevated in-store experience. Designed to make customers feel as if they’re walking into a high-end studio and getting ready for their close-up, Sephora’s store atmosphere offers a memorable in-store trip.

On the other hand, shopping at Ulta is a more casual experience. With many drugstore brands to choose from in addition to premium brands, there is contrast with Sephora’s solely high-end product lineup. This design is made for convenient shopping, ideal for customers looking to shop efficiently. Although Ulta’s Q3 2022 company earnings were up year-over-year, Ulta may be seeing decreased foot traffic due to its in-store experience.

In 2023, the lipstick effect is in full swing. Consumers want to continue purchasing affordable luxuries like high-end cosmetics at Sephora. This may be why Sephora locations saw more foot traffic growth in consumer visits than Ulta, CVS, or Walgreens. For more foot traffic growth this year, it seems that brands will need to attract consumers with an elevated in-store experience.

In each region of the U.S., Ulta’s foot traffic decreased year-over-year. Conversely, Sephora saw year-over-year foot traffic increases everywhere except for in the northeast. This may be due to the northeast region’s tendency to shop online. Of the top 10 states where online shopping is the most popular, 7 are in the northeast.

The region of the U.S. that saw fairly minimal changes in foot traffic to Ulta and Sephora was the southwest. There, Sephora saw an increase of 1.3% year-over-year, while Ulta saw a decrease of only 2.2%. Perhaps there are strategies Ulta is using in the southwest that could be resonating with consumers better than in other regions, resulting in a smaller decrease in foot traffic in this area.

Ulta is a leader in the beauty category, and the company has the potential to turn things around and see more visitors in 2023. Ulta has recently partnered with Target for shop-in-shop locations, much like Sephora’s partnership with Kohl’s. This means that Target shoppers could be shopping at Ulta locations more and more this year. Not only that, but Ulta has recently remodeled stores and plans to focus on its loyalty program to increase value.

Although Sephora has attracted greater levels of in-store foot traffic than Ulta in the past 12 months, 2023 could look very different. As economic disruptions persist, consumers may become more cost-conscious, prioritizing affordability and convenience. Ulta, with its emphasis on value and accessibility, could therefore become the go-to destination for budget-conscious shoppers. However, Sephora’s premium products and customer experience could still attract a loyal customer base despite economic uncertainty. Should the lipstick effect continue, Sephora could continue with strong foot traffic growth. Only time will tell which brand will resonate with consumers more this year and prevail in the competitive beauty industry.

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