Lets not pretend otherwise: Gen Z are facing economic uncertainty. In 2023, nationwide research released by ASIC’s Moneysmart program seven in ten (68%) Gen Zs had finances as a major cause of concern, more than any other age group (57% of non-Gen Zs). From battling the HECS debt, the housing crisis, AI in the job market and the risk of unemployment, it’s no doubt many of us are seeking a morale boost in these hard and uncertain times.
But even with all of that, something as simple as a cup of coffee and a chocolate croissant can feel like a small reward. ‘I deserve this,’ is a common way of justifying a reward for tackling busy schedules or after completing procrastinated tasks. To take a short turn to get a treat for something that is not needed but justified. It’s nothing short of a quiet reminder that small indulgences help to unburden the unpredictability of the future with a moment of comfort in the present.
If this sounds like a familiar experience, you’re not alone, you’re simply part of what is now labeled as the ‘treatonomics’ phenomena; a small economy that encapsulates consumer behavior that spends on small indulgences during uncertain economic times.
The lipstick effect
The phenomenon was first coined as the ‘lipstick effect’ by Estee Lauder’s chairman Leonard Lauder. Where he provided evidence of lipstick sales increasing after the 2001 terrorist attacks, and similar effects after the 2008 recession. This was also identified during the Great Depression in the 1930s where industrial production in the US halved, but sales of cosmetics rose in the four years from 1929 to 1933. It captured a new behaviour pattern of consumers spending on small luxury items like lipstick over high-end goods that are relatively affordable.
This challenges traditional economic theory of the income effect where consumers are predicted to reduce demand for non-essential goods or services as a result of a change or reduction in real purchasing power. In 2020, a study was undertaken to evaluate the ‘lipstick effect’ and its initial cause. It found as consumers face decreased purchasing power, they substituted more expensive items such as clothing for cosmetics like lipstick to gain more utility. This can be regarded as a product of both the income and substitution effect to manage budget constraints without entirely cutting spending. Additionally, the lipstick effect differs from impulse buying or conspicuous consumption as consumers spend more intentionally.
A remerging trend
Fast forward to today, it reemerged as the ‘treatonomics’ with the similar psychology and consumer spending patterns. It evolved from lipstick to over priced matcha, a new toppings of frozen yoghurts, concert tickets and Rhode skin-care packs. Ongoing economic uncertainty has reshaped our generation’s long term financial goals. Gen Z has come to increasingly delay major financial milestones to more immediate experiences. Take the example of mortgages, Sydney’s median house price rose 6.4 per cent, or $105,487, over the year to December to hit a record of $1,759,909, as of the latest Domain House Price Report.
The psychology behind this is: Why worry about affording a mortgage in Sydney when you can buy tickets to a music concert on the weekend. This has shifted long term thinking into more short term goals that affect the immediate future rather than uncertainty of achieving long term goals.
The devil that is social media
Social media narratives and influencers on platforms such as TikTok and Instagram work hard to keep this phenomena grounded. Gen Z and Millennials, 84% and 66% retrospectively, were more likely than any other age group to turn their screens into shopping malls.
Take the Labubu trend, the hashtag #labubu has been used in 32,000 TikTok posts in the United States alone and in more than 1 million posts overall. Dubai chocolate that led to the global pistachio shortage of 2021. Similar to Labubu it went viral over social media platforms launched by boutique Emirati chocolatier, FIX. Trends like these reflect treatonomics, both create a sense of instant gratification. Whether it’s unboxing a limited edition Labubu from a blind box or reviewing the texture of the Dubai chocolate bar. Social media escalates the need for people to try and indulge in small purchases, leading to a sense of FOMO (Fear Of Missing Out). Despite not being a necessity, consumers may reduce spending on eating out but balance expenditure with more affordable substitutes.
Source: @emmaroberts via Instagram
Source: Arab News via TikTok
What can you do with spending that is ‘full of randomness‘
By tracking budget spendings, the $10 spent guilt free on frozen yogurt purchase to legitimise the stress of midterms now reminds of what other stuff that could’ve been bought with the money that was spent. This is when treatonomics becomes a coping mechanism, and essentially, a threat- where occasional daily expenses turn into a financial drain. But cutting spending entirely to manage finances more responsibly doesn’t solve the problem.
As I’ll put in as a disclaimer: this article is not to take away from your usual fun and whimsy activities!