OE-12a

Running Head: THE BODY SHOP CASE 1

The Body Shop Case:

A Managerial Economics Final Case Study Paper

Pratima Tharval

New England College

THE BODY SHOP CASE 2

Abstract

The Body Shop Company deals in eco-friendly beauty products for both men and women. The

products are produced mainly from natural ingredients, which make the company work closely

with farmers in a bid to ensure they get natural supplies for their products. The company has

invested heavily in research, to come up with more natural beauty products, all which are

evidence-based. The company targets high income earners of the high social class, hence its

higher prices for products compared to competing companies. Some of the things it got right,

hence attracting loyal customers include dealing in a large range of products, creating a high

brand value, and having a large supplier network. Additionally, the company has aligned itself

with environmental protection guidelines and transparency, hence building a good image in the

society. Despite being a large retailer, some of the mistakes it made are set to encourage more

competition from other players in the market. Some of the mistakes include little investment in

advertisements, the franchise system which reduces the level of control of most of its outlets

form the top management and a limited number of retail outlets.

Keyword: demand analysis, price analysis, competition

THE BODY SHOP CASE 3

Overview

The Body Shop Company is a private beauty retailer company operating internationally,

which deals in natural and healthy beauty products for both male and female customers. It

manufactures and commercializes beauty, organic skin care and cosmetic products. The

company was initially founded by Anita Roddick in Brighton, UK, in 1976. It now has over

3,000 stores in over 60 countries, and still continues to grow. The company is dedicated towards

finding the best ethically sourced ingredients for its wide range of naturally inspired beauty

products. This means that the company works with farmers and suppliers, working on 100%

vegetarian basis, while at the same time taking a firm stance against animal testing. The

company continues to operate under the founder, Anita Roddick’s founding principles, as

expressed by its ‘Enrich Not Exploit’ commitment. The policy lays out the need for the company

to support local communities, maintain transparency and protect the environment during their

operations (Kent & Stone, 2007).

According to Kemna (2017), the Body Shop’s top competitor is Estee Lauder, which is

led by Fabrizio Freda, the CEO and president of the company. The Body Shop’s CEO on the

other hand is David Boynton. Other competitors across the globe include Alliance boots GmbH,

Bath & Body works LLC, Sephora USA inc, L’Occitane, Lush, Yves Rocher and Weleda. These

brands as well focus on environmental protection and natural ingredients, just like The Body

Shop. Maybelline New York, although not an obvious competitor, also positioned itself against

animal testing and environmental protection, posing the threat of being a possible competitor to

the company too. The Body Shop notably operates in a pure competition market structure.

THE BODY SHOP CASE 4

The body shop currently has more than 1200 products and has employed more than ten

thousand people in its various stores. The company’s leadership is geared towards juggling, in a

bid to effectively manage the business and effectively adapt to the stiff competition in the nature

of market in which it operates. The company has built its organization through employing very

strong staff and human resource. Its recruitment strategies are top notch, with the structure of the

company built up very tightly to ensure the entire organization works with the same goals and

process. The company’s headquarters are based in London, West Sussex, and Little Hampton. It

also has four main regions which are the Republic of Ireland, UK, America, Middle East,

Europe, South Africa, and Asia Pacific. Within the four regions, many of the international stores

of The Body Shop are set up under franchise arrangements (Kent & Stone, 2007).

Price Analysis

The Body Shop has a wide range of products and has different price tags for the various

products, with a focus on targeting the different social levels of potential customers in the

market. The main products in the market that I will cover are the bath and body care, fragrances,

skin care, men line and make up. Although the products are high quality, they are sold at low-

medium prices. The company therefore engages the low-medium price policy while still

enforcing strict quality control measures. The prices are set based on forces of demand and

supply, as well as through assessing the prices that the competing companies set for their goods,

before placing theirs slightly higher than that, to target the high-end customers. The strategy

ensures that the company is able to effectively compete with its main competitors, including

those that have employed low price strategies in order to conquer the market. Before the

company built its brand in the market in the past decades, it would sell its products at low prices,

employing a low-price strategy that boosted its initial market share. After gaining a large market

THE BODY SHOP CASE 5

share and discovering that its main target in the market was people with considerable income, it

raised its prices to the medium level, while still maintaining a few products with low prices that

low-income earners can afford (Chun, 2016).

At the end of the financial year 2018, the company posted revenues at 1.4 billion US

dollars (Chairunnisa et al, 2019). The company now targets women from the urban class and

cosmopolitan cities, who are health and beauty conscious. That is the main reason for the rise in

their prices, since its customers belong to the higher income group. Since the brand has

positioned itself effectively in the market as a natural care luxurious brand which caters for a

high-end section of the society, it has been able to maximize on profits greatly. It has also

recently included men in their target customer list and has been marketing their products widely.

Having created considerable customer loyalty for its products in the market, the company is able

to gather large amounts of money from its prices despite the rise in their pricing policy. Its target

group of customers also believes in purchasing higher price commodities, as they believe such

products are of better quality than the low-price ones provided by competing companies.

The strategy to target those that are appreciative of eco-friendly products, although their

range is high, has been so effective in placing the company as a top retailer. The company’s

nature of branding is ethical, which contributes to its high costs and high prices of products. The

brand has maintained premium prices for premium products, although it faces a lot of

competition even in the premium category (Chairunnisa et al, 2019). In order to compete with

rivals, the company has adopted a competitive pricing policy that keeps its products at par with

the prices rival brands set for their products.

THE BODY SHOP CASE 6

“What they got wrong” Analysis

There are a number of things that The Body Shop got wrong in its marketing strategy.

First, the company does very little advertising of its products. An advertisement is a clear way of

increasing the market share. People tend to make their decisions based on what they see on social

media, the internet and other advertising platforms, as they believe those are the new trends in

the market. Emerging companies that invest heavily in advertisements tend to pick quickly in the

market. There is no way people can know of the emerging trends that the company has adopted,

or its new products, except through the advertisement platform. It also enables people understand

the strengths and importance of the products being marketed, increasing sales (Chun, 2016). The

company’s competitors, including those that could not have come to the limelight like

Maybelline New York that advertised heavily are now beginning to gain ground in the market.

What people see on television for instance has great influence and is likely to make even loyal

customers decide to try new products they see on advertisements.

The second thing they got wrong in my opinion is the franchisee system, which limits the

level of control that proprietors have on all its stores. One of the things that place a company

high in the market radar is its leadership strategy, mission, and vision. A company that has a

strong connection with the top management tends to perform better in the market, as it closely

follows the guidelines put in place and the organizational culture. The franchisee system

encourages loss of organizational culture since employees at the bottom lack connection to the

top management. This reduces the level of trust customers have towards the organization,

especially when loopholes such as poor customer service are detected in some stores.

Sometimes, poor leadership may culminate in lack of motivation for the employees, which

THE BODY SHOP CASE 7

means that they do not perform well for the organization. Some may end up being absorbed by

competing companies and even leak the company’s strategies to competitors (Chun, 2016).

Additionally, the company got it wrong in having a limited number of retail outlets. This

reduced the company’s ability to reach everyone that is interested in their products (Kemna,

2017). Such a thing makes people that are willing to buy their products but unable to, to resolve

for purchasing a different company’s products, develop loyalty for the products and end up

encouraging other people to join them in purchasing the rival company’s products.

“What they got right” Analysis

To begin with, the company got it right when they went for a wide range of products, of

more than 1200 products. Customers like to have a choice for the products they purchase in the

market. A wide range of merchandise to choose from is therefore a good strategy for gaining a

large market share. The second strength is having a well-designed store layout and ambience,

which creates customer attraction (Kent & Stone, 2007). What is more, new customers are easily

able to identify the customer stores, which create loyalty.

The company’s high brand value is another thing they got right. It is viewed as a socially

responsible company especially because it is engaged in many philanthropic activities. People

also want to purchase from companies that are keen on conserving the environment (Chairunnisa

et al, 2019). Additionally, the company maintains good relations with its employees, making sure

to take good care of their welfare. That results in good customer service, which is key in

propelling the company further.

The company invested in a good supplier network, which also ensures that they have

enough raw materials for their commodities. Its step to ensure its products are from natural

THE BODY SHOP CASE 8

products is also a plus, as people are focused on using healthy care products. A good supply

network also ensures that the company gets cheap raw materials in constant supply, which

ensures that its stores are fully packed at all times, increasing the sales volume. What is more, the

company saves on transport costs by creating a wide network of suppliers, closer to all its stores

located globally (Chairunnisa et al, 2019).

Conclusion

Lastly, I believe that the bid to target higher income urban men and women is a good one

in positioning itself strongly in the market. People that are conscious of beauty and health

products are mainly from a high social background. Therefore, the ‘luxury natural care for the

body’ positioning of the company has ensured that it strongly builds itself in the market, as most

people interested in the products fall in that category. Essentially, such customers believe that

higher price commodities are of better quality. Consequently, the low-medium pricing policy is

best suited in ensuring the company remains a leader in the beauty industry.

THE BODY SHOP CASE 9

References

Kent, T., & Stone, D. (2007). The Body Shop and the role of design in retail

branding. International Journal of Retail & Distribution Management, 35(7), 531-543.

Kemna, L. (2017). The body shop Indonesia (Doctoral dissertation).

Chun, R. (2016). What holds ethical consumers to a cosmetics brand: The Body Shop

case. & Society, 55(4), 528-549.

Chairunnisa, S. S., Fahmi, I., & Jahroh, S. (2019). How Important Is Green Marketing Mix For

Consumer? Lesson From The Body Shop. Jurnal Manajemen, 23(2), 321-337.