Business | Retail

Body Shop struggles to reinvent itself

UK company founded 35 years ago as green alternative to mainstream cosmetics struggling amid competition

  • Bloomberg
  • Published: 00:00 December 13, 2011
  • Gulf News

London: The Body Shop was ahead of its time in using natural ingredients and getting customers to recycle packaging. Five years after L'Oreal SA paid $1 billion (Dh3.67 billion) for the retailer, shareholders are still waiting for a payoff.

The maker of £12.50 (Dh71) Candied Ginger Body Butter, founded 35 years ago as the green alternative to mainstream cosmetics, has struggled amid competition from Tesco to Lush, the Poole, UK-based maker of hand-made soaps and face creams. The Body Shop failed to react to louder and more ambitious claims by these and other rivals, said Vivienne Rudd, senior European beauty analyst at Mintel International.

"It doesn't seem to have a unique selling point anymore and that's hard to get back once it's gone," Rudd said.

Sophie Gasperment, who joined the Body Shop as chief executive officer in 2008, wants to change that. The London-based company, which has more outlets than Hennes & Mauritz AB, the owner of H&M stores, will redesign stores next year to showcase the origins and potency of its formulas as well as introduce new packaging and products including the Chocomania bath and body range.

Underperforming sales

L'Oreal chairman and CEO Jean-Paul Agon expects the retailer, whose championing of human rights and fair trade once won customers by making them look and feel good, to match its owner's sales growth by 2014. Revenue at the Body Shop, which accounted for 3.9 per cent of L'Oreal's total last year, rose 2.6 per cent on a comparable basis in the first nine months of 2011 after declining in the previous three quarters. L'Oreal's sales rose 5.1 per cent in the period.

L'Oreal, the world's largest maker of cosmetics, bought the company for £652 million in 2006. The Body Shop's annual sales have fallen 4.1 per cent since 2007 when they reached a record €786.9 million (Dh3,834 million) L'Oreal's revenue has gained 14 per cent in the last three years.

Only Limited Brands' Bath & Body Works has grown at a slower rate than the Body Shop since 2005 in terms of retail sales in dollars, according to an analysis of 12 beauty retailers by Planet Retail. The global beauty and personal care market is set to expand 5.5 per cent to €304.7 billion this year and reach €387.3 billion by 2015, Euromonitor International estimates.

Starting with one store in 1976, founder Anita Roddick built the Body Shop into a chain that now has 2,657 outlets, about ten per cent more than H&M, the world's second-largest clothing retailer. Roddick, who died in 2007, opposed animal testing, used natural ingredients such as mango and tea tree oil and encouraged customers to return plastic bottles for refills.

"It's not always easy to refresh brands," Agon said of the Body Shop in an interview in April. "It's taking time."

Pilot stores

While the Body Shop's natural and ethical stance helped set it apart at first, it hasn't worked hard enough to reinvent itself as a rele-vant brand for young people, according to Matthew Stych, non-food research director at Planet Retail.

"They seem to be sticking pretty much with a core range of products over the last 10, 20 or 30 years and just innovating around the fringe," Stych said.

Lush, the closely held maker of £30 Ladyboy perfume, "is probably seen as more radical these days."

Gasperment, who managed L'Oreal's UK business before joining the Body Shop, halted expansion in 2008 and commissioned research to gauge perceptions of the brand. In the last two years, she has introduced organic lines and updated products like Hemp Hand Protector with Community Fair Trade ingredients. The store revamp marks "a step change" in the Body Shop's strategy, Gasperment said in an interview.

"We've been doing some remarkable things for years but we probably weren't communicating it in the right way before," she said. "The stores are part of the brand expression."

The Body Shop opened three pilot stores in London with pale wood floors, white walls and areas where consumers can test and learn about products. At one in Islington, maps show where ingredients come from and tags give information about suppliers and recommendations from staff. Space is also devoted to causes the retailer supports such as stopping child sex trafficking.

The format is working so far. On average, customers spend up to ten minutes in the pilot stores, twice as long as in the chain's other outlets, according to Gasperment. Since the first opened in May, the new shops are outperforming the retailer's top 40 stores in the UK by mid-to-high single digit percentage, the CEO said.

"Consumers have a huge appetite for storytelling," she said.

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