The Body Shop International plc is a global manufacturer and retailer of naturally inspired, ethically produced cosmetics products. Founded in the UK in 1976 by Dame Anita Roddick, The Body Shop now has over 2,400 stores in 61 countries, with a range of over 1,200 products.
Body Shop has a strict no animal testing policy. In fact The Body Shop is the first international cosmetics brand to be recognized under the Humane Cosmetics Standard for our Against Animal Testing policy.The Body Shop is a leader in promoting greater corporate transparency, and it has been a force for positive social and environmental change through our campaigns around our five core Values: Support Community Trade, Defend Human Rights, Against Animal Testing, Activate Self-Esteem, and Protect Our Planet. The Body Shop also has it’s our own charity, The Body Shop Foundation. Launched in 1990, The Body Shop gives financial support to pioneering, frontline organisations that otherwise have little hope of conventional funding.The Foundation’s focus is to assist those working to achieve progress in the areas of human and civil rights, environmental and animal protection. In March 2006, The Body Shop agreed to a ? 652. 3 million takeover deal by L’Oreal family.
I will be Carrying out a comprehensive market audit and analysis of Body Shop, using various marketing analytical tools for my report. MARKET AUDIT Situation Analysis Company The Body Shop International is a multinational company which specialises mainly in producing ecological skin and hair products.The products are exclusively based on natural ingredients. In addition, they are manufactured according to strict ethical codes, which are opposed to animal testing. The Body Shop franchise is considered to be one of the biggest around the globe, in the cosmetics industry. The franchise has a well established reputation, and can be found in 61 countries. The Body Shop markets over 1200 products, which can be classified into seven broad groups: • Skin products: body lotions • Body products: deodorants / anti-perspirant Makeup products: lipstick, foundation, mascara • Fragrance products: perfume oil, eau de toilettes, eau de perfume • Hair products: shampoo, moisturisers, scalp treatment • Aromatherapy products: massage oil, relaxing body treatments • Hands and feet products: foot scrub, cooling leg gel, foot spray, hand cream New products make up about 15% of the product mix, which is currently below the industry average of 23%.
A new product line called colourings is currently performing well in stores across the globe, especially in the Asian region.Corporate social responsibility is such a major part of the culture of The Body Shop, that it is ingrained in the operations of The Body Shop. The two are almost inseparable. As a retailer, The Body Shop is aware of the amount of rubbish it generates and has taken every effort to reduce the impact of such waste on the environment. Collaborations L’Oreal, which is one of the dominant companies in the beauty industry, acquired Body shop in March, 2006.Although Body Shop has become a subsidiary of L’Oreal it still acts according to its own policy, values and ethical code. L ‘Oreal’s acquisition of Body Shop, has solved the financial problems and has provided the means for expansion to a bigger market share, and increased growth of the organisation.
The Body Shop believes in fair trade to such an extent, that over 20 years ago the organisation set up its own trade programme, called ‘’Trade not Aid’’. Body Shop believes this level of commitment to trading is unique in the cosmetics industry.The trade scheme now works with over 30 suppliers in more than 20 countries, providing over 25,000 people across the globe with essential income to build their futures. Most of the products contain Community Trade ingredients. Customers The Body Shop has developed a niche market for its products, which has brought about brand loyalty. The products of the Body Shop are viewed as essential. The franchise tends to experience boom in sales during festive periods, as people tend to purchase more of the products as gift items.
Reasons for the demand of Body Shop products include; the ethical codes in which the products are made, the natural materials used to make the products, and the price of the products. It has been observed that Body Shop products tend to have lower prices than other brands in shops. Environmental analysis (Political Factors) Political unrest, and instability in different areas where some of the ingredients that are used to make the products of The Body Shop is a major factor affecting the operations of the organisation.For example, the political unrest that in Guatemala, from where The Body Shop sources its aloe vera ingredient used in production, or the political situation in Peru, where the Brazil Nut Oil is sourced from in the Amazon forest. MARKET ANALYSIS Market size The cosmetics industry is a very large industry housing more than 40 established brands, and over 70 smaller brands. The market leader in the industry is L ‘Oreal, followed by the likes of Estee Lauder, Proctor and Gamble, Revlon, and Avon to mention a few.
The Body Shop as a sole entity is amongst the top 15 brands in the industry. The acquisition of Body Shop by L ‘Oreal, has brought about an increase in the brand presence in the market, and in its total market size in the industry. Market share Coming off a record-setting 2000 in both sales and profit, L’Oreal SA remains the global leader in cosmetics with a 16. 8% market share and 2000 gross sales of roughly $4 billion, according to Euromonitor International, a global market research firm with offices in Chicago, London and Singapore. Estee Lauder Company (10.
%), Procter ; Gamble Company (9. 3%), Revlon Inc. (7. 1%), and Avon Products Inc. (4. 7%) round out the top five. Shiseido Company Limited (4.
2%), Coty Inc. (3. 3%), Kanebo Limited (2. 1%), Kose Company Limited (2%) and Chanel S.
A. (1. 7%) round out the top 10. Together these producers account for 62.
1%, or $15. 15 billion, of the total $24. 4 billion global cosmetics market. The balance of the top 20 global cosmetics companies; LVMH, The Body Shop, Mary Kay Inc.
, Kao Corp. , Yves Rocher SA, Pola Cosmetics Inc. , Beiersdorf AG, Oriflame International SA, Alticor Inc. and the Boots Company PLC, account for a roughly combined 11% of market share, according to Euromonitor International. Overall, the top 20 cosmetics producers accounted for roughly 73% of the global marketplace Of the estimated 11% market share, Body Shop has been able to carve out about 4%, with LVMH (An international group with over 50 luxury brands) commanding 5% and leaving the rest to handle 3%. Market segments The Body Shop operates in the following regions around the world; • Americas • Asia Pacific • Europe • Middle East • United KingdomMarket Trend Demand for Natural Cosmetics: General rise in the demand for natural products that are seen to be healthier. Growth of Sales Channel: With the development, and growth of the online sales, coupled with the launch of more online avenues to purchase Body Shop products, there is growth through the sales channel.
All the stores that are located around, and the others that are popping up, also impact on the growth too. Shift in Focus to Youth: as people look for means to looking younger, the natural products appeal most to this trend. Distribution channelCoupled with the vast marketing strength of L ‘Oreal and the ever expanding market size of The Body Shop, the products of The Body Shop have come under increased demand. Body Shop has spread its tentacles to almost all part of the world, with over 2400 stores, in over 61 countries, where only Body shop products are sold and advertised. The internet is another avenue for the distribution of The Body Shop products.
In recent years, the internet through the online sale avenue, has accounted for more than 45% of the sales in the cosmetic industry.In light of this, Body Shop has launched various e-commerce sites, in various regions of the world, so as to keep up with the growing online shopping trend all over the world. COMPETITIVE ANALYSIS Even if Body Shop has been acquired by L ‘Oreal, Body Shop continues to function as a corporate entity, which adheres to its ethical standards, and operating processes in the manufacturing of its products. Based on this, The Body Shop has many competitors, and as such I will pick on two of them for my analysis. | | | | | |The Body Shop |Estee Lauder |Dove | | | | | | |Product Line |Mainly skin care and hair care |Broad, producing a wide range of |Mainly skin care | | |products |products | | | |Environmentally Friendly | | | |Market Position |Top 15 in the industry |Number 2 position in the industry |Competitor in the cosmetic industry| | |Natural based products |Rich and vast experience | | |Competitive Advantage |Brand value |A global brand found world wide |Low pricing, and product innovation| | |Ethical Code and standard | | | | | |Mid range, and slightly lower than | | |Price Range |Mid range, and low Prices |Body shop prices |Mid low prices | General Overview of the Competitions compared to Body ShopThe table above gives a general overview of the products, pricing, position, and comparative advantage of The Body Shop, and a couple of its competitors. Strength – Weakness Analysis |Company |Strengths |Weaknesses | | |Well known for |Recent cost control | |Estee Lauder (US) |high-quality, and |reflects ability to | | |innovative products |promote and sell products| | |Products ranked in |Relatively low operating | | |prestige level |margin | | |Leader in US fragrance |Maturing fragrance market| | |segment |in USA | |Best known global brand |Too large to be | |Procter ; Gamble (US) |for consumer products |innovative despite of 4% | | | |of sales on R;D | | |Company is sustainable |Company bureaucracy | | |from consumer products |hinders quick decisions | | |Relative high operating |It takes approximately 5 | | |margin: 14. 5% |years to bring a new | | | |product to market! | | |New executive is more | | | |externally focused: more | | | |growth outside USA | | SW (Strength, Weakness) Analysis table of the Competitors Based on Porter’s Five Forces Analysis, the following can be identified for The Body Shop. Threats of New Entrants into the market: For skin care products, the threat is relatively high • For hair care products, the threat is relatively high • For make-up products, the threat is high Threats of Substitute product and services: The threat of substitutes to compete with The Body shop in natural based products is relatively low, as the popularity and demand for plant ingredients in cosmetic production increases.
Bargaining power of buyers: High –Dual distribution with multi-channel strategy. Bargaining power of suppliers: Relatively high, using supply chain management design. Rivalry among existing competitors: High [pic] The diagram above is an illustration of how Porter’s forces, interact in the industry, or market place. | | |STRENGHTS |WEAKNESSES | | | | |Niche market positioning |Reducing profits | |Economics of scale (low cost materials) |Inadequate product promotion; especially through advertisements | |L ‘Oreal’s support | | |Presence in various geographical regions | | |OPPORTUNITIES |THREATS | | | | |Entry into new markets (African Continent) |Conflicting ideology | |Increase in online sales |Strong competition | |Development of new products for men (Metro-sexual Factor) |Bad publicity of L ‘Oreal | |Increase in demand for plant based cosmetic products | | | | | SWOT Analysis Strengths Niche market positioning The Body Shop is renowned for its ability to have been able to create a niche market for naturally inspired skin and hair care products. The company has been able to introduce a wide range of natural products to people from different races, and geographical location.The Body Shop has also transformed the ethical ideology of the cosmetic industry, by implanting a policy that does not allow the testing of its products on animals.
This has opened the company’s products to a wide range of consumers. L’ Oreal’s support By being a subsidiary of L’Oreal, Body Shop appears to have an increase in sales. Furthermore, L’Oreal’s experience in advertisement and marketing can boost overall sales As a result of the acquisition of Body Shop by L ‘Oreal, the company now seats on a larger capital base, which it can tap into to carry out product research and development. This will help Body Shop to strengthen its presence in their niche market, and also to develop products which they can introduce to new markets. Weaknesses Inadequate product promotionBody Shop has not tapped into the benefits associated with product promotion. From the analysis of the products of The Body Shop, it clear to see that general change in the taste of individual towards natural based cosmetics, and the growing trend for anti-aging cosmetics, is what has been driving the sales of Body Shop’s product. This is a major weakness of the organisation. Opportunities Entry into new markets Body Shop has planned to move into new market regions, with shops opening in places like Russia, Jordan, India, and Poland to mention a few.
This growth in cosmetics and toiletries is expected to be catalysed by the rising level of personal hygiene and beauty awareness due to changing lifestyles, ncreasing incomes of people, greater media exposure in form of advertisement, and more better improved product ranges. This strategy will augur well for growth in company. Increase in sales online Body Shop launched an e-commerce site in the US, and this improved its presence and sale in that market.
With this incite, the company plans to replicate this in the Europe, especially in the UK where online sales is one of the fastest growing sector, accounts for a large sum of sale revenue made by companies in the region. Body Shop’s increasing online activity in the light of rising online sales, should reduce its operating margins by reducing operating cost, leading to greater profitability. Threats Conflicting ideology / Bad publicityL ‘Oreal’s acquisition of Body Shop in 2006, is a deal expected to be beneficial to both companies. This is so because of the growth opportunities opened to both companies. Apart from this, there are concerns about the corporate image and ideology of the two companies. The Body Shop has built an ethical image for itself promoting ideas like non animal testing, trade opportunities between the company and less privileged regions.
Body Shop is also known for its use of natural ingredients in making its products. L ‘Oreal on the other hand, has been brought under the spot light for its unethical processes, particular to animals, in form of cruelty, and tests which it carries out.In as much as the acquisition may have rewarding opportunities for both companies, there is a tendency for Body Shop to suffer adverse effects on its corporate image and ideology in the long run. Strong competition The competition in the cosmetic industry is a very intense one, with numerous small, and a few big organisations, struggling for market share, and sales. Body Shop comes up alongside the likes of Estee Lauder, Unilever, just to mention a few. In recent times, the larger organisations have intensified their product base in the beauty and personal care market. With big players focusing on this segment, it could result in drastic effects such as reduction in price, reduced profit margins, and loss in market share.
OBJECTIVES The following are the organisational objectives for Body Shop. 1.To gain additional 3-4% of the market share from competition, there by moving from the current 4% position to about 6-7% by 2012, by achieving sales growth of 2-3% by investing in, and development of the Metro-Sexual product line (cosmetic products for modern men, who are more sensitive to their appearance, and general grooming), and the fragrance developed by MTV, in conjunction with The Body Shop.
2. Build brand loyalty of its products, so that at least 10% of the target demographic become repeat buyers, instead of one time buyers, by promotional , pricing, and distributional strategies by the end of 2011 3. To establish and expand market and sale operations in the African continent for the sale of Body Shop products by 2013, by using the organisation’s Fair-Trade scheme as an avenue to penetrate the new market, so as to increase sales by a further 2-5% | | | | |Existing Product |New Product | | | | | |Existing Market |Market Penetration |Product Development | | | | | | |Increase in the market share, and sales through its |Fragrance product developed and in conjunction with MTV | | |niche marketing style |Male grooming product | | |Online marketing, and online sales, through | | | |developments in its I. T. epartment and technology | | | | | | |New Market |Market Development |Diversification | | | | | | |Entry into new markets; Africa. | | Ansoff’s Matrix Form the diagram above, a corporate framework for growth, development, and achievement of objectives in the organisation and other opportunities can be identified, by analysing the effects of product development, market penetration, and market development on target segments by the organisation.
MARKET PENETRATION Body Shop has already developed a niche market for itself, with its wide range of naturally made products.Niche marketing is one of the strengths of the company, and for it to improve its market share and sales figure, it has to continue to drive these products in the markets it has already established. Maximization of this strategy can be gotten by the right manipulating the marketing mix, aimed at the right market segment. Target Market Segment/Demographic • Sex:Female • Age:21-45 • Income:Top income earners-Average income earners • Lifestyle:Working class individuals Market Mix (es) • Product:All the usual products, ranging from skin care products, hair care products, fragrance products, make up products, hand and feet products, and aromatherapy products.New packing of the products may be introduced to spice it up, and give a fresh new look, that will more eye catching to the consumers, and customers. • Price:Since the products of Body shop are heavily differentiated as a result of the ethical and natural ingredient branding, pricing is slightly on the high side. For example, a bottle of shampoo from Body Shop will cost about ? 2-? 3. • Place:Body Shop franchise stores, and shops, online sites, and other retailers.
• Promotion:In stores, and shop advertisements; as the tendency for women to go shopping is high. Advertisement in flyers, advertisement in magazines read by the target market such as Vogue, Glamour, and Ebony, and advertisement on websites, that appeals to the target segment.The driving factor for this target segment is the niche market that the organisation has, coupled with the growing demand for natural based products. More sales outlets will be opened, in areas where the targeted segments are located such as the high streets, retail parks, malls, etc. The major strategy for this segment is advertising. Understanding the female psyche, and knowing how to get their attention, is going to be the determining factor, and this will be achieved through advertising. Other factors to consider Quality of the product, packaging, and the style of the product, are some other factors that can determine the achievement of desired results. PRODUCT DEVELOPMENT Metro sexual lineAs the men, become more conscious of their appearance, and grooming, there is a trend developing in the cosmetic industry and market.
These individuals are tag as the Metro sexual market. Competition in the market has already tapped into this growing segment and is posting growth figures. Based on research, male grooming products such as body wash, deodorant, hair gel, shaving cream, razors, moisturizer, etc. , make up one of the markets that now lead the overall cosmetic markets in many regions of the world, despite the present economic down turn. A market estimated to be about $19. 7 billion worldwide in 2009, male grooming products will boom to $28. 0 billion by 2014.
Let it be stated that men also use grooming products that are for the female market – which raises the total value of male consumption to a grand $61. 3 billion in 2009, with $84. 9 billion expected within five years. From any viewpoint, a lot is being spent on men’ s grooming, thanks to the ongoing rise of middle-class sectors; the enhanced connectivity of all regions of the world, via the Internet; marketers’ more sophisticated appeals to men. The potential is staggering, with it most noticed in the following regions; United States and Canada, BRIC (Brazil, Russia, India, and China) France, Germany, Italy, Japan, Spain, and other countries and regions.Target Market Segment/Demographic • Sex:Male • Age:21-50 • Income:Top income earners-Average income earners • Lifestyle:Working class individuals Target Market Share • For this product, 2%-4% of the market share is aimed. Market Mix (es) • Product:All the products applicable to men, ranging from body wash, deodorant, hair gel, shaving cream, razors, moisturizer. • Price:Since the products of Body shop are heavily differentiated as a result, prices should be on the high side, but due to the fact that it’s a new product we will start of at a low price that will catch the market, and be competitive.
Products will be priced at a pound lower than competition. Place:Body Shop franchise stores, and shops, online sites, tele-visual-sales, and other retailers • Promotion:Advertisements in magazines which are common read for the targeted segment such as GQ, and other publications targeted at the segment. Advertisements in online websites, since it is most likely that men will shop online than in stores. In stores, and shop advertisements will be done too, to cover any open angle.
National dailies and flyers will also be used to spread awareness of the products. Our major strategy in this case will be pricing, and direct advertisement, or awareness campaign through means which have been identified above.The pricing strategy might be a burden to the operational revenue of the body shop, but this is strategy is key for the beginning stage of product introduction. After 18-24months, the pricing will change. By that time, our estimated Fragrance Product sponsored by MTV A joint effort, between MTV (Music Television) and Body Shop, to produce a new body fragrance, will be another new product to hit the market from Body Shop. Based on a charity campaign, by both organisations, this is another avenue through which Body shop can stamp its authority, and presence in the market and hearts of the consumer, therefore enforcing its founding ideology as an ethical brand.Most of the funds raised from the sale of this product will go to charity.
The targeted market for this product is any individual, young, or old, male or female, but particularly, for the youth. Target Market Segment/Demographic • Sex:Male/Female • Age:16-50 • Income:Income earners of all sort, students (individuals in school or not, who receive income either from parents, or guardians) • Lifestyle:Working class individuals/students Target Market Share • This product should give Body Shop about 1%-2% of the market share, as it enforces the brand image, and ideology, therefore increasing awareness of Body Shop’s other products. Market Mix (es) Price:Since the product is done in conjunction with MTV, pricing will be mid range, so that it is affordable for everyone, and Body Shop can make a little revenue to cover its operational cost. • Place:Body Shop franchise stores, and shops, online sites • Promotion:majorly advertisement, done by MTV, through all its various outlets (TV Channels, Websites, magazines) The strategy been targeted through this product development, is image promotion, and brand selling, through collaboration with a multi-national organisation.
This form of publicity will be strong point for Body Shop, with other products of the organisation in the market. MARKET DEVELOPMENTThe ‘’Trade Not Aid” is a scheme developed by Body shop, to develop, and improve the living conditions of the various people, and places where the organisation sources for its raw materials. “Trade Not Aid” initiative was developed with the objective of creating trade to help people in the Third World utilise their resources to meet their own needs. An example of this is a paper factory in Nepal established by The Body Shop, employing 37 people from the community to produce bags, notebooks and scented drawer liners. This scheme is present in places like Brazil, Peru, and Asia, where Body shop has established franchise shops where its products are sold.
In Asia, The Body shop has blossomed into a strong market brand which is well respected and demanded by the people.In the last 4years, Body Shop has achieved a steady growth rate of 3% compared to other competitors, who have dropped in the face of the economic down turn. Body Shop generates huge revenue from the Asian market, coupled with the economics of scale it gets from sourcing its raw materials from the region. The same frame work should be implemented in the African continent. The vast natural resources especially plant life, will be a good source for Body Shop raw material, coupled with the benefits the communities around will gain from the trade scheme. Body Shop will use this Opportunity to market its products in the region, thereby developing a new market for its goods. RECOMMENDATION Body Shop as an organisation should do more in the area of product promotion, utilizing promotion tools like advertisements, public relations, and vast media resources of L ‘Oreal at its disposal.
Advertisements in magazines, national dailies, and other forms of media should be used to spread the message. Sponsorship programmes like the MTV collaboration should be done more often, at least twice a year, various opinion drivers. • To combat the issue of reducing profits, even in light of increasing sales, Body Shop has to explore the option of moving its operations out of developed regions such as the UK, USA, etc. to areas where its raw materials are sources to reduce the operational cost, therefore eliminating some over head cost. SUMMARYIncreasing demand for natural products, ethical business ideology, growing demand for anti-aging cosmetic products, are a few of the factors that have driven The Body shop, in the cosmetic industry.
Body Shop continues to post growth figures yearly, despite other organisations in the industry not doing so well. The acquisition by L ‘Oreal, may not have gone down well with the public, but Body shop proved the critics wrong, remaining steadfast to their ideology and processes. With the expansion and boom of the Body Shop’s Asian market, such a strategy should be further implemented. In a nutshell, Body shop has to tap into other means of product sales, through promotions, opening new sales avenue, and more product range.