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What will it take to turn around The Body Shop? Part I

By Simon Pitman+

23-Mar-2017
Last updated on 24-Mar-2017 at 20:21 GMT2017-03-24T20:21:33Z

What will it take to turn around The Body Shop? Part I

With speculation mounting over the uncertain future of The Body Shop, we asked two experts from the Kline Group about what went wrong and what type of business should take it on.

In the first of a two-part series we concentrate on what has happened to The Body Shop business in recent years and why the business has continued to under-perform.

L’Oréal acquired The Body Shop in 2006, when the business was already starting to lose steam, as competition in the retail space for natural cosmetic and personal care had become highly competitive. 

Things proved to be more complicated...

Eleven years ago the acquisition seemed like a good fit for L’Oréal, diversifying its portfolio into both the specialty retail area as well natural beauty, but things proved to be more complicated, as Carrie Mellage, Kline Group’s vice president of consumer products explains.

“Both market segments were - and still are - attractive as they had been growing at double-digit rates throughout much of the early 2000s. However, The Body Shop had been registering only low single-digit growth,” Mellage told Cosmetics Design.

“L’Oréal—undisputedly a brilliant product marketer—struggled to find its way as a retailer. Indeed The Body Shop came to L’Oréal as a market laggard, but the beauty giant has failed to turn it around. Ten years later The Body Shop is the only boutique beauty retailer chain in the U.S. among the top 10 that registered a sales decline in 2016, according to Kline’s Boutique Beauty Retailers report.”

The natural cosmetics space is very different today

Mellage also points out that the natural cosmetic and personal care space is a lot different today, with the advent of certification giving rise to much more ingredient accountability and a higher standard for products.

In this context, The Body Shop only falls under the category of “nature inspired”, putting it in the shadows of many newer, often organic certified brands that comply with the strict ingredient guidelines laid down by the certification bodies - a point that is outlined in Kline’s report on the global natural personal care market.

While the bar has been raised on product formulation, Mellage states that the natural beauty retail space has also greatly evolved.

“The Body Shop now faces increasing competition from rising players like Lush, Sabon NYC, and Neal’s Yard in specialty retailing and Honest Beauty, Shea Moisture, and Dr. Hauschka in natural personal care,” she points out, while also stressing how “the ownership experience has educated L’Oréal about how to be a retailer.”

In the second part of this article we speak to Kline Group’s Susan Babinsky to find out about the best possible strategies to turn around the business and what type of player might be best positioned to take this challenge on. 

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