Running Head: The Body Shop Case
Running Head The Body Shop Case
The Body Shop Case: A Managerial Economics Final Case Study Paper Pratima Tharval New England College
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 from the top management and a limited number of retail outlets. Keyword: demand analysis, price analysis, competition
Paper For Above instruction
Introduction
The Body Shop, established in 1976 by Anita Roddick in Brighton, UK, is a pioneering entity in the eco-friendly and ethically sourced beauty products market. Its core mission revolves around promoting natural ingredients, supporting fair trade, and advocating against animal testing. Operating over 3,000 stores across more than 60 countries, the company has positioned itself as a leader in ethical cosmetics, appealing primarily to environmentally conscious consumers with higher income levels. Its strategic choices, market positioning, and operational challenges provide a rich case for analyzing demand, pricing, competition, and strategic management in the beauty industry.
Company Overview and Market Structure
The Body Shop specializes in organic skin care, beauty, and cosmetic products, emphasizing ethically sourced ingredients and cruelty-free practices. Its competitors include Estee Lauder, Sephora, L’Occitane, Lush, Yves Rocher, and Weleda, all of which emphasize natural ingredients and sustainability. The market structure for The Body Shop aligns with perfect competition in some segments, characterized by numerous firms offering similar eco-friendly products, and monopolistic competition in terms of branding and product differentiation. Regulatory oversight primarily involves consumer safety and environmental standards, with agencies such as the FDA and local environmental bodies ensuring compliance.
Demand Analysis
The demand for The Body Shop’s products is driven by multiple factors, including consumer preferences for natural and ethically sourced products, income levels, and perceptions of quality. Consumer behavior studies indicate that buyers’ purchasing power and substitution effects significantly influence demand. The company targets high-income urban consumers, whose willingness to pay premium prices for eco-friendly and cruelty-free products is high. Demand elasticity is relatively inelastic among this demographic, as they prioritize quality and ethical considerations over price. Price sensitivity tends to vary across product lines, with premium items less elastic than more affordable products like basic body care items. Moreover, advertising elasticity plays a crucial role; increased visibility and brand reputation enhance demand, especially among Millennials and Generation Z consumers, who value corporate social responsibility.
Pricing Strategies and Analysis
The Body Shop employs a value-based pricing model aligned with its brand image of ethical luxury. Its pricing reflects the higher costs of ethically sourced ingredients, cruelty-free testing, and sustainable packaging. The company adopts a premium pricing strategy for its core products, reinforced by consumers' perception that higher prices signal better quality and ethical standards. The strategy also involves price skimming for new product launches, capitalizing on early adopters willing to pay more for innovative and ethically driven products. Additionally, the company uses bundling, promotional coupons, and loyalty programs to encourage repeat purchases and increase perceived value. Price discrimination is evident across various markets, with localized pricing reflecting income levels and competitive intensity.
Missteps and Strategic Challenges
One critical mistake identified is The Body Shop’s limited investment in advertising and digital marketing. In an increasingly digital environment, weak online presence limits brand reach and customer engagement, giving competitors who heavily advertise an advantage. Furthermore, its franchise system, while expanding its global footprint, reduces control over service quality and brand consistency, potentially damaging its ethical image. Limited retail outlets restrict customer access, especially in emerging markets, and hinder market penetration efforts. These challenges weaken the company's competitive positioning, especially against aggressive marketing competitors like Sephora and Lush.
Strengths and Strategic Successes
Conversely, The Body Shop’s extensive product range of over 1,200 items appeals to diverse customer preferences, fostering loyalty. Its store layout and ambiance reinforce brand identity and attract consumers seeking an engaging shopping experience. The company’s brand value, rooted in social responsibility and environmental conservation, enhances customer loyalty and differentiation. Its strong supplier network ensures the consistent availability of natural raw materials, reducing costs and supporting its core ethical stance. Maintaining high standards for employee relations and customer service further fortifies its market position. These strategic elements collectively contribute to its competitive edge within the niche of eco-conscious consumers.
Conclusion
The Body Shop’s strategic emphasis on natural ingredients, ethical standards, and targeted high-income consumers has effectively positioned it within the premium segment of the beauty industry. Its pricing, branding, and product diversification strategies align with consumer perceptions of quality and social responsibility. However, gaps in digital marketing, control over franchise outlets, and market expansion opportunities suggest avenues for strategic improvement. To sustain its growth trajectory, The Body Shop should enhance advertising investments, refine franchise oversight, and expand retail presence in emerging markets, leveraging its strong ethical brand to compete effectively in a dynamic global landscape.
References
- Chun, R. (2016). What holds ethical consumers to a cosmetics brand: The Body Shop case. Business & Society, 55(4).
- Kent, T., & Stone, D. (2007). The Body Shop and the role of design in retail branding. International Journal of Retail & Distribution Management, 35(7).
- Kemna, L. (2017). The Body Shop Indonesia (Doctoral dissertation).
- 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).
- Friedman, M. (2002). Capitalism and Freedom. University of Chicago Press.
- Porter, M. E. (1985). Competitive Advantage. Free Press.
- Hollensen, S. (2015). Marketing Management: A Relationship Approach. Pearson.
- Kotler, P., & Keller, K. L. (2016). Marketing Management (15th ed.). Pearson Education.
- Yale, R. (2013). Business Strategy and Sustainability. Routledge.
- David, F. R. (2017). Strategic Management: Concepts & Cases. Pearson.