Corporate Make-Over
Leave it to Body Shop to become the first major retailer to launch a line of beauty products made of hempseed, from the plant family that includes marijuana.
The new hemp skin-care line, one of the company’s innovations this year, is likely to prickle some people. But with its U.S. sales sputtering amid a wave of competition, the British retailer needs the buzz.
Heralded as a pioneer of natural beauty products more than two decades ago, Body Shop today plays the role of a fading starlet sharing the stage with the younger, fresher protegees it inspired, including Bath & Body Works, Aveda and Origins.
“What the Body Shop did was create a category, but then they just sat around and did the same thing,” said Suzanne Grayson, author of a U.S. cosmetics marketing newsletter. “They didn’t respond quickly enough to competitive pressures.”
Jolted by key executive departures, wary investors and declining store sales, particularly in the United States, Body Shop has learned tough lessons about the American marketplace, namely that trends don’t last no matter how popular they may start out to be.
To offset its missteps, Body Shop will bring new packaging and more sophisticated--even controversial--products to its 1,600 stores in 47 countries. Although the revamping began a few years ago, many of the changes will hit the U.S. market this year.
“The market is so saturated that if you don’t have the latest and greatest products, it’s going to be tough,” said Kris Barger, the company’s general manager of worldwide product development. “As years have gone by, customers expect more from products.”
The company’s most attention-getting launch will occur this spring with its line of hempseed oil body-care products. Although the oil contains no detectable traces of marijuana’s mind-altering properties, its use could raise questions because of U.S. laws banning the plant’s production.
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Despite a possible negative response, Body Shop is braced--eagerly--for controversy. Instead of trying to downplay the issue, in April the company will stage a media event at the United Nations during which speakers will challenge U.S. hemp laws.
Along with the hemp launch and additions to its successful aromatherapy collection, Body Shop has initiated a make-over of its packaging.
Instead of continuing with dark-green labels, the company will phase in clear labels to create a more sophisticated look. Meanwhile, its Colourings makeup cases will go from “gun metal gray” to metallic green.
The company is also experimenting with unique packaging for its five hemp products. The Hemp 3 in 1 Oil, for instance, comes in an aluminum container resembling an oilcan.
“We want customers to walk into the stores and see and feel a difference,” Barger said. “In the past, we had launched new things, but because we put it in the same packaging, it was difficult for customers to realize what was new.”
In addition, five U.S. stores will undergo face lifts this year, the first time the company will stray from its signature green look.
The updated design, which has already been put into place at six stores outside the United States, offers brighter lighting, hardwood floors, a bolder storefront logo and such hues as light green, bright orange and yellow. The new layout is intended to help consumers locate products more easily.
“So far we’ve received a lot of feedback from customers saying they’re seeing products they never noticed before,” said Simon Cowell, Body Shop’s director of new store concepts. “We’ll be monitoring to see how it works in the U.S. to determine whether to renovate more stores.”
Although the company once dismissed advertising as unnecessary, last year it introduced a shock ad campaign featuring an overweight female doll. The doll, Ruby, will continue to serve as the company’s spokesmodel, although details of the new advertising plan have not been announced.
With such moves underway, Body Shop says it’s optimistic that increased sales in the United States will follow. But some analysts believe a more extensive restructuring is needed.
“There’s still a heck of a lot that needs to be done,” said Matthew Siebert, an analyst with ABN AMRO in London. “They’re taking steps to improve their retail strategy, but their U.S. operation is not going to turn around overnight.”
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Siebert believes Body Shop faltered partly because it tried to be a specialist in too many areas--manufacturing, distributing, franchising and retailing.
“They need to do more outsourcing to free up management time and capital,” he said. “Then they’ll be able to focus on the core brand name and go back to basics. The brand is universally well-known and has tremendous integrity, but the company strayed off the path.”
Body Shop was founded in 1976 by Anita Roddick, who opened her first shop in Brighton, Britain, as a way to support herself while her husband, Gordon, went on a two-year horseback trip. Using natural ingredients she had learned about on her world travels, Roddick immediately inspired a following.
The company grew rapidly, adding more stores and eventually going public in London in 1984. Four years later, the company opened its first U.S. store in New York, then expanded to the rest of the country.
Championed as a company with a social conscience, Body Shop impressed customers with its opposition to animal testing, trade partnerships with needy communities and use of environmentally sound products. But in 1994, the company found itself embroiled in a public relations mess when it was accused of falling short of its ethical goals. The company vigorously denied the allegations, which were later deemed unfair by an independent research group.
Still, the negative press discouraged investors, who continue to snub the stock during the company’s financial struggles. The company’s American depositary receipts fell $1.13 to close at $9.88 in over-the-counter trading.
Body Shop’s recent sales figures aren’t likely to inspire a rebound. Results at U.S. stores open at least a year--known as same-store sales--dropped 5% in the 44 weeks ended Jan. 3, while Asian economic woes caused a 6% sales decline for that region. The company warned that its worldwide operating profit for the fiscal year ending Feb. 28 will be flat.
Shortly after last month’s financial announcement, Steen Kanter, president and chief executive of the company’s U.S. unit, resigned “to pursue other interests.” He will be replaced by David Edward, the company’s U.S. chairman.
Meanwhile, Body Shop’s chief U.S. rival, Bath & Body Works, had a stellar year, backed by the marketing muscle of its parent company, Limited.
Last year Bath & Body Works’ sales rose 40% to nearly $1.1 billion, while same-store sales increased 11%. The chain also added 171 stores, bringing the total to 921, all but five of which are in the United States.
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Analysts attribute the company’s robust growth to its product innovations and marketing, whereas Body Shop has until recent years focused on the environment and other politically correct endeavors.
“Body Shop has been fixated on being flower children and this whole thing about saving the Earth,” said Allan Mottus, publisher of a New York-based cosmetics trade publication. “That’s fine if you do it in Oregon or New Hampshire, but it’s only a small segment of the population that will buy products because of that. Women want to look good, not just feel good about their purchases.”
Body Shop, however, attributes its difficulties in the U.S. to a painful learning process.
“We’re one of the very few UK retailers operating in a span of 47 markets,” said Body Shop representative Didier Lagae. “We may have underestimated particulars of the U.S. market, but we have learned from that and it’s taken the time it has taken.
“We’ve done some things brilliantly, but we know we can do other things better.”
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Body English
London-based Body Shop is reshaping its look, with a store redesign, above, and a new line of hemp products. U.S. sales have declined in recent years, mainly because of competition from other personal-care retailers.
Figures from 44 weeks to January 4, 1997
Total retail sales: +2%
Same-store sales*: -3%
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Figures from 44 weeks to January 3, 1998
Total retail sales: -1%
Same-store sales*: -5%
*Stores open at least a year
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More than a quarter of the Body Shop’s sales come from the United States.**
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Sales for year ended Percent Country Feb. ‘97, in millions of sales Britain $173 39% Other European stores 63 15 United States 119 27 Canada, Mexico 16 4 Asia 59 13 Australia/New Zealand 11 2 Total 441
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**Includes wholesale figures to franchised shops and sales at corporate-owned stores.
Source: Body Shop
