The Body Shop's business model and value propositions analysis

¶ … Body Shop

The Business model

According to *Psterwa;der's Business model canvass, the 9 building blocks for a business model are:

Key partners -- with which partners do we leverage our business

The Community Trade is their key partner. They gain their provisions through small suppliers. Other partners are 'Earth Aid' and a 3-year partnership with MTV international

Key activities what key activities do we need to run the business

The Body Shop carries a wide range of products for the body, face, hair, and home. Although its logo is 'natural', the Body Shop does not claim that all its products are 'all-natural', but that, if not 'natural', they are 'inspired by nature and many of them feature oils that are supposedly healthy for the body and uplifting for the mood. Their most popular oils and ingredients that they featured in many of their products are marula oil and sesame seed oil that is sourced through the Community Fair Trade Program.

6. Key resources -- on which assets are they running their business

The Body Shop carves its niche via its natural or inspired by nature products. They carry a range of over 1200 naturally inspired ethically produced beauty and cosmetic products targeted at different female and male age groups of ABC1 grade.

Their key resources are also their ECOCERT certified organic skincare line, Nutrigenics (introduced 2010) shortly followed by a hairline (Rainforest Hair Care) that has been advertised to contain no parabens or colorants. Their store-produced antiperspirant deodorants are also original in that they contain no parabens or aluminum salts, using volcanic minerals instead.

7. Channels -- how do we reach each of our client segments

The Body Shop had its own retail stores and consultants. Their channels are the Body Shop stores, the Body Shop at Home scheme and Internet-based virtual presence.

8. Cost structure -- where are their most important costs.

Inflationary pressure during the last few years have caused the oil price to go up, as well as that of bio-diesel crops.

9. Revenue streams -- how do they earn money

The store earns money through their innovative, store-produced natural or natural inspired products such as the ECOCERT certified organic skincare line, their hairline toiletries, and their antiperspirant deodorants

Other popular products include: Body Butters makeup; full skin care ranges; a pediatrician approved baby range; and men's skin care (including Maca Root and White Musk).

Their pricing is relatively high due to high product differentiation.

SWOT analysis

Strengths

The Body Ship has almost 2, 500 stores in 61 countries. Started in the late 1970s to appeal to a market that has been increasingly enamored with natural ingredients and products, this market has only grown whilst trends for holistic and organic items have, if not stayed constant, certainly increased. In this way, the Body Shop not only managed to carve a niche for itself when inclination for natural products was just beginning but it has gained a reputation and foothold in this field, that a rare few have been able to beat.

The Body Shop is a mature market and a long-established company having a niche in the field. It has high entry barriers making for tough competition and little opportunity for new entrants. Their key strength is, therefore, their name, experience, and image. They also have the financial backing and experience of L'Oreal.

Weaknesses

The 1994 investigative article on the corporation, published in Business Ethics magazine resulted in a huge brouhaha in the international and national media, including its story running in the New York Times and on ABC World New Tonight. The story essentially demonstrated that the founder of the story, Anita Roddick, not only stole the store's name, design, marketing concept and most product line ideas from another store in Berkeley, California but she also fabricated her story of traveling around the world discovering exotic beauty ingredients. It was also found that Roddick's 'natural' products contained immense amounts of artificial colorings, scents and preservatives and that, despite claims of the Body Shop giving "most if its proceeds to charity," documents retrieved from Britain's Charity Commission showed that the Body Shop had not given anything to charity during the past 11 years. In fact, the Body Shop, despite presence of a Foundation is penurious in its philanthropy today. The story led to questioning the Body Shop as being a 'socially responsible' company and there was a 50% drop in the market value of shareholder's stock as well as the industry facing millions of dollars in claims by disenchanted industries that had bought their products. The company has never since then regained its former luster or credibility, a number of stores in the UK closed since and it lost a lot of money and supporters over the scandal. Still today, the case is cited widely in university business ethics classes.

Threats

Their cosmetics companies source Aloe Vera from Guatemala, but Guatemala has been undergoing periodic political instability. Similar political instability exists in Peru, which is their source of Brazil nut oil (extracted from the Amazon forest).

The collapse of banking and economic institutions as well as the recession have been hurting, and can still hurt the store. Similarly too, the fall of the British pound indicates higher prices for imported ingredients and products.

There are increasingly stricter and newer legislation appearing all the time regarding chemical products and ingredients used in their items. One such legislation passed in 2008, for instance, stated that all chemicals imported in Europe in amounts at 1 ton per year (including blends) would need to be registered with a European Chemical Agency (ECHA). This makes for slower distribution as well as unstable supplies of ingredients, materials, and products.

The EU also passed a ban on the sale and marketing of animal-tested cosmetic products.

Opportunities

Falling interest rates are favorable for the company's franchising policy. The Internet with increasing interest in e-commerce is proving advantageous for the Company in that they have an increased number of online buyers.

There is also increased male awareness about beauty products and increased interest in enhancing male appearance (called the 'metrosexual' factor).

Altogether, there is an increased awareness of organic and eco friendly products and an increased awareness regarding ethical trading.

An ageing population with motivation and the capacities to spend on premium-priced products that claim to possess natural anti-ageing properties is another factor that works in the store's favor.

Referneces

The Body Shop. (2009) Living our values. The Body Shop International PLC