The Body Shop Files for Bankruptcy: Where Did It All Go Wrong?

Founded by Dame Anita Roddick, the ethically branded store has suffered through several business decisions that led up to filing for bankruptcy protection.

Mar 04, 2024 | By Sanjeeva Suresh

“It didn’t change with the times,” reads reports as The Body Shop Canada Ltd. files for bankruptcy. The news comes as The Body Shop Canada makes plans to close 33 of its stores and halt its e-commerce operations as it seeks to restructure under the Bankruptcy and Insolvency Act. This comes after The Body Shop’s Denmark arm filed for bankruptcy, with 15 stores to close and approximately 90 roles set to be impacted while The Body Shop’s German operation filed for bankruptcy in the Düsseldorf District Court.

The Body Shop’s UK business has also fallen into administration, putting more than 2,000 jobs and 200 stores at risk in a further blow to Britain’s shopping districts. The retailer, owned by private equity firm Aurelius, appointed administrators at FRP Advisory on Tuesday, 13 February. Aurelius said the move was the best way of securing the brand’s future. The buyout firm, which also owns sportswear chain Footasylum and Lloyds Pharmacy, agreed to acquire The Body Shop from Brazilian cosmetics conglomerate Natura & Co late last year, in a deal that valued the retailer at £207 million (USD 351.5 million). Natura & Co had owned the brand since buying it from L’Oreal in 2017. Fellow retail chains Paperchase, Cath Kidston and M&Co have all also gone into administration in the past 18 months, further marking the decline in Britain’s retail sector.

So how did The Body Shop get here? One may be all too familiar with the rich, fruit-flavoured aroma as you enter The Body Shop, the high street and online retailer that specialises in cosmetics, skincare and beauty products. With its sustainability and eco-friendly initiatives, The Body Shop was one of the first accessible beauty brands to sell a holistic, sensorial experience in testing their array of sweet-scented soaps alongside a vast skincare and beauty offering. Reaching its notoriety in the 80s and 90s under the helm of founder Anita Roddick, the business saw a successful 30-year growth. Recent years have seen a steep decline in The Body Shop as it faces competition from the emergence of other ethical brands along with a weakening branding and marketing identity that didn’t stand the test of time.

The L’Oréal Letdown

Things first appeared to have taken a downturn for The Body Shop when L’Oréal absorbed it in 2006. Body Shop founder Dame Anita Roddick and her husband Gordon sold the business to L’Oréal for approximately USD 825 million. While The Body Shop was renowned for its environmentally friendly and green initiatives, L’Oréal was not built on similar ethics of sustainability. According to reports, under the ownership of L’Oreal, the firm saw its business model shift by moving production to the Philippines and using discounts to drive sales. The mass production and increased volume may have led consumers to the conclusion that the brand was not as sustainable as it was touted to be. By increasing production, the production of non-sustainable products like plastic bottles and plastic packaging will undoubtedly increase, which will not bode well in a world of tracking carbon emissions, sourcing transparency and minimising waste.

Natural ingredients and fairtrade production may not have been high on the priority list for the beauty conglomerate. L’Oréal would eventually sell the company to the Brazilian cosmetics group Natura & Co for approximately USD 1,114 million in 2017 after the business’ then-CEO Boynton explained the brand had “run out of steam”. At the time, The Body Shop’s operating profits had plunged 38 percent to USD 49.3 million with sales down 5 percent to USD 991 million in the year to 31 December 2016.

Crushed By Competition

The Body Shop would then face steep competition with the emergence of fellow ethical and natural beauty brands including Lush, L’Occitane, Neal’s Yard Remedies, Rituals and The Ordinary. The issue is that today, a brand that markets itself solely on its sustainability no longer holds a unique brand value as the beauty industry is already moving towards sustainability. Remove the sustainability element from The Body Shop brand and what are they left with? What exclusive offerings does Body Shop have that one can’t get from a similar store?

Therefore in a push to maintain the overheads, The Body Shop finds itself constantly pushing products that have yet to make an impact on the market, particularly with Millennials and Gen Z-ers who have a higher purchasing power and are more accustomed to buying their make-up or fragrances from celebrity-led brands like Selena Gomez’s Rare Beauty or Kylie Jenner’s Kylie Cosmetics. With growing saturation in the market, The Body Shop in comparison — particularly in terms of price point and product offerings — to the aforementioned brands starts to become a “glamorised”, upmarket drug-store brand with an ethical branding that no longer provides differentiation from its competitors.

Languishing in Layoffs

So what is the state of The Body Shop today? The Body Shop is in the midst of a strong turnaround strategy that has seen the brand shut down numerous stores across the UK and Canada after announcing administration plans. The company, which employs around 2,200 workers and has 198 UK stores, tumbled into administration in a bid to become “financially stable”, reports say. Part of the company’s restructuring could see a number of staff get laid off with an estimated decrease of full-time employees by 40 percent.

Perhaps the best mode of action for The Body Shop is to stop releasing too many products or similar-branded offerings and instead look for a mode of differentiation, the way Lush sells their bath bombs or how Neal’s Yard Remedies has revolutionised skincare. The Body Shop also needs to hone in on its online presence and shift out of its current gifting market (which is seasonal) to more evergreen offerings. The Body Shop still has a strong visual image as consumers have grown up with the brand and have an understanding of what the brand is. Hopefully, the next phase of The Body Shop sees itself do a bit of rebranding to catch up with its competitors. If anything, the rise and fall (for now) of The Body Shop clues us into the bigger picture of the state of the beauty industry today.

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