Body Shop in China Essay

The Body Shop in China: Market Feasibility Research and Strategy Design DU Yuping 1,2, Mai Jinger2 School of Economics and Management, Wuhan University 2 School of International Trade and Economics Guangdong University of Foreign Studies, Guangzhou, P. R. China, 510420 1 Abstract: The well-known British brand, the Body Shop, is a strong advocate of environment and human rights. In recent years, it has accelerated its global presence by its naturally inspired, ethically produced beauty and cosmetics products. However, it has no market share in China yet.

This paper provides an insightful perspective on this company and its products, as well as its competition that it may encounter in the future. The authors also point out the necessity of its impendent entry into China, supported by theoretical and practical evidence. Then, using sampling questionnaire survey, the paper explores how the Body Shop should choose its target market with detailed marketing strategies in China. Keywords: The Body Shop, China, marketing strategies 1 Introduction The Body Shop is a global manufacturer and retailer of naturally inspired, ethically produced beauty and cosmetics products.

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Founded in the UK in 1976 by Dame Anita Roddick, they now have 2,133 stores in 55 countries; with a range of over 1,200 products in Europe, America, Middle East, Asia and Africa. However, so far the Body Shop has not entered the China market. It takes a strong position on activism, ethical business, human rights and environmentalism in a global perspective. The Body Shop is banned in China, because cosmetics sold there have to be tested on animals, according to Roddick. However, things dramatically changed in 2006 when it was bought by the French cosmetics company L’Oreal, which is a big player in China.

China has launched scientific developing strategy for sustainable future since 2006. The Body Shop’s values, culture and marketing approaches coincide with the same values as the current policies of advocating Scientific Development Concept to build a harmonious society in China. [1] Hence it is the perfect time for the Body Shop to enter China market. However, prior to that, as an independent member of the L’Oreal family, the Body Shop has to make decisions on differentiation marketing strategies, market segmentation, and market positioning. 2 Theory of Societal Marketing Concept and the Body Shop Corporate Values 2. Theory of Societal Marketing Concept Marketers in the twenty-first century are increasingly recognizing the need to have more complete, cohesive approach that goes beyond traditional applications of the marketing concept. A whole set of forces that appeared in the last decade call for new marketing and business practices from “the holistic marketing concept” perspective. Holistic marketing incorporates social marketing and understanding boarder concerns and ethical, environmental, legal, and social context of marketing activities and programs.

The cause-and-effects of marketing clearly extend beyond the company and the consumer to society as a whole. New terms “humanistic marketing” and “ecological marketing” are suggested, but Kotler, et al. propose calling it the societal marketing concept. The Societal marketing concept holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well-being.

A number of companies—including the Body Shop, have achieved notable sales and profit gains by adopting and practicing a form of the societal marketing concept called cause-related marketing. [2] Pringle and Thompson define this as activity by which a company with an image, product, or service to market, builds relationship or partnership with a 441 “cause,” or a number of causes,” for mutual benefit. [3] 2. 2 The Body Shop’s Unique Corporate Values The Body Shop sees cause-related marketing as an opportunity to enhance their corporate reputation, raise brand awareness, increase customer loyalty, build sales, and increase press coverage.

Its corporate values are composed of five core values. The first one is to Oppose Animal Testing. The opposing animal testing for both cosmetic products and ingredients began in 1976. In the 1980s and 1990s, they successfully campaigned with animal protection groups to change the UK and European laws to support the development of alternative testing methods. At the very beginning, the products were tried on human volunteers. Along with the development of technology, tube testing has played a leading role to protect the rights of both human and animals. The second one is to Support Community Trade.

The Community Trade Program initiates the “Trade Not Aid” objective of creating trade to help people in the Third World utilizing their resources to meet their own needs. This reflects its avowed practice of trading with communities in need and giving them a fair price for natural ingredients or handcrafts they purchase from these often marginalized countries. They have found many trade partners in over 24 different countries that are often overlooked by the local as well as the global society. The third one is to Activate Self Esteem. Women are the main customers and employees in The Body Shop.

They have never neglected protecting women’s rights. The first campaign against domestic violence took place in the mid-1980s in Canada. Now, the campaign has been spread to 27 countries in the world. The fourth one is to Defend Human Rights. The Body Shop has long campaigned on human rights, highlighting abuses and increasing the global awareness of issues by making full use of the geographic advantages of their shops and supporting other human rights organizations. The last one is Protect Our Planet. In 2001 a huge campaign against global warming was hosted by the Body Shop and Greenpeace.

They advocated the use of recyclable source and materials. Significant progress was made at the World Summit on sustainable development hosted at South Africa. They successfully persuaded the leaders to promise the Green Effect. It is also renowned for its forest protection. The Body Shop is a large consumer of plants and forests, but at the same time, it is a protector. It cooperated with the Forest Stewardship Council to maintain the balance in forests. In late 1990s, a series of environmental protection activities were held by the Body Shop. [4] The Analysis of Direct Competition The Body Shop’s direct competition is not from the name brands like Dior, Chanel or Olay, but rather the less well-known brands from Japan or Korea. Along with the great impact of Korean fashion, many Korean cosmetics brands like Missha and the Face Shop have already established shops in China. These two brands also promote their natural ingredients and target the young customer segment as what the Body Shop is currently focusing on. Comparing to the competitors, the Body Shop has advantage in products but disadvantage in price. . 1 Products Competition The concept of product has been broadened in the modern marketing theory. A product is anything that can be offered to a market to satisfy a want or need. Philip Kotler defines that marketers should plan their market offerings at five levels, which are the core benefit, basic product, expected product, augmented product and potential product. [5] Each level adds more customer value, and the five constitute a customer value hierarchy. Products of these three brands are all using natural ingredients and simple and natural in packaging.

The Body Shop, however, differentiates itself at the top two levels of the Five Product Levels. It encompasses all the possible augmentations and transformations the products might undergo in the future. 442 Figure 1: The Product Levels of Missha and the Face Shop MISSHA & THE FACE SHOP Natural & flavors Effective Moisten & whiten Skin protection Consumers buy skin care products to protect their skin (core benefit), and their expectations will be broadened to moistening or whitening ingredients if they are willing to pay more (basic product). Ingredients never equal to effect, which most customers are aware of (expected products).

To enhance the product level, many flavors can be found in the products of Missha and the Face Shop (augmented product), though they strongly emphasize that they are natural. The highest level (potential product) cannot be found in Missha and The Face Shop. See figure 1 Figure 2: The Body Shop’s Product Levels THE BODY SHOP Products of the Body Shop offer the same benefits as those of Missha and the Face Shop, Unique Corporate Values from its core benefit to expected product. The difference is that the flavors used by the Body Shop are mostly natural (augmented level).

Far more than the visible products, the Body Shop’s unique corporate values create the potential Mainly from natural value to fulfill customers’ desire of making a better harmonious world. Its good corporate Effective citizenship goes beyond supplying rational and emotional benefits. (See figure 2) 3. 2 Price Competition Moist & whiten Since most of the Body Shop’s factories are still located in the UK, where wages and salaries are Skin protection much higher than in Asia, product prices from the Body Shop are higher than that from Missha and the Face Shop.

Furthermore, Missha conducts mass production, leading to economy of scale; therefore its products are cheapest among the three. 4 The Analysis of the Body Shop’s Entry Motivations 4. 1 Market Analysis – Why China? It is clear that business organizations must be profitable to survive. Although the Body Shop promotes its core values concerning the environment and human rights, we would rather say that the Body Shop is a brand with more global vision than a non-profit organization.

The Body Shop divides its markets into four parts: Americas, Europe, Middle East & Africa, UK & Republic of Ireland, and Asia Pacific (including Australia and New Zealand). The retail sales reports from 2002 to 2006 are described for each of these markets. (See table 1) [6] 443 ) ( Table 1: Retail sales of The Body Shop in different areas? 2006 2005 2004 Americas 175. 9 162. 6 164. 4 Europe, Middle East & Africa 218. 4 201. 7 200. 5 UK & Republic of Ireland 166. 0 161. 2 161. 5 Asian Pacific 211. 7 183. 2 173. 1 2003 162. 4 194. 0 179. 6 161. 2002 163. 2 187. 0 181. 3 149. 2 This data shows that the sales in the U. K. and Ireland have experienced a decrease from 2002 to 2005. It started to increase in 2006, comparatively slower than other markets. In Asia Pacific, the sales are growing dramatically except for China. The Body Shop’s global vision takes all of its stakeholders’ needs into concern and now this worldwide brand needs China. The Body Shop should invest in China not merely because of the huge market with a population of 1. 3 billion, but for the huge demand of Chinese.

The past annual reports of the Body Shop shows that hand and body lotions are the most popular around the world, which is predicted to be a great need of Chinese in the coming years. 2005 China cosmetic market sales increase 18. 19%, consumers cosmetic expenditure is USD $10. 3 billion, increased 11% than 2004, 68% than five years ago. The estimation is that between 2002-2007, the increase rate should be 7% average each year, most from skin care and color cosmetic, among which skin care products will take 40% at 20% increase rate, till 2010, cosmetic retail sales will reach 17 billion. 7] 4. 2 Timing Analysis – Why Now? Some multinational cosmetic brands, such as Dior, Chanel, Shiseido, Olay and Pond’s, have captured most Chinese market share. Their market shares will not affect the Body Shop sales for two reasons. One is the difference of market positioning; the other is the difference of brand value. The world brands like Dior represent status and wealth, while the Body Shop stands for protection of the environment and animals. The customers will find satisfaction from the Body Shop’s values being environmentally friendly and social conscious.

Few corporations in China have similar values for their products. The Body Shop can bridge this gap by providing skin care products, as well as a sense of being environment-friendly. The values and the image of the Body Shop are unique, and they will spread all over China. Another reason why the Body Shop will highly be recognized is that its marketing strategy coincides with the policies of the Chinese government. The fast development of China’s economy is partially at the cost of the environment, natural resources and the infrastructure of population.

The Chinese are now realizing that the development and modernization of society does not rely on the growth of GDP only, but also the harmonious relationship between people and nature. The Green GDP and scientific development concept of achieving social harmonious is being implemented by the government 4. 3 Target Market — Who are the target customers? A sampling questionnaire survey was conducted among 200 consumers, ranging from 18 to 50 years old in May 2006. a total of 170 valid responses that were used for analysis in this paper. Among the 170 responses, 66% are females.

The findings are: (1) About 60% hope that cosmetics can be a symbol of being environmental friendly. (2) 90% will choose products made of natural ingredients. (3) 90% spend less than 300RMB on cosmetics and skin care products quarterly. (4) 83% Chinese youth (age range from 18 to 25) are innovators and conscious of environment. The conclusion is that the Body Shop can take a share of potential market in China. The Body Shop should initiatively launch its products among younger generation in China. The target customers for the cosmetic industry are young females who chase beauty and are willing to spend money on it.

So packaging is one of the vital factors in attracting customers. The Body Shop takes a unique approach by choosing simple packaging. The packaging is not made for mature women. It is made for young female students, who can enjoy an international brand at an inexpensive cost. The Body Shop not only meets the young people’s demand for beauty, but the demand of being responsible to environment and human rights. In this case, the target market of the Body Shop should focus on young people ageing from 15 to ? All numbers are stated in million of UK pounds. (From The Body Shop Annual Report 2002 to 2006) 444 0. Based on the marketing model of Time of Adoption of Innovations, young people will be opinion leaders and early adapters for their knowledge and salary, and they will be the innovators of new products. Though they just take up 2. 5% of the total population, they are the key to influence the early users who occupy 13. 5% of the total. [8] The consumption habits of these early users are quite similar to that of the innovators but only more conservative and reluctant to take risk. As soon as someone tries the new products and reacts favorably, others will follow.

Once the youth market captured, the rest will follow especially processional females. According to the latest survey, Chinese women’s employment rate reaches 45% in China [9]. Hence professional women will be another huge potential market. 5 Marketing Strategies 5. 1 Pricing — how to choose a right price for the right market? Pricing can be determined easily when a target market is identified. From the above-mentioned sampling survey, 64% of the 170 responses spend less than 1000 RMB on cosmetics and skin care every quarter; and 24% of their expenditure is between 100 RMB and 300 RMB on cosmetics and skin care.

This number cannot be ignored if a cosmetics company wants to enter this large market and be a leader. For the younger generation the price of the products cannot be high. The price of these main competitors ranges from 10 RMB to 200 RMB. The prices in Hong Kong are higher than that in the US or the UK. And the consumers’ purchasing power in Mainland China is much lower than that of Hong Kong. Hence the Body Shop should adopt a price range in China which similar to that of the US or the UK rather than of Hong Kong.

Once the Body Shop establishes its manufacture base in China, the cost will be greatly reduced and the capability of price adjustment will be achieved accordingly. 5. 2 Channel — how to arrange the selling channel? 5. 2. 1 Chain stores The sampling survey reveals that supermarket and shopping mall counter is the most popular place for Chinese to purchase skin care and cosmetics. 120 out of the 170 responses hope that they can choose products from the chain stores in the future, which suggested that the Body Shop should build up its own stores to attract potential customers.

The Body Shop is regarded as “a corporation with soul”, that cares about corporate culture and corporate image. It insists on selling in its own stores rather than setting up counters in a shopping mall. The stores of The Body Shop can be found easily worldwide because of stores are identical. Product differentiation is of crucial importance in this competitive buyer market. The chain store of the Body Shop stands out for both differentiation and its unique values. Hence, in China, its appearance should be the same as elsewhere worldwide.. 5. 2. The Body Shop At Home™ The Body Shop At Home™ is a direct sales channel started in the UK in 1994 and then spread to the US and Australia. Some housewives join the Body Shop as sales agents and hold sales parties for other housewives. This sales channel allows the Body Shop to reach out to more customers by bringing the store directly into customers’ homes. This would be a totally new method of marketing in China, but it offers a good opportunity for women to choose products and share feedback in a relaxed atmosphere. This fresh concept can attract female consumers.

Nowadays students in China can only obtain famous skin care products and cosmetics brands from campus agents, as they cannot afford the products sold over the counters. It is a major problem that agents cannot guarantee the ingredients and the quality of the goods. If the Body Shop can hold small parties to share products and opinions, that would be a good way to boost sales among students. 5. 2. 3 Body Shop. Com & Body Shop Hotline With the development of taobao. com and ebay. com, buying online has become a popular way for Chinese individuals in their 20s to 40s.

The survey shows that the network purchasing rates the second place after the chain store. Youngsters like networking and adopt internet purchasing. The Japanese cosmetics corporation DHC has tried internet sales in China and experienced a sales increase. Customers of DHC can make an order through phone calls or logging on to the homepage of DHC. The Body Shop can adopt the same method, and set up these selling channels. Customers can order through its home pages once the distribution channel is established in China. The Body Shop can send some 445 roduct information to customers with samples to enable customers to try before purchasing. If they are satisfied, customers can order directly through phone calls. After receiving orders from calls or network, the goods will be delivered to customers. 5. 3 Promotion 5. 3. 1 Posters & Commercials The Body Shop adopts environmental friendly manufacturing, opposes abuses of human rights, and is accountable for its actions. The unique values attract numbers of media groups in many countries. This results in its establishing a good reputation without any advertising.

The Body Shop also joined numerous social causes, which substitute advertisements. In China, however, it is totally different. In this brand new market, most people are not aware of this company. If it carries on a marketing promotion of “No Commercials” it is impossible to reach a high market share. Hence commercial ads are inevitable in China. The Body Shop uses this advertisement to give an impression that women should care about their well being both mentally and physically and it has created a “sexy” brand with simple packaging and without objectifying women.

Many brands reach customers directly by colorful commercials and show their products in movies and TV play series. For the sake of brand image, some programs and movies about human rights, environmental protection and animal protection can be chosen by the Body Shop as carriers for particular commercial as most of the audiences are well educated, well paid and environmentally concerned. 5. 3. 2 By-products Many brands will launch a line of souvenirs occasionally, which may be sold at stores or given to customers as free gifts. The Body Shop has already used this method to promote its corporate culture and products.

It cooperated with MTV in Hong Kong to launch a new wallet, which will be on sale in its chain stores in six Asian countries. One unique idea of this wallet is that there is an interlayer for condom storage, which will help prevent sexually transmitted diseases. It corporate values cannot be expressed clearer than this. 5. 3. 3 Product promotion and skin care demonstration The target consumers of the Body Shop, aged from 20 to 40, are energetic, knowledgeable and environmentally concerned. Similar to the famous cosmetics brand Mary Kay, the Body Shop can give some lectures on makeup or skin care on campuses.

Some sales people from Mary Kay emphasize too much on sales and this raises negative feeling among students. To reach broad brand awareness and high brand loyalty such kinds of sales demonstration should be held and some samples should be given to students after the demonstrations. “Trying is believing” matters for these innovators so as to promote its products by experience marketing approach. 5. 3. 4 Sponsorship and activities The British Consulate regularly sponsors some competitions and hold some meetings to upgrade its image. The Body Shop can sponsor environmental knowledge competitions as well.

They can offer the winners a chance to go to UK and visit the production lines and show them accountability of its business, which will result in brand enhancement. Besides, the Body Shop can be the sponsor of the Arbor Day and Earth Day, which will support the core values of the company. To conclude, the Body Shop can support any activities in accordance with its corporate values, such as environmental protection competition, festivals and human or animal rights exhibitions to build its corporate identity among the public in China. 5. 3. 5 Taxi! In March 2005, the Body Shop launched a partnership with Transport for London.

The cab will issue taxi receipts calling on customers to support the Body Shop’s campaign on domestic violence; and the taxi cabs are painted with the pattern of family peace. The method kills two birds with one stone by promoting the brand and supporting the campaign against domestic violence. Using this method in China will dramatically promote its corporate values. 6 Conclusions and Limitations The Body Shop is famous for creating a niche market sector for naturally inspired skin care and 446 cosmetic products through it unique corporate values worldwide.

In this paper, through analysis of cooperate values, its products, its competitors, and the micro- and macro-environments of China market, The significance and imminent of the Body Shop’s early entry into China market are strongly proposed. Once the Body Shop decides to enter the China market, the relevant marketing strategies and management should be implemented, such as, the market segmentation and market positioning with the proper consideration of Chinese consumers should be studied in order to win the mind share of potential Chinese customers with the right marketing strategies.

Overall, the findings of market survey and theoretical analysis strongly support the feasibility of the Body Shop’s early entry into China market. This paper also has some important implications for foreign multinational companies to grasp proper opportunity to enter China market as a crucial step in its worldwide expansion. As this paper is only based on a preliminary market survey and in a limited small sampling group, further systematic survey should be conducted. Reference: [1] Ma Zhancheng, Fan Ruiun, and Yao Dawei.

Promoting Scientific Development Concept and Social Harmonious. People’s Daily (Overseas Version) Canadian Publication Mail Time-Committed Sales Product Agreement No. 40013499, Canada. Version 8, March 06 2007:1(in Chinese). [2] Kotler P. Keller L. K. and Cunningham H. P. Marketing Management. Canadian 12th Edition, New York: Pearson Prentice Hall, 2006:17-21. [3] Pringle H. and Thompson M. Brand Soul: How Cause-Related Marketing Builds Brands. John Wiley & Sons, 1999. [4] The Body Shop .

Our Values and Campaigns. The Body Shop International PLC, 2007. [5] Philip Kotler. A Framework for Marketing Management. Peking University Press, 2004, pp. 213. [6] The Body Shop. Annual Report and Account. The Body Shop International PLC. 2002, 2003, 2004, 2005, 2006. [7] Chinabgao. Report on China’s Cosmetic Market in 2006. China Baogao Dating Research Report Net. Sep. 30 2006, No: yb06-14578 . [8] Everett M. Rogers. Diffusion of Innovation. New York: The Free Press. 1983. [9] Xinhua News Agency.

The Employment Rate of Chinese Women Occupies 45% in society”, (in Chinese) People’s Daily (Overseas Version) March 08 2007, Canadian Publication Mail Time-Committed Sales Product Agreement No. 40013499, Canada. Version 8, P. 1 (in Chinese). DU Yuping PhD Candidate of School of Economics and Management, Wuhan University Associate Professor of School of International Trade and Economics,Guangdong University of Foreign Studies, Guangzhou, P. R. China, 510420 Mai Jinger, Postgraduate Student of School of International Trade and Economics,Guangdong University of Foreign Studies, Guangzhou, P. R. China, 510420 , 447


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