Why did The Body Shop enter administration? 4 key takeaways for business owners

A woman scanning a cosmetics product with her phone

On 13 February 2024, private equity company Aurelius announced it had put cosmetics retailer The Body Shop into administration just three months after purchasing the business.

The US arm of the company immediately ceased trading, while some UK stores will remain open. However, according to Sky News, there are plans to close 75 stores and cut staff at the London headquarters by around 40% to keep the business operational for the time being.

The administrators will now decide whether to restructure the business, sell it, or break it up into its constituent parts. Only time will tell what will become of The Body Shop, but the story so far may teach you some valuable lessons that you could apply to your own business.

Read on to learn more about The Body Shop and why it went into administration.

The Body Shop is in administration after nearly 50 years of operation

Since Anita Roddick and her husband Gordon first launched The Body Shop in Brighton in 1976, it has become one of the UK’s most iconic high street cosmetics brands.

The ethical and environmentally sustainable values of the founders were at the heart of the business – in fact, The Body Shop was one of the first companies to speak out against animal testing.

Over the next 30 years, Anita Roddick steered the business through a period of rapid growth, taking advantage of its unique position as an ethical retailer in the cosmetics space.

The Roddicks floated the business on the London Stock Exchange for £80 million in 1984, and continued expanding until they eventually sold to the French company L’Oreal in 2006.

Anita Roddick died shortly after selling the business. Then, L’Oreal changed operations, moving production to the Philippines and trying to boost sales by heavily discounting products.

In 2017, The Body Shop was sold again to Natura & Co – the owners of Avon in the UK – who held it for six years before selling it to Aurelius. It was during this period that The Body Shop first experienced difficulties, reporting a loss of £71 million in 2022 after sales slumped.

Unfortunately, Aurelius was unable to rescue the business and on 13 February 2024, announced it would go into administration.

Unpacking the interesting history of The Body Shop and why it’s currently in a difficult position could help you gain more insight into your own business.

4 potential reasons why The Body Shop went into administration

1. The rise of ethical and sustainable cosmetics brands

Anita Roddick had a revolutionary vision when she launched The Body Shop. At the time, very few others were selling sustainable products and fighting against animal testing.

This unique selling point attracted consumers in droves during the 80s and 90s. But, as attitudes changed, more ethical and sustainable cosmetics brands appeared. For example, companies such as Lush, Evolve, and Neal’s Yard currently enjoy worldwide success.

Additionally, the UK government banned animal testing for cosmetic products and ingredients in 1998. As a result, The Body Shop no longer offered a niche alternative to its competitors – the values that made it successful had become mainstream.

Indeed, according to the 2023 UK Ethical Markets Report, spending on “ethical personal products” increased by 20.4% from 2021 to 2022 alone.

Consequently, The Body Shop clearly struggled to differentiate itself from other cosmetics companies as ethical branding became a must-have for many of its peers.

2. Increased demand for affordable and personalised cosmetics routines

Competition from online retailers is a common issue for high street brands in all industries. The Body Shop is no exception – cosmetics brands such as Sephora, The Ordinary, and Skin+Me have grown in popularity in recent years.

These retailers often represent a different approach to cosmetics as consumers increasingly want a practical, tailored option that’s also affordable.

For example, Skin+Me uses questionnaires and photos to provide dermatologist-approved advice and a unique skincare blend for every customer. The Ordinary has a “regimen builder” which helps consumers choose a selection of products based on their own skin type and needs.

According to Bolt, 57% of Gen Z shoppers said they would pay between 11% and 20% more for a cosmetics product if they had a personalised online experience. Also, 62% said they’re more likely to buy a product if they can use tech tools to find the right formula for their skin.

Personalised cosmetics experiences could become even more integral in the future as companies use artificial intelligence to expand the capabilities of their online platforms.

On the other hand, The Body Shop doesn’t offer this personalised approach to cosmetics. This means it may have failed to keep up with changing consumer trends.

3. Competition from celebrity cosmetics brands

Celebrity-endorsed cosmetics brands could be another significant challenge for high street companies such as The Body Shop.

Hugely influential celebrities including Rhianna, Kylie Jenner, Ariana Grande, and Selena Gomez all have skincare brands, which they mostly market on social media.

According to Shopify, 85% of consumers aged between 16 and 23 said that social media influences their purchasing decisions.

Consequently, celebrities and online influencers may tap into a captive audience and create a lot of competition for high street retailers.

4. Multiple changes of ownership

The Body Shop may also have faced difficulties because it was sold several times in quick succession.

When L’Oreal purchased the company, many loyal consumers raised objections. After all, L’Oreal is a large multinational corporation and some people felt that it didn’t align with the values that were central to The Body Shop and its success.

According to the Guardian, animal rights groups Naturewatch and Uncaged led a boycott of the company, citing fears that L’Oreal tested its products on animals.

Despite this potential blow to the brand, The Body Shop remained profitable. However, after L’Oreal sold to Natura & Co, The Body Shop began experiencing difficulties. Without consistent management, neither owner effectively evolved the business to help it survive.

As a result, by the time Aurelius purchased it, it didn’t take long for The Body Shop to fall into administration.

Perhaps with more consistent leadership and long-term solutions, much-needed changes could have been made to the business.

The Body Shop’s story demonstrates the fine balance between core values and evolution in business

The Body Shop is an interesting case because the origin story of the company demonstrates the importance of core values.

Anita Roddick was passionate about creating ethical, sustainable cosmetics at a time when nobody else was selling them. Ultimately, this mission statement made The Body Shop a leading brand on the UK high street.

It may be important to have a similarly clear vision for your own business, and crucially, this means knowing what makes you different from your competitors. It could be beneficial to keep those values at the heart of everything you do.

Yet, The Body Shop is facing difficulties now because it failed to adapt as consumer trends changed. Its overriding mission became less relevant as sustainability and ethical practices entered the mainstream. It also faced claims of abandoning its values when the Roddicks sold to L’Oreal.

Unfortunately, The Body Shop didn’t find new ways to differentiate itself from its rivals. Meanwhile, its competitors used personalised products, lower prices, or celebrity endorsements to tap into new markets.

So, while core values are important, it is equally crucial that you adapt to changing trends. Finding a balance between the two might be the key to helping your business thrive in the long term.

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Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

About the author
Oliver McDonald
Oliver McDonald
Oliver is the managing director and independent financial adviser at Engage Wealth Management.
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