Finance4U

Why Did The Body Shop Fail as it Enters into Administration?


High street stalwart The Body Shop is teetering on the brink, with the business looking likely to join the deluge of UK brands entering into administration.

A tough period of trading has compelled The Body Shop’s new owners, private equity investor Aurelius, to appoint administrators and potentially begin an insolvency process. The business, which dates back to 1976, is expected to make an announcement about the next steps this week.

With over 200 shops across the UK, the collapse of the Body Shop brand could put thousands of jobs at risk. But, what went wrong for the once-thriving UK business? We explain the trends that worked against it, and if there’s any hope for salvaging the brand.

Why has the Body Shop struggled?

The Body Shop is, of course, far from the only high street business to have struggled in recent years. An unrecognisable retail landscape has led to multiple UK brands entering into administration. This can involve closing multiple branches; going online-only, or the complete dissolution of a one-time favourite store.

For The Body Shop, multiple factors have led to its present predicament:

Poor Christmas trading

The Aurelius group purchased The Body Shop business only a few weeks before Christmas. However, a disappointing period of festive trading has since led to the likely need to appoint administrators, just a couple of months later.

Businesses that are reliant on the crucial November through January trading period are deeply susceptible to “one bad Christmas”. Most famously, the collapse of the Woolworths business was tied to a series of underwhelming holiday sales periods, where the brand would typically see strong trading. A poor Christmas trade for Woolworths in 2007 was followed by the announcement in November 2008 that it wouldn’t even reach its next festive sales window.

For The Body Shop, a dire trading period last December hurt the brand badly, with customers eschewing the typical gift bundles that were once a reliable Christmas seller.

Overhang of unpaid staff bonuses

On top of its headaches over a poor trading period, The Body Shop’s owner, Aurelius, has a costly legacy problem on its hands.

According to an exclusive finding from Retail Week, previous owners Natura & Co have sent legal instruction to Aurelius over an obligation to fulfil a long-term incentive scheme for staff. Retail Week has learned that around 20 former Body Shop employees could be owed bonuses worth collectively £2m-£3m.

The pain of online retail

It’s hardly news that retail trends have shifted dramatically towards online retail. Since the COVID pandemic hit, numerous high street businesses that were reliant on footfall and in-person browsing have suffered, as online-only competitors grew.

Natalie Hitchins, Head of Home Products & Services at UK consumer organisation Which?, sympathises with The Body Shop’s situation, but recognises its plight from her own purchasing habits, too.

“I haven’t shopped there in years – it’s a bit of a nineties classic,” Hitchins tells us. “It’s a shame if they go, because the shampoo I like is from there. But, even that, I’ve been buying from Amazon.”

It’s possible that The Body Shop brand is salvaged in some form during the administration process, which could see its products – like that favourite shampoo – still available for online purchase, including through other retailers.

Failing to keep up with Gen Z buying trends

It seems the next generation of consumers isn’t trudging to The Body Shop to load up on skin care products.

While it’s tempting to think that all of Gen Z’s purchases are online only, this isn’t necessarily the case. Savvy high street brands can keep must-have items in stock, and jump aboard the sense of viral purchase excitement. For instance, much-hyped skincare brand Bubble has gone viral on TikTok, and is now said to sell an item in the UK every ten seconds. The range has rolled out across 200 Boots stores since January 2024, as well as being available online at boots.com.

With a staler brand that hasn’t kept pace with the purchasing power of the younger market, The Body Shop has been at risk of fading as a relevant retail destination.

The Body Shop to join the collapse of high street brands

The UK high street is a shadow of its former self. Since COVID and the cost of living crisis hit, numerous UK brands have entered into administration.

One of the more recent collapses was the Wilko chain, which went through an agonising period of “will-they, won’t-they” before entering into administration on August 10th last year. A potential deal to save 51 Wilko stores fell through the following month.

Other high street brands including Debenhams, Monsoon / Accessorize, Oasis and the various businesses of the Arcadia Group all fell into administration in recent years.

While some of these businesses have been able to maintain a more limited presence, through a smaller number of stores, or online-only trading, other UK brands have been wiped from the map. It remains to be seen how much of The Body Shop business will survive the impending administration process, but numerous stores and jobs are likely to be impacted.

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