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As an entrepreneurial venture, Lush company is acknowledged as the successful cosmetic retailer which is created by Mark and Mo Constantine in Poole, Dorset, United Kingdom under the name of Cosmetic House Limited in 1994 (Wikipedia, 2012). It was in 1995 that they adopted Lush as company’s name due to the competition ran in the fledgling company’s first handmade newsletter and catalogue. Nowadays, Lush company has almost over 820 stores in 50 countries all over the world (Lush Website, 2012).
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Product and service
Lush company’s products are: bath products, shower products, hair products, face and beauty products, body lotions and other products, perfume. But the innovation and highlights of the products in Lush company are: differentiation, communication, fresh ingredients, environmentally-friendly packing. Producers use the fresh fruits or vegetables to make different shaped products with different color for looking artisanal, which create the differentiation on the market. Besides, each producers’ name will be located on the products’ label for connecting the customer on the personal level and promoting the brand. Lush company also encourages the ethical value such as packing with the recycled materials (Marketline, 2008). According to the different types of innovation by Schumpeter (See Appendix1), Lush company belongs to type1 the introduction of a new or improved good or service (Paul Burns,2011).
Lush company not only provides the considerate service in the store but also providing the remade order for customer through the website. Consumers can also communicate with Lush through the publication of Lush Times (Lush Website, 2012).
Stewart and Zhao (2000) define the model as ”a statement of how a firm will make money and sustain its profit stream over time.” Therefore, the business model represents how the firm will be running. As Gary Hamel (2001) believes that there are four components of a business model, namely, core strategy (competition strategy), strategic resources( how a firm acquires and uses its internal and external resources), partnership network( suppliers, partners, other relationships), customer interface(how to interact with customers).
For Lush Company, I the form below can illustrate its business model.
- Core strategy
Business mission —-We Believe (See appendix 2)
Product Scope—– personal care products
Basis for differentiation— Use fresh ingredients and products are handmade
- Strategic resources
Core competencies—–unique style of retail, retain its original focus, we believeâ€¦â€¦
Strategic assets—- corporation culture, brand reputation, ethical beliefs
- Partnership network
A private owned company with subsidiaries in global
- Customer interface
Target customer- young adult women ages12-30, diverse customer due to divers products
Fulfillment and support—-natural ingredients and anti-animal testing trade
Pricing structure—- lower than the luxury brand like The Body Shop, higher than the products in the supermarkets.
A firms’ target market is the small number of group of individuals or business that it pursues or tries to appeal to in a certain time (Bruce R. and R. Duane Ireland, 2012).The primary target market of Lush focuses on the young adult women who ages 18-45, the urban adult women in highly populated cite, and the diverse market due to the diverse products. The second target market is the acquaintances of the primary target market (Kwilkison, 2012).
Price is the only component in the marketing mix that generates revenue, all other elements stand for costs( Kotler and Armstrong,2001). The most used methods to set the price of products for the entrepreneur are cost-based pricing and value-based pricing(Bruce R. and R. Duane Ireland, 2012). As Lush company uses the natural ingredients for handmade products, therefore, they price their products based on the costs rather than on what the market thinks it should receive. Compared with the local competitors and supermarkets, Lush products price a litter higher but less than the famous cosmetic company like Body Shop(Lush marketing project, 2012). Lush offers customer’s good value, most of their products varies from designing style and weight, which is also the value of products, therefore, Lush prices different item based on the ingredients and weight with high quality.
Branding contributes to the development of a company, a strong brand could become the powerful assets of a firm. As Bruce R. and R. Duane Ireland (2012) pointed that “One of the keys to effective branding is to create a strong personality for a firm, designed to appeal to the chosen target market”. Lush standardize its brand and stick to its value when globalize its market.
Partners must use brand name Lush rather than translated local language like Chinese in Twian, Japanese in Japan((Schmitt, Pan and Tavassoli 1994; Tavassoli1999; Zhang and Schmitt, 2001).
Concentrating on promoting brand value and emphasizing the beliefs of Lush, against animal testing, using fresh ingredients, making handmade products, protecting the planet, supporting communities and promoting happy people making happy soap (Marketline, 2008).
Localization of subsidiaries on website, all the subsidiaries of Lush should share the common value with Lush but they can promote products with different methods for adapting to the local market(Ping-Kuan Lin, 2012).
Route to market insource vs outsource
The insource of Lush can be understood as the internal competencies, mainly, the differentiation of products, the unique retail style. As those competencies could solidify the firm’s role in the external source and it lies at the heart of the business model (Applegate, 2001; Viscio and Pasternack, 1996).
Minimum packaging—–using recyclable and reusable materials as packaging, naked packing campaign(See appendix 3).
Customization—–interacting with the customers through the publication of Lush Times.
Ethical campaign replaces the advertising—– In August 21, 2008,Lush and Sea Shepherd launched Partnership Campaign to Protect Sharks(Wendy Evans,2009).
Advertising by the smell and experience in store.
Lush company encourages partners to invest in its firm and gives them exclusive rights to develop their brand, besides, they also embarked on single store franchising in some countries like France, Italy, Spain(Lush Website, 2012).
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E-strategy is mainly shown form the firm’s website, the business models on the web that Lush used is the manufacturing model which uses the web to reach buyers directly and compressing the distribution channel. There are mainly three key parts on their web, purchasing part, customer-focus part, company propaganda part.
Buyers purchase products through the categories on the web(See appendix4)
Customer can reserve the limited products through section of Retro and find news of Lush on Lush Times(See appendix 5)
Company information presented on the web intends to attract partners and connect the subsidiaries(See appendix 6)
As the firm grows, it requires a large amount of money to operate as the basis of serving the customers. In the beginning, Lush is private owned by Mark and Mo Constantine but with a small number of shares, with the expanding of the firm, Lush gradually relied on the funds of partners in the team, Andrew Gerrie one of the Lush partners said that Lush is funded by a team who started the business together with funds from a wealthy investor (Startups, 2002).
Innovation of Lush
It is important for the entrepreneur to have a good venture idea for running a business. Therefore innovation penetrates the whole process in the venture. Trott (2008) believes that innovation= theoretical conception + technical (or process) invention + commercial exploitation. For lush company, their business idea comes from the interests of Mark Constantine and Elizabeth Wire in beauty therapy, then they developed many recipes and sold them to other companies until 1976, they contracted with The Body Shop as one of their suppliers (Wikipedia,2012). For an entrepreneur, the innovation is not always a continuous process which will be influenced by the dramatic changes in the market, social, technology as well as the regulatory environments (Paul Burns, 2011). In order to keep innovative, in 2003, Lush company launched a new beauty brand and retail concept, B Never Too Busy To Be Beautiful, there are only four shops of this brand located in UK, (Journal of MarketWatch, 2003). By keeping the small numbers of stores with a unique location, Lush could increase the desirability of products to customers and encourage the existing-consumers loyalty (Marketline, 2008). It is believed that in the future, Lush would emerge much more creative brand to satisfy the customers.
Stick to the original focus
In the intensive competition of the market, entrepreneurial ventures would come across the risk of takeover by the leader of the industrial, some of the firms will agree on takeover in order to make profits, for instance, Bees by Clorox, and The Body Shop by L’Oreal (Marketline, 2008). But, Lush still insist its independence and avoids any demands for takeover. What’s surprised me is that, as the best suppliers for The Body Shop, Mark and Mo Constantine didn’t give into the compromise of Anita Roddick, founder of The Body Shop. “If you were going to sell the leading ethical company in the world, there couldn’t be a much worse choice than L’Oreal,” (Mark Constantine quoted in Financial Times,2007). This comments showed that in order to retain their original focus, they will never accept takeover, and only the independent operation can facilitate the advancement of their brand.
Recognizing and coping with risks
It is believed that entrepreneurs are more intended to make decisions through the different using of information or employing heuristics and rules, depending on their instincts and intuition (e.g., Schwenk, 1986; Cooper et al., 1995; Forlani and Mullins, 2000). Therefore, it is important to recognize the risks of starting up the business.
For Lush company, the previous years, the manager in the store have to forecasts the products demands for deciding the amounts of products, the lack of accurate predicting generated the risks of lost sales and lower customer services(Prophix, 2012). However, they uses the retro part of website to make sure the producing quantities of products based on the customer’s reservation, which greatly save the costs of sales to a great extent.
Furthermore, since The Body Shop has been taken over, Lush has to consider its risks of being taken over by leader of cosmetic industry, while Mark Constantine considered forming a staff ownership scheme for its company, which can prevent the business takeover Lush to some extent (Marketline, 2008). Although it is agreed to make the staff become the stakeholders in the company, Mark Constantine does not approve to turn Lush into a public company due to his untrusting of shareholder’s decision-making capability. “If a business goes public it has to consider its shareholders above all else. I realize the people you can trust most are your own staff,” (The Guardian, 2007). It is a controversial issue that the staff may lack the ability to make a good business decisions.
Learn from Mark Constantine- the successful entrepreneur
As an entrepreneur, the personality plays an important role in growing the business, the second resource indicates five personality factors of an entrepreneur, namely extraversion, openness to experience, agreeableness, conscientiousness and emotional stability (Barrick etal., 1991). Constantine shows those traits through his success of Lush.
Hiring strategy—— employ those who are passionate, enthusiastic, ethical.
Never being frightened—– Mark Constantine once stated that ” I went through a period when I was a bit frightened of the business. People who have very corporate businesses are rather frightened of them. If you’re frightened you’re constantly putting in layers and fiddling about because you don’t know what you’re doing”, (Kate Walters, 2010).
Creativity—– Lush holds 38 patents and Mark is proud of his focus, the continual supervising of products makes the company less vulnerable to innovative competitors (Kate Walters, 2010).
Specific makes the entrepreneurial venture success
Sheth et al (2000)state: “The fundamental precepts of marketing remain unchanged, but more attention must be given to specific areas, such as customization and one-to-one approaches”, which indicates the entrepreneur should follow the structure of the business and concentrate on the specific issues. Indeed, Lush’s intense focus on customization, innovation of products and dynamic methods of promoting bring benefits of growing its business and facilitate the victory of the market.
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