In a rather very obvious way, there actually isn’t anything secret about Lush.
The beauty specialist is one of the most prominent fixtures on the high street – not just because of its visibility, but because of its distinctive smell.
The scents of its bath bombs, lotions and potions typically drift some distance from shop to street, while inside the handmade products are a riot of colour.
Although it may make a big impact on the senses, the retailer – well-known for its ethical style of doing business – manages to keep a low corporate profile.
The retailer’s origins lie in the 1970s, when Mark Constantine and Liz Weir began making natural beauty products in their homes. Ten years later they began to supply another retail newcomer, The Body Shop.
They became The Body Shop’s biggest supplier, eventually selling their product formulas to the retailer before setting up Lush in the 1990s. Since then, it has grown apace.
“Lush’s success, both at home and abroad, is underpinned by its ethical positioning and product development strengths”
Philip Wiggenraad, head of research, Retail Week Prospect
Today, Lush has 100 stores in the UK, and almost 950 worldwide – about half of its international stores are operated under licence or as joint ventures – and total brand turnover in its most recent reported year climbed nearly 27% to £574.1m.
Retail Week Prospect head of research Philip Wiggenraad says that Lush’s success, both at home and abroad, is underpinned by its ethical positioning and product development strengths.
A vertically integrated business model – Lush manufactures all of its own products – delivers a cost advantage over competitors and provides a powerful platform for new product development.
In the UK, retail sales climbed 41% to £95.1m in 2014/15, when group sales advanced almost 16% to £290.8m.
Its business strategy in Britain is focused upon selective new store openings, including relocations to bigger premises.
Opened in 2015, the retailer’s flagship in London represents that latest thinking about the brand.
The store carries 200 exclusive product lines as well as the standard range, and incorporates a spa and a gallery space.
Reassessing its strategy
However, while Lush has been profitable at group level for several years, its UK business has sometimes been loss-making.
It moved back into profitability in 2013/14 and achieved a big step forward the following year when UK pre-tax margins came in at 7.2%.
“Its business strategy in Britain is focused upon selective new store openings, including relocations to bigger premises”
It’s overseas operations that are the star of the show at Lush, accounting for the bulk of business, and continued international development is a focus.
The retailer already has a strong North American presence with about 200 stores, and is targeting markets including Hong Kong, the Middle East and Brazil.
More than half of its global network is operated through joint venture partnerships and franchise agreements, which has sometimes brought problems. In Japan, Lush assumed control of the business there.
“Local management had failed to invest in the store network or satisfactorily communicated what the brand was all about”, observes Wiggenraad.
Lush has opened a 75,000 sq ft Dusseldorf warehouse supplying goods to European countries including Germany, France and the Netherlands. It will also service Finland, Norway and Sweden later this year.
Alongside development of its international business, Lush is concentrating on digital opportunity. The aim is to generate 25% of sales online.
After relaunching its UK website in 2014 that featured more editorial content, Lush is adopting a similar approach for its international websites.
Despite its reputation for ethical business, Lush does not use that phrase. Its website says: ‘We find the term rather a difficult concept, because it seems to us that it is used to describe companies who try not to damage people or planet with their trade practices – when surely this should not be regarded as ‘ethical’ but as normal business-as-usual.’
Lush’s distinctive business as usual approach has made it a great entrepreneurial success story that has taken it from the Dorset coast to the rest of the world.
Lush’s sweet smell of success
Group sales (2014/15): £326.5m
UK sales: £95.1m
Online sales: £26m
UK like-for-likes: 38.8%
Group pre-tax profit: £24.5m
UK pre-tax profit: £6.9m
Source: Retail Week Prospect