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Bath & Body Works' Enduring Formula for Success

The success of Bath & Body Works often gets overlooked amidst all the dramatic headlines about Victoria’s Secret and parent company, L Brands. But the mall chain is thriving in an environment in which it has little competition.
Bath & Body Works | Source: Shutterstock
By
  • Cheryl Wischhover

NEW YORK, United States — A steady stream of shoppers went into the Bath & Body Works store in the Flatiron neighbourhood in New York City on a recent morning. There were older couples, moms and daughters and several young women alone. Almost all of them walked out with one of the store's signature bright blue gingham bags.

Laura, 19, was one of them. She was visiting New York from Belgium and made sure to schedule a stop at Bath & Body Works because of Zoella (Zoe Sugg), a UK-based influencer with almost 12 million YouTube subscribers.

“She’s obsessed with all the candles and stuff so I needed to smell everything,” she said. Laura thought some of the candles were a bit expensive, but acknowledged they smelled “amazing.” She ended up buying hand sanitisers in different scents to bring to her friends back home.

It may seem like an odd purchase, because hand sanitisers are not exactly a buzzy beauty item in the market now. Bath & Body Works has largely ignored the beauty and wellness trends that have driven the success of specialty chains like Sephora and Ulta. At its more than 1,700 stores across the US and Canada, Bath & Body Works sells scented candles, diffusers, body lotions and hand washes. Prices are low — $24.50 for a three-wick candle, half the cost of some candles sold at Sephora. Instead of exclusive, limited collections from influencers, Bath & Body Works offers seasonal and holiday scents that its fans wait for anxiously and even collect. Colourful, cutesy branding hasn’t changed dramatically since the 1990s, though more modern, stripped-down labels with sans serif fonts have started creeping in.

Because of consistency and accessibility and affordability, they manage to rise to the top

And yet the chain is a retail success story, a rare mall-based store that has defied the decline of brick-and-mortar retail and the ups and downs of other mass-market beauty brands. Sales reached $4.6 billion at the nearly 30-year-old brand last year, up 11 percent.

“It’s not necessarily that it’s the coolest or most innovative,” said MaryLeigh Bliss, vice president of content at YPulse, which in a recent survey found teen girls ranked it as the number one health and beauty brand, taking into account attributes like trustworthiness.“But because of consistency and accessibility and affordability, they manage to rise to the top.”

There's just one problem: Bath & Body Works' parent company is L Brands, which for years has been struggling to turn around its biggest and best-known brand, Victoria's Secret. More recently, attention has shifted from the lingerie giant's declining business to L Brands Chairman Les Wexner's ties to alleged sex trafficker Jeffrey Epstein. In March, activist investor James Mitarotonda of Barington Capital Group recommended a spinoff of the soap and candles chain, suggesting its success was being "overshadowed" by Victoria's Secret's poor performance. Barington did not respond to a request for comment.

Bath & Body Works is third in US beauty sales behind Dove and L’Oréal, according to a May report by the Kline Group, a market research company. It is No. 1 in the home fragrance category, with nearly a third of its sales coming from candles and diffusers.

Victoria’s Secret has floundered in a changing lingerie market where smaller competitors have chipped away at its market share as accusations that its marketing, especially the annual fashion show, has not evolved with the times. By contrast, Bath & Body Works, helmed by Chief Executive Nick Coe since 2011, has managed to grow and thrive by taking the strongest elements of its heritage and pairing it with new trends and opportunities for discovery in stores.

Though the bulk of its sales still come from cheap candles and scented soaps, the more-expensive White Barn sub-brand is now featured separately in shop-in-shops in 700 locations. White Barn offers stripped-down labels and clear fonts, similar to pricier fragrance brands like Byredo and Le Labo. Bath & Body Works declined to comment.

YPulse’s Bliss also credits Bath & Body Works with creating Instagrammable products and “keeping up with trends” like using mermaid and cactus imagery. Teens consider buying beauty products like those offered at Bath & Body Works a small luxury.

Plus, the chain creates a memorable shopping experience, offering sinks to try products and cheery sales associates in aprons who greet shoppers when they walk in and tout current promotions. The store is a sensorial experience the minute the door opens.

“There’s an element of fun and experience and discovery that people like in those stores,” said Sucharita Kodali, a retail analyst at Forrester. “They’re very tactile and they’re not easily replicated online because you can’t smell through the internet. They’re very social experiences.”

It helps that it has no real competition. Fellow mall brand The Body Shop was its biggest competitor, but it currently only has about 100 US store locations. Rituals, the Dutch bath and body store that is prevalent in Europe, has just begun to make inroads in the US market, but its assortment costs more.

“They’ve definitely built themselves a pretty interesting business model that doesn’t have a tremendous amount of pure-play, like-for-like competition,” said Erinn Murphy, an analyst at Piper Jaffray.

You certainly don't want to throw out the baby with the bathwater and harm the entire chain if part of it is doing well.

Lush, the UK-based brand with a focus on clean and sustainable products, seems the most likely to give Bath & Body Works serious competition, but it has about 200 stores in the US. Bath & Body Works, which still uses controversial ingredients like parabens in some of its products, may soon face a reckoning as more consumers demand so-called clean products. But so far there are no signs this has had a serious impact on its business.

It's tempting to compare L Brands' situation to other companies like Gap and J.Crew, whose marquee parent brands struggle while the younger, cheaper upstarts Old Navy and Madewell thrive. However, Bath & Body Works is in a different product category than Victoria's Secret.

Though Barington has since been appointed a “special advisor” to L Brands and withdrew its proposed board nominees, calls for a spinoff or IPO may gain momentum if Victoria’s Secret doesn’t turn itself around. The chaotic situation behind-the-scenes likely distracts executives and siphons resources that could be used to grow Bath & Body Works even more. In beauty, constant innovation is a necessity, and the chain needs to stay competitive as Lush and others will start to nip at its market share.

Kodali agrees that the company should look seriously at its options, to “unleash the value of the stronger performing brand. You certainly don’t want to throw out the baby with the bathwater and harm the entire chain if part of it is doing well.”

Especially when the bath water smells like “Marshmallow Pumpkin Latte.”

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