Lush Porter Five Forces Analysis
Five Forces analysis of Lush covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
Lush is a cosmetic company catering to bath, body, skin and hair care. It started in 1995 and is located in Poole, Dorset, United Kingdom. There are many issues that new entrants face. High capital and resources are required in this industry. Lush has high brand equity, so maintaining its reputation is very difficult. Customers are usually very loyal to Lush as it is an established brand. Therefore, for a new entrant, such kind of customer loyalty is very hard to achieve. The new entrants also have to be careful of copyrights and patents involved in this industry. Another issue that could pose a threat could be policies and restrictions put up by the government of the country they’re located in. Since it is a competitive industry, there is a high chance of new entrants trying to capture the market share. Since people are becoming environmentally conscious, new entrants who are sustainable could capture more markets. The threat for new entrants seems to be low since it is a capital-intensive industry.
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This concludes the threat of new entrants in the Lush Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Lush:
The threat of substitutes could pose a real threat to Lush. Companies that provide the same quality of product but at a lower price.
Customers would then use these substitutes, thereby reducing Lush’s market share. People are now becoming highly environmentally conscious. There are many companies coming up which are 100% natural and use non-toxic ingredients. By creating such organic products, they are catering to the environmental-conscious population, which is growing every day. These substitutes can hamper the company’s market. Since there are many competitors of Lush, the switching cost is comparatively lower. Lush provides a great in-store experience which is very difficult to beat. Even though there could be substitutes for the products, providing an experience is a comparative advantage for the company.
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Bargaining Power of Customers:
In the Lush Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The main customers of Lush cosmetics are young women between the age of 18 to 45 years. They are mainly educated and professional women with proper sources of income. The bargaining power increases since there is fierce competition in the industry. As a result, the switching cost is lower. In this industry, the customers have a higher possibility to bargain. Therefore the prices of these products are very sensitive to market choice. The products in this sector belong to the niche market. Lush doesn’t have all-natural ingredient products, though some of the products in the product line could be natural. There is a segment that would want to choose natural products over Lush. Lush has high brand equity with strong ethical values and strong CSR too. Another issue here is that the products are comparatively a little more expensive than its competitors.
The company also offers a great in-store experience which makes Lush more customer-centric.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Lush:
Lush works with a number of suppliers from across North America who manufacture, grow, harvest, and supply the raw materials to the company. Lush also supports Fair Trade and Community Trade initiatives. There is a possibility of the suppliers trying to influence the market by manipulating the prices. The company should be aware of such malpractices. Lush should also be ethical while purchasing products from its suppliers. The company should maintain its integrity and not indulge in these unethical practices. The cost of switching suppliers in this industry is a little high. The company could have a tough time in case there is some issue on the supplier end. The choices of suppliers are limited; therefore, the company might have a tough time finding new suppliers immediately. The suppliers could forward integrate and make the product, but it would be slightly difficult to do so. Since the research and development required would be high.
Competitive Rivalry:
The impact of key competitors in the Lush Porter Five Forces Analysis is as follows:
The main competitive advantage of Lush is that the products are 100% vegetarian. They are against animal testing, and the products are hand-made. It has about 900 stores worldwide and are located in around 50 countries. The main competitors of the brand are Bath and Body Works, The Body Shop, Loreal, Debenhams, etc. Lush sells bubble bars, toothy tabs, dusting powders, bath bombs, shower jellies, and body scrubs. Lush stores also have DIY parties where there are games, skincare tutorials, and mix and make your own products. These things set the company apart, and the company also has in-store spas. The company does not compete with others on the basis of prices. Building up customer loyalty is important, but that is difficult to build through just by products. Many other advertisements and activities build up the loyalty of customers. The entry and exit to the market are very high, so the companies must be very careful.
The company should bank on its unique in-store experience to stand out in the market.
To conclude, the above Lush Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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