- When close substitutes exist the demand tends to become price elastic. Since price increases tend to influence the consumer to switch to other products that are cheaper comparatively. It is true that body shop’s prices are extremely high and they are the most expensive cosmetic company. It’s the costs they incur since their products are animal cruelty free and the ingredients used are grown with the right fertilisers in order to produce the most natural form of any ingredient used in the cosmetics. Natural products require a lot of labour and hand work which is expensive.
The company uses the best and the most natural ingredients for their cosmetics. Due to this they incur extremely high costs and their products tend to be the most expensive in the market. Substitutes are available in the market at comparatively cheaper prices. The basic cosmetics are available in various brands such as Rimmel, Maybelline etc. These are comparatively cheaper and also of good quality. The propensity of the buyer switching to another brand is high and so are switching costs. Since every customer lost is a loss to the company but The Body Shop has a certain class of extremely loyal customers who can well afford to buy body shop products. This product is not aimed at the masses anyways. There is a huge difference in the prices of the substitutes so the people switching to other products are high as well. But there is a perceived level of product differentiation since body shop uses natural products and it has been proved that their product do what they claim to do unlike other companies. This does pull consumers towards the shop but it totally depends on the customer’s affordability. But it is true that the product is aimed at the elite class and serves to a niche market. This product is a luxury and a novelty. It does give value to the customers and is a status symbol (Borrington and Stimpson, 2002)
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Essay: The threat of substitute products for Body Shop