Business Advice

Lush’s social media amputation: How to decide whether to remove or repair a bleeding business unit

Dean Salakas /

Halloween

The Party People's 'chief party dude' Dean Salakas. Source: Supplied.

As a chief executive officer, you are constantly plagued by things in your business that are not working like they need to — many of which the public never notice. But internal bleeding can kill a business, so you need to act fast. The decision is often between removing the problem altogether or finding a better solution.

Lush recently dropped a (bath) bomb by announcing it was removing its social media accounts. To me, it seems more like a knee-jerk reaction than a strategic approach to a problem.

As a chief executive myself, I have had to make many decisions like this. For example, 18 months ago we shut down our eBay store. We did some analysis, finding orders we received from eBay had an average order cost of less than $50, while on our website, our average order was more than $100. People shopping for a party curate a range of products to create the style they want. When shopping on eBay, they buy from many sellers, but on our website, they add a range of our products. We did have an ‘eBay store’, however, customer shop on eBay using the search bar rather than seeking out a sellers’ store.

Twelve months after we shut down our eBay store, the result was a loss in sales of $500,000, but a profitability improvement of $250,000. That said, I believe my decision was the right decision short term but the wrong decision long term. As chief executive officer, my job is to think long term and a better long-term strategy would have been to find a way to refine my marketplace strategy so it was profitable.

We are now looking to re-launch on marketplaces with a different strategy that involves only targeting profitable categories and packaging products rather than selling them individually. For example, we cannot profitably sell a pack of toothpicks on marketplaces, but we could profitably sell 1000 packs, so we should consider listing 1000-pack toothpicks. No, we won’t get the B2C consumer anymore, but we will get the B2B consumer, and while the total volume of sales will be less, that volume will be a profitable volume.

I think the same could be said for Lush. Instead of removing its accounts, it could change its strategy. Lush executives seem to be complaining about the paid aspect of social media advertising, so why not refine the business’ paid social media advertising strategy, or at worst, just cut the advertising rather than shut down the free accounts? Seems like sour grapes to me, so they are giving social media the middle finger rather than finding a practical long-term solution to their pains.

Lush UK’s social media accounts have more than one million followers, who will now be told to call or email, instead of using their preferred method of connecting with the brand: social media. I am sure many will no longer engage with the brand, while others will make the effort to email. In any case, Lush will lose a connection with many of its fans. It also seems like its decision is in an effort to improve communication, but I cannot see how forcing people to communicate with you via email when they have chosen to communicate with you on social is best practice.

I think Lush should stop the bleeding by removing its paid advertising spend on social and continue to engage with fans in the way fans have chosen to engage with them. This will ease the pain and give them time to formulate a more profitable paid social media marketing strategy. Most importantly, it won’t amputate its most passionate and loyal fans.

NOW READ: Why this family business is sticking with bricks-and-mortar but ditching the checkout

NOW READ: Plug it in, try it on: How product-review videos can boost e-commerce sales

Advertisement
Dean Salakas

Dean is the chief party dude at The Party People, the leading party-supplies retailer in Australia. He is a frequent speaker and commentator on all things retail, was named Retail Leader Of The Year by the Australian Retail Association two years in a row, and has appeared on many TV shows, including Channel 10’s Shark Tank.