Headquartered in New York City, Avon is one of the world’s largest direct-seller firms, and is by far the largest direct seller of cosmetics and beauty-related items. Avon is the fifth-largest cosmetics and fragrance firm in the world. The company receives sales from catalogs and a website, but the vast majority of its sales come from its 6.4 million independent sales representatives in some 110 countries. These women are all independent contractors. Avon has 39,100 employees, but only 4,800 are employed in the USA. Since 1892, Avon has been on the forefront of empowering women to be their own boss and be independent and become leaders in communities and business.
Avon products include cosmetics, fragrances, toiletries, jewelry, apparel, home furnishings, watches, footwear, children’s products, skin care, and gift and decorative products, nutritional products, housewares, and entertainment and leisure products. Avon owns and sells Silpada jewelry. A few well-recognized company brand names include Avon Color, ANEW, Skin-So-Soft, Advance Techniques, and mark. Although a large U.S. iconic corporation, Avon is struggling today to recover from poor management strategies that led to CEO Jung resigning over global bribery investigations. The direct-selling business model has waned in the USA, but it is effective in many emerging economies globally. Avon obtains 85 percent of its revenue from outside the USA. Millions of motivated direct sellers in many countries is Avon’s key competitive advantage going forward, but the company needs a clear strategic plan.
Avon reported a loss of $38.2 million in 2012 compared to a net income of $517.8 million the prior year. Avon’s second-quarter 2013 net income declined 48 percent but that was above Wall Street expectations and so Avon’s stock price hit a new high for the year. Avon has made an offer to settle its overseas bribery allegations for $12 million; the offer has been rejected by U.S. authorities. Avon’s beauty products earned $31.9 million for Q2, down from $61.6 million a year ago. Revenue slipped 2 percent to $2.51 billion due to currency rates and North American sales. Avon’s sales in North America during Q2 2013 declined 12 percent, hurt by a 13 percent drop in the number of active sales representatives. Avon’s Asia-Pacific sales fell 9 percent, but the company’s sales in Latin America and Europe, the Middle East and Africa rose. For the quarter, Avon’s prices rose and their average order size increased.
Copyright by Fred David Books LLC. (Written by Forest R. David)
David McConnell started a business in 1886 that eventually came to be named Avon Products. A traveling book salesman, McConnell did not originally intend to create a beauty company, but he realized that his female customers were far more interested in the free perfume samples he offered than in his books. McConnell had also noticed that many of his female customers were isolated at home while their husbands went off to work. So, McConnell purposely recruited female sales representatives and believed they had a natural ability to network with and market to other women. At a time of limited employment options for women, the Avon earnings opportunity for women historically was a revolutionary concept for mankind. It marked the start of the company’s long and rich history of empowering women around the globe.
In 1892, McConnell changed the company name when his business partner, who was living in California, suggested that he name his business the California Perfume Company, because of the great abundance of flowers in California. In 1916, the California Perfume Company was incorporated in the state of New York and filed its first trademark application for Avon on June 3, 1932. The document described the company’s goods and services as perfumes, toilet waters, powder and rouge compacts, lipsticks, and other toiletry products.
Avon entered the Chinese market in 1990, but legal changes in 1998 forced Avon to sell only through physical stores called Beauty Boutiques. The company received China’s first license for direct selling in 2006. Avon purchased Silpada, a direct seller of silver jewelry, in 2010 for $650 million. Brazil is the company’s largest market, passing the USA in 2010. Avon closed its Atlanta distribution center in 2013 and is closing its Pasadena distribution center in 2014. Avon’s revenue dropped 5 percent to $10.72 billion in 2012.
Vision and Mission
Avon has stated vision and mission statements on its corporate website. Avon’s vision is: “To be the company that best understands and satisfies the product, service and self-fulfillment needs of women—globally.” Avon’s mission statement is quite lengthy, but in summary it says: Avon’s mission is focused on six core aspirations the company continually strives to achieve: (1) leader in global beauty, (2) women’s choice for buying, (3) premier direct-selling company, (4) most-admired company, (5) best place to work, and (6) to have the largest foundation dedicated to women’s causes.
Marketing and R&D
Avon uses both door-to-door sales people (“Avon ladies,” primarily, but a growing number of men) and brochures to advertise its products. Avon training centers help women who want to become Avon representatives selling beauty products, jewelry, accessories, and clothing. The Avon training centers have a small retail section with skin care products, such as creams, serums, makeup, and washes. There are classroom areas in which the representatives learn about the products and sales techniques. Avon representative are each independent sole proprietors running their own business.
Avon spent $253.6 million on advertising in 2012, down from $311.2 million the prior year. Avon spent $75.2 million on R&D in 2012, down from $77.7 million the prior year. Avon’s primary R&D facility is located in Suffern, New York.