World of Direct Selling: Avon’s Strategic Directions

avon.logoAvon’s top management gave a detailed presentation at the Consumer Analyst Group of New York Conference (CAGNY) last month. The purpose was to explain the company’s current situation and what the management was aiming to do. This article brings you the highlights from this event.

A considerable part of this year’s presentation was devoted to the U.S. market. Besides being the homeland of Avon’s, North America is an important market for the company in terms of the revenue generated there. However, Avon has been performing quite poorly in this region: Avon’s revenue growth in North America was -2% in 2010, -6% in 2011, -%8 in 2012 and -17% in %2013. So, not only things are going bad in North America, but they have been going worse and worse. As a result, the company’s sales in this region dropped to $1.5 b in 2013 (15% of global volume) from $2.2 b in 2010 (21% of company’s global volume).

The U.S. presentation was made by company’s President, North America Pablo Munoz. Pablo Munoz joinedpablo.munoz Avon in June 2013 from Tupperware. As he puts it, the three main challenges Avon has been facing in the U.S. are:

1) Field is not engaged,
2) “Store” is stagnant, and
3) Operations are insufficient.

In response, the measures that are being taken in the U.S. have been announced as strengthening and investing in high potential districts, and increasing representative contacts and connections.

Avon divides the U.S. into 850 districts. The management says those districts that have Hispanic population are doing better than the others. Avon’s top 10 districts for example are mostly Hispanic and 31% of senior field leaders are also Hispanic. Moreover, average order from Hispanics are 11% more than the average in the U.S. These are certainly interesting statistics. But, it is as interesting to learn that Avon management has turned its back to these data for years. Pablo Munoz comments on this, saying, “Have we recognized this soon enough, we would be in a different shape today.”

One important step Avon will take in the U.S. market is to increase the “entry fee”. Avon plans to increase the fee and add products to the “starter kit”. This fee is USD 10 now and Pablo Munoz says, “It is less than a movie ticket.” And an Avon representative receives “a box full of paper”, he adds. Avon believes adding products, following what the industy is doing with a higher fee will add benefits. The expectation here is to increase trials and that the increased trials will bring conversion and then, loyalty.

Pablo Munoz says Avon has also re-discovered in the U.S. that advertising the earning opportunities in its product catalogues indeed, worked! The last time Avon did this was back in 2009 and management now says it was “incredibly succesful”! So, Avon is re-launching this to make use of its millions of product brochures that go out to the field.

Munoz also complained during the presentation about the complexity and the broad range of their product portfolio in the U.S, saying they would take measures here, too. For instance, the number of products in ANEW line will be reduced to 31 from 45. Avon is also in the process of reducing the size of its product brochure from 180 pages in 2012, to 164 pages in 2014 and eventually, to 152 pages in 2015. By the end of this period, Avon’s product range in the U.S. is to be reduced by 15%. With this, Avon expects to save 6 billion printed pages every year, as well.

Avon concluded this extensive part by accepting the short-term risk on sales while moving towards the expected long-term benefits. Avon says “getting U.S. back on track is critical to ensure overall profitablity in 2015″.

sheri.mccoyMoving from the U.S. to the global scene, CEO Sheri McCoy says, they need to “strengthen the direct sales core”. To accomplish this, Avon plans to strengthen field management to ensure more represenntatives selling more products and to improve its commercial marketing side to increase consumer demand. At the end, they expect these two to support the tearning opportunities on the field.

Within this context, Avon emphasizes the importance of the “digital” and the progress it has made in this area (e.g. social media tools, virtual make over tools, and the mobile brochure app). As told in the presentation, more than 90% of people order online in the Avon world. In 2013, Avon launched a mobile app in eight markets and it plans to continue introducing it in other markets as well.

During the presentation, we had the opportunity to learn what different product categories meant to the management. As CEO puts it, “color” is the point of entry to Avon, “fragrance” is the key driver of representative earnings, “skin care” leads to repeat purchases and higher earnings, and “fashion and home” brings incremental sales.

Sheri McCoy emphasizes the importance of e-commerce. She says it provides added convenience for Avon reps, brings new consumers and also increases trial of products. Avon identifies three types of online consumers:

1) Who was introduced Avon by a rep and wants the convenience of online,
2) Who doesn’t know an Avon rep but wants to shop online and to have advice from a rep,
3) Who wants to interact directly with Avon who doesn’t want a rep.

These said, Avon now plans to re-launch its e-commerce site in the U.S. in the summer of 2014. With the lessons learned, U.K. e-commerce site will be launched in 2015 and Avon’s other top markets will follow this.

CEO McCoy says 75% of Avon’s business is coming from emerging markets. Avon lists its top markets as: Brazil, US, Mexico, Russia, Central Europe, Venezuela, Argentina, Colombia, UK, Philippines, Turkey and South Africa. She adds she is very proud of the progress Avon has made in Brazil, company’s number one market. Avon’s plan is to move top markets to growth, expand to new markets and continue to exit wherever it makes sense. After McCoy joined the company, Avon withdrew from countries like South Korea, Vietnam, Ireland, and France.You can see Avon’s current geographical strategy below:


As far as the brand strategy is concerned, Avon aims at reaching new consumers with targeted brands korressuch as KORRES in Latin America and Liz Earle in the U.K., and at maximizing the potential of its selective brands like ANEW. Avon expects KORRES to fill a gap in its skin care portfolio. In February 2014, Avon had entered into a strategic alliance with KORRES, a brand that was created by the Greek pharmacist George Korres. KORRES has granted Avon exclusive rights to develop, manufacture and market its products in Latin America.

Avon’s 2014 outlook is:

1) Revenue growth to resume in the second half of 2014
2) Margin in the first half negative, with a particularly weak first quarter
3) Continued efforts to reduce costs and to improve cash and working capital

Sheri McCoy says, “We are going to continue to see ups and downs, but I’m confident we will succeed.”

Please click here if you wish to listen to the whole presentation.


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Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals