Avon Case Study

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Group 2
Q1) Who is Avon's target market? How can it be
segmented?

– Avon’s target market is the mass market of roughly 25 million woman aged 25-
50 with average to below-average household income. Avon is targeting women
who are also not internet savvy or women who want a personal/friendly
connection for their purchase or need advice on purchasing beauty products in
person and aren’t comfortable getting this advice in a public setting or the
internet. These women prefer to meet someone in person who would take their
order, give beauty tips in their own home and delivery the beauty products.
There are a couple of ways that Avon segments the larger market of women. One
segmentation is based on the products they buy (Fragrance, Lipsticks),…
2) Should Avon sell direct to the
consumer? Why or Why not?
– Also, most of the target customers may not have access to Internet or may not be
computer literate. So Avon should not sell direct to consumer
3) What does "selling" mean in this situation? Can
the Web do this for Avon?

– “Selling” is giving the customer one-on-one attention and advice to each and
every customer who is a neighbor, friend, or a colleague. So “selling” means the
personal connection that sales representatives have with their customers. Often,
the customers initially buy from the sales representatives because of this friendly
connection and then continue to buy because of the product quality that they
receive from their friend. Therefore, the Web cannot do this for Avon because
that personal connection does not exist in order to make the sale. However, the
Web could facilitate the sales process and the customer retention process
providing the one-on-one attention, advice, and question answering a
salesperson could do.
4) What potential channel conflicts exist
here? How might Avon avoid them?

– Selling direct to customer on the internet means the customer does not buy
anymore through the sales representative. So effectively these two channels
could end up competing for the same customers. Another potential channel
conflict is Avon’s B2C and B2B channels. With the Web, these two could
become blurred into the same depending on how it is set up. One possible way
to avoid these channel
– Sources of Conflict:
1. The Representatives might have issues with sharing what they consider their assets, in the form of the Customer Lists. This
could be seen by the Reps as an attempt by the Company to eliminate or diminish their role in the process. The launch and
expansion of the online activities itself will be seen as a threat by long-time members like the President's Club members and
others.
 2. The Company, Avon, is identified with Direct Selling through its Avon ladies. The launch of serious online stores for all
products could dilute the recognition or credibility of the brand. It might lose the uniqueness that it now commands in
the market. Thus, this will need more communication from company top management regarding these changes. The Reps will
need to be assured of their continued importance to the direct selling model of Avon and fears of replacement by the online
model also will need to be allayed.
3. Avon being a recognized company in the direct selling format, there is a possibility for the company to face failure with its
online store format. Without returns on the site, the company might have to face embarrassment.
Some of the steps actually taken by the company include:-
– Marketed directly through consumers in addition to Reps
– Advertised the site name on new brochures and catalogues
– Options available on site to have sales via Reps or directly to consumers
5. Avon Products, Inc

– Leading social selling beauty company

– Founder : David H. McConnell, Headquartered in London(UK)
– Annual sales over $5 billion
– World’s largest direct seller of beauty products and fifth largest beauty company
– The product portfolio includes award-winning skincare products, color cosmetics, fragrance and
personal care products, featuring iconic brands such as ANEW, Avon Color and Mark
– Having a sales network of 2.8 million sales representatives world wide
– Having a share swap with Brazilian beauty company Natura by a contract to by Avon Products
for more than $2bn
– Natura holding the 76% of the combined business with over $10 billion in annual revenue
6.WORLD COSMETICS
MARKET
– Global cosmetics market is expected to grow $429.8 billion by 2022, registering
a CAGR of 4.3%
– Skincare was the leading category, accounting for about 39 percent of the global
market. Hair care products made up a further 21 percent, while make-up
accounted for 19 percent
– A shift of preference towards natural and organic beauty products, particularly in
U.S. and European countries, fosters the growth of natural, herbal and organic
beauty products
– Top players in the market are L'Oréal ,Unilever ,P&G , Estée Lauder , Avon
7.FINANCIAL RATIOS COMPARED WITH PEER
AND INDUSTRY
Ratios AVON REVLON INDUSTRY AVERAGE
Debt Ratio 1.13 1.41 0.47
Current Ratio 1.19 1.16 3.47
Operating Ratio(%) 3.1% 1.3% -42.9%
Receivables 24 64 16
Turnover(Days)
Profit Margin 0% -6.5% -92%

– The financial ratios don’t seem to be telling a pretty picture for the present times
– Revlon, the competitor has an advantage when it comes to the Debt Ratio which is above Avon. Avon
should focus on improving this.
– Both company and the competitor are below the industry average when it comes to current ratio, which
indicates Avon is losing the grip in the industry
– Operating ratio is better than industry average for Avon – indicates it has more operational efficiency in the
industry. Same is the case for Receivables Turnover.
– The industry is overall making loss which makes Avon better among competitors like Revlon
8. Future of these kind of products

– Belonging to the household products sector means this company will be affected directly and
indirectly by a number of disruptive opportunities and challenges over the coming decades.

– *First off, advances in nanotech and material sciences will result in a range of materials that
are stronger, lighter, heat and impact resistant, shapeshifting, among other exotic properties.
These new materials will enable significantly novel design and engineering possibilities that
will impact the manufacture of future household products.

*Artificial intelligence systems will discover new thousands of new compounds faster than
humans that can, compounds that can be applied to everything from creating new makeup to
more effective kitchen cleaning soaps.
– *The booming population and wealth of developing nations in Africa and Asia will
represent the largest growth opportunities for household product sector companies.

*The shrinking cost and increasing functionality of advanced manufacturing robotics

will lead to further automation of factory assembly lines, thereby improving
manufacturing quality and costs.

*3D printing (additive manufacturing) will increasingly work in tandem with future
automated manufacturing plants to drive down the costs of production even further by
the early 2030s.

*As the manufacturing process of household goods becomes entirely automated, it will
no longer be cost-effective to outsource the production of products overseas. All
manufacturing will be done domestically, thereby cutting labor costs, shipping costs,
and time to market.