Avon’s Distribution Channels

Submitted by Group 2

Members:

Blas, John Vincent

Aquino, John Basti

Baldivas, Red Vincent

Dequina, Jasper

De Jesus, Chyna Rose

Rivera, Laarnie

Bartolome, Jocelyn Feliciano

Umbar, Jamal

Tomada, Angelica

Resurreccion, Carlo

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COMPANY OVERVIEW

Avon’s Distribution Channels

Avon, as of 2012, was the world’s largest direct seller of beauty products.
Headquartered in New York, USA, it reported US$ 10.7 billion as annual revenues in 2012.
Avon’s business was based on the traditional marketing model door to door selling, through a
network of 6.4 billion active sales representatives who sold the products directly to the
customers.
Over the years, Avon expanded its business to other parts of the world, and had a presence in
more than 100 countries across the globe. It was highly popular in emerging markets like
China and Russia.
The company, with a history of more than 125 years, was a pioneer in direct selling.
During the late 1990’s, however, the business started to face problems. In 1999, Andrea Jung
became the CEO and things looking up for Avon. But business started to decline after 2008,
mainly due to the problem in the direct selling model in Avon’s home market, the US.
Background Note
The history of Avon can be traced back to 1885 when it was founded by David H. Mc Connell
(McConnell), a travelling book salesman. In 1886, while going from house to house with his
books, he found that his customers, especially women, were more interested in the free
perfume samples he offered than the books he was selling. He also recognized that many
women had the potential to become good salespeople. He took up the perfume business more
seriously and became a perfume entrepreneur. He incorporated California Perfume Company
(CPC) and P.F.E. Albee (Albee) was the first representative of the company. She travelled by
horse, buggy, or even train to sell perfumes door-to-door.
Albee also appointed other women as representatives. This method of selling directly to the
customers went to become the hallmark of Avon’s business model. Albee was called the
“Mother of the California Perfume Company”. McConnell developed corporate principles
which became the guidelines of Avon.
Product Library of Avon
Avon, being an international manufacturer and distributor of beauty, household, and personal
care products, had believed in direct selling since its inception. It offered a wide range of
beauty products, including skin care products, cosmetics, perfumes, spa treatments, make-up
and everyday cosmetics and toiletries lotions. Its product line included many recognizable
names such as Anew, Avon Color, Skin So Soft, and Advance techniques. Avon Color was
one of the leading cosmetic brand in the world. The products were targeted at women in the
group of 25 to 50 years. The products were of high quality, were priced affordably and
positioned as products that provided value.

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Evolution of the Direct Selling Model
Broadly, Avon’s distribution could be divided into three major categories: Direct Selling,
Limited Retailers and Online. Of course, direct selling was its primary channel while the other
two were secondary channels of distribution. The direct selling channel was Avon’s core
channel, one of which the company had relied on since 1886 when its founder himself used
to undertake door-to-door selling.

The Distribution Model

The representatives were independent contractors and not employees of Avon. Once a person
signed up to become an Avon Rep, the district manager, who was the employee of Avon,
called him/her to explain the process of selling the products. The new reps were required to
remit a sign-up fee of $10. They were given 20 brochures, sample products, sales books,
order forms, etc.

Retail
In the early 1980’s, retail outlets were gaining a strong hold on the market. Almost 80% of all
beauty products were sold through retail stores and this market had become difficult to ignore.
However, for Avon, selling its products through retail stores was difficult as it knew the move
could alienate its sales representatives. In order to enter into department and specialty stores,
Avon entered into a joint venture with Liz Claiborne (designer) and created fragrances and
cosmetics line and made these products available in 2,000 stores.

Online
In 1997, Avon became the first cosmetic company to sell its products directly online. There
was a dedicated Avon representative website which also informed consumers about new
products in the industry. Though it was started in 1997, the electronic commerce strategy was
not taken very seriously till 1999.

Channel Conflict?
Jung’s venture to establish a retail channel and an online presence made consumers and
representatives alike feel that Avon was no longer a direct sales company, and that it was
turning into a packaged goods company. Jung tried to position some products as premium
cosmetics, but that plan did not work out, as the premium products were hard to sell through
direct marketers. Similarly, restricting efforts under the direction also prove unsuccessful.

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CASE PROBLEM

Distribution Channels
One of the major challenges faced by Avon was determining the most effective
distribution channels for the company. While the idea of utilizing multiple distribution
channels to reach a wider customer base seemed promising, Avon struggled to successfully
implement this strategy. Avon primarily relied on direct selling as their main distribution
channel, with limited retail and online channels as secondary methods. However, this approach
created conflicts in their outlet sales strategy.
Avon had built its reputation in the industry through direct selling, utilizing
representatives who would sell products through door-to-door interactions. The introduction of
retail stores and online platforms seemed to contradict this direct selling approach. While
incorporating retail stores was not necessarily a bad idea, it posed challenges to the existing
representative-based model. Similarly, while utilizing online platforms was a great idea, the
timing of its implementation may not have been ideal, as it was not during a time when the
population had widespread access to online platforms.

Marketing Challenges
Avon faced several marketing challenges when they incorporated retail and online
marketing into their sales strategy. The perception that their products became pre-packaged
had a highly negative impact on the image of their beauty products which this contradicted
Avon's traditional approach of using representatives to sell their products, as the personal
touch and individual connection with customers were nullified. Furthermore, the association of
packaged goods with mass-produced products undermined Avon's unique selling proposition
of offering exclusive products through their direct sales model. It created the perception that
Avon's products were no longer special or distinct from those found on store shelves.

Ineffectiveness of premium products

Selling premium products through direct selling may present challenges in effectively
conveying their value and justifying their higher price points. While Avon representatives can
provide personal recommendations and demonstrations, it may be more difficult to convince
customers of the added benefits and justify the premium pricing compared to less expensive
alternatives. Additionally, the direct selling model may limit the reach and exposure of
premium products. Unlike retail stores or online platforms, which have broader customer
bases and wider visibility, direct selling relies on the representative's personal network and
reach. This limited reach may result in a smaller pool of potential customers for premium
products.

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SWOT ANALYSIS

Strength

Avon’s strengths lie in their long-standing reputation, global brand recognition, and extensive
network of representatives, enabling personalized customer interactions. They also excel in
direct selling, leveraging social networks and word-of-mouth marketing effectively.

1. Recognition to the Market

Avon’s recognition in the market is significant for several reasons. Firstly, it’s a pioneer in
direct selling, which builds trust and loyalty among customers. Secondly, its wide range of
beauty and personal care products appeals to diverse consumer needs. Thirdly, Avon’s strong
brand presence fosters customer confidence and attracts new sales representatives, enhancing
its distribution network. Overall, Avon’s recognition ensures competitiveness and sustains its
position as a leader in the beauty industry.

2.Clear Target Market

Knowing their target market in advance provides several advantages for the Avon company:

Efficient Resource Allocation: Avon can focus its resources, such as marketing efforts and
product development, on catering specifically to the needs and preferences of its target market,
leading to more efficient resource allocation.

Tailored Marketing Strategies: With a clear understanding of their target market, Avon can
develop targeted marketing strategies that resonate with their audience, resulting in higher
engagement and conversion rates.

Product Innovation: Understanding the needs and preferences of their target market allows
Avon to innovate and develop products that address specific pain points or fulfill unmet needs,
increasing the likelihood of product success.

Competitive Advantage: By effectively serving their target market, Avon can establish a
competitive advantage over competitors who may not have as thorough an understanding of
their audience, leading to increased market share and profitability.

Customer Loyalty: By consistently delivering products and experiences that align with the
preferences of their target market, Avon can foster strong customer loyalty and retention,
leading to long-term success and sustainability.

3. Adoptability

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Avon’s adaptability to diverse women is crucial for its success. By tailoring products,
marketing, and sales approaches to various demographics, Avon not only broadens its
customer base but also fosters inclusivity and empowerment among women of all
backgrounds. This flexibility helps Avon resonate with a wide range of consumers, promoting
a sense of belonging and relevance within its community.

4. Technological Adjustment

Avon’s adjustments to their distribution market in technology are crucial for staying
competitive in today’s digital landscape. Embracing technology enables Avon to reach a wider
audience, enhance customer experience through e-commerce platforms, optimize supply chain
management, and utilize data analytics for personalized marketing strategies. These
adjustments empower Avon to adapt to changing consumer preferences and stay ahead in the
cosmetics industry.

Weaknesses

Weaknesses may include challenges in adapting to digital marketing trends, as well as

maintaining consistency in product quality and availability across diverse markets.
Distribution management might face complexities in coordinating with a large network of
representatives and ensuring timely delivery.

Emerging Competitors

Modern makeup products and competitor companies can impact Avon in several ways. For
instance, if competitors offer innovative formulas or trendy products that Avon doesn’t have, it
could lead to a loss of market share. Additionally, aggressive marketing and pricing strategies
by competitors might affect Avon’s sales and brand loyalty. Avon would need to adapt by
innovating its product offerings, enhancing its marketing strategies, or differentiating itself in
some way to remain competitive in the market.

Overall, Avon’s marketing strategy benefits from its personal touch and widespread presence,
but it needs to continually evolve to remain competitive in today’s dynamic market landscape

Opportunities

Since the emergence and exponential growth of the internet in 1997, there has been
evidence that the Internet is an effective platform to showcase and sell different products. It
includes developing websites, creating pages on various social media platforms, and using
paid advertising to reach more users. In 2012, other companies rose by marketing their
products on the World Wide Web, and some of them became successful namely Amazon, and
eBay.

In terms of distribution, due to the development of roadways and other means of

transportation, companies can reach more customers in secluded areas to introduce and sell

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their products. It also opened up opportunities for Avon to have manufacturing and
distribution channels in certain areas to lessen transportation expenses and distribute their
products efficiently.

Threats

Due to the evident growth and profitability of AVON, different companies emerged
and proved themselves to be a huge threat to the company. However, different threats became
more visible due to the emergence of competition such as consumer behavior, technology
disruption, economic factors, brand reputation, and supply chain issues.

RECOMMENDATION

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 To address the challenges faced by Avon, the following recommendations are
proposed:

Evaluate and Adapt Distribution Strategy

Avon should conduct a thorough evaluation of their distribution strategy and consider
adjusting the balance between direct selling, retail, and online channels. This evaluation
should take into account customer preferences, market trends, and the effectiveness of each
channel in reaching the target audience.
Strengthen Differentiation and Value Proposition
Avon should focus on reinforcing the unique selling proposition of their products,
particularly the premium offerings. This can be achieved through effective branding,
highlighting the exclusive features and benefits of premium products, and clearly
communicating their value to customers.
Explore New Partnership Opportunities
Avon can consider partnering with other retailers or online marketplaces to reach new
customers and expand its distribution. Instead of opening their own retail stores, they can
collaborate with established retailers, benefiting from their existing customer base and
infrastructure. This approach allows Avon to maintain control over how their products are
represented and positioned, while tapping into a wider market reach.
Invest in Market Research
To better understand its customers' needs and preferences, Avon could invest in market
research to gather insights that can inform its product development, marketing strategies, and
distribution channels.

CONCLUSION
In conclusion, the challenges encountered by Avon should not be viewed as failures,
but rather as opportunities for growth and improvement. These hurdles highlight the

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importance of strategic marketing and the careful selection of distribution methods to
effectively reach a diverse customer base. By considering the proposed recommendations,
Avon can not only lessen potential future challenges but also identify new avenues for
enhancing their marketing efforts and differentiating their products. Ultimately, these
improvements will strengthen Avon's position in the market and contribute to their ongoing
success in the beauty industry.