Market analysis: Avon in China

15Dec2012

In 1886, David McConnell founded the California Perfume Company. In 1939, due to his admiration for William Shakespeare, he renamed the company Avon, named after a river in Shakespeare’s hometown. For more than a hundred years, Avon has maintained its core company values: trust, respect, humility and high standard. Now, Avon is headquartered in New York and is one of the world’s largest cosmetic companies with 43,000 employees, 4,400 thousand sales staff, and operations in 145 countries. In 2005, the total turnover of Avon was 8 billion dollars.

Avon entered China in 1990. Now, Avon (China) has 74 branches in 23 provinces, 5 autonomous regions and 4 municipalities directly under the central government. It has a total of 2,000 employees in China. The production base in Guangzhou(广州) was put into use in 1998. Now, Avon provides Chinese consumers with skin care products, cosmetics, personal care products, perfumes, fashionable ornaments, modern underwear and healthy products. In 1998, Avon ushered in a new trend in China, and began selling products in the retailing channels of exclusive stores and special counters.

Avon: a retailing pioneer

Avon uses many different retailing channels to satisfy the different demands of Chinese consumers. In China, there are more than 6,000 Avon exclusive stores, more than 1,500 counters in many big department stores, and over 300 warehouse counters. Also, Avon is one of the first brands to provide online retailing of its products to its customers. In addition, Avon actively attempted to increase its human resource in China. It employs many famous beauticians and professional beauty consultants to improve the quality of its services.

Avon: in danger

Avon is currently facing a couple of problems in China. In 2008, some scandals were reported, which still influence Avon’s reputation today. Four Avon executives, including three from China, were suspended and later fired following investigations regarding bribes. Although its global turnover has been slowly but steadily increasing, its turnover in Asia has been dropping. There is news that Avon was exaggerating the effect of its products and was accused of producing misleading advertisements. Avon used to be the market leader in the direct selling channel, but in 2011, its income in China amounted to only about two billion yuan. Other direct selling brands such as Amway, Mary Kay and Infinitus all have achieved annual turnovers of more than ten billion yuan. Even some domestic brands like Ningbo(宁波) Sansheng(三生), have caught up with Avon. It seems that Avon is in a lot of danger, and measures need to be taken to mitigate the risk of continuing operations.

Daxue Consultant China

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Credit Photo: Baidu