By: Dheeraj TripathiPGDM 2013-15Roll no: 1301-065Section A

Case Analysis: Avon.com

INTRODUCTION

•World’s largest direct seller with over USD 5 Billion in sales

•World’s fifth largest beauty products company

•Established by Donald H. McConnell in 1886 as ‘California Perfume Company’, renamed ‘Avon’ in 1939

RETAIL SYSTEM & PRODUCTS

Color Cosmetics

Skin Care

Fragrance

Fashion & Home

Hair Care

Personal Care

Products

Retail System

• Direct Selling• Mainly single

level

SALES FORCE• Full time representatives• President’s club members• 20% of total members (1 Million)• Long customer list• Selling Avon products for a long time• 12000 Leadership representatives

Career Avon Representative

• Working in part time• Secondary job• Joined to fill the void of ex-representative• Majority of Avon representatives (80%- 4 mn)Part Time Avon

Representative

26 Avon Campaigns in a yearOn an average , 12 attended by each representative

Purchase of BrochuresDistribution of brochures to customers personally, by mail or left at conspicuous placesPlace an Order by filling 35 page long purchase order

Delivery from Avon in 5 daysInventory sorting and delivery to customer

SELLING PROCESSTotal no. Avon Customers = 15*5mn= 7.5 Million= 70% of Target MarketSize of Target Market = 10.71 Million

84.40%

15.60%

Advertising Spend

USA ($38 mn)Overseas ( $7 Million)

REVENUE & MARKETING

39.30%60.70%

Net Sales

USA( $ 2 bn)Overseas ($3.2 bn)

•Launched in 1997, developed on a budget of USD 400,000

•Only for commerce

•Beauty products only

•Direct sales to consumer, no involvement of representatives

•Avon viewed it as a test of potential new channel

•Little advertising, insignificant sales volume

AVON.COM

Eve.com Strategy• Commerce only site• Traditional online retailer• Fit with Direct Selling tradition

iVillage Strategy• Active online community of women• Information exchange through forums-

chats• Relationships beyond the geographic

confines

AVON.COM- TAKE II

B2C• Total no. of Avon Customers = (15 customers/representative)*(5mn

representatives)= 7.5mn = 70% of Target MarketSo, Size of Target Market = 10.71 Million

• No. of customers who would buy from Avon but not through a representative = 18% of Target Market = 1.93 Million

• Cost in updating Avon.com = $ 3-5 Million• Cost of shipping the items= $3 per order (No Processing cost)Assumption: Target to reach 20% of this untapped market

Consumers= 20% of 1.93mn = 0.386 mnCost of Shipping= 0.386*3= $1.158 mn Advertising cost = 4% of sales = $0.30 mn Total cost= $5mn+ $1.158mn + $0.30 mn = $6.458 mnEach customer buys on an average of 20$. Sales = 20* 0.386 = $7.72mn Profit= 7.72- 6.458 = $ 1.262 mn

Break even point would be 16% of this untapped market

B2B

• Total no. of Avon Customers = (15 customers/representative)*(5mn representatives)= 7.5mn

• Cost of processing = $1 per order• No. of Campaigns = 26, Avg 12 attended by representatives• Total number of orders = 7.5* 12 = 90 mn• Total Cost of processing the order= $1 * 90mn= $90 mn per annum• Total cost for a 5 year period = $90 * 5 = $450 mn• Cost of developing the B2B project = 60 million over 3-5 years

• Savings = 450-60= $390 mn

B2C vs B2B

B2CShould be implemented to tap the 18%

market of customers who doesn’t want to buy Avon products through

representatives

Developing online communities will also help the company in connecting to the

consumers

Online shopping is future ready

B2BShould be implemented as it saves a lot of

processing cost

Fully functional online ordering system will make it easy for representatives

Online ordering is future ready

THANK YOU