Abstract

The case discusses the various challenges faced by the CEO of the world’s largest direct seller of beauty products — Avon Products Inc. — in 2013. Avon was started as California Perfume Company (CPC) by David H. McConnell in 1886. Later on, in 1939, the company was named as Avon by David H. McConnell Jr. The whole business of Avon was based on the pillars of its sale representatives working through the direct selling model. The core business comprised beauty products and household and personal care products for men, women, and kids. In 1999, Andrea Jung became Avon’s first female CEO. Under her leadership, the company showed healthy growth for a few years. But business started to decline after 2005, mainly due to problems in the direct selling model in Avon’s home market, the US. To arrest the downfall, Jung came out with two turnaround plans, but neither worked. In 2008, Avon faced allegations of possible violations of the Foreign Corrupt Practices Act for bribing Chinese officials and making questionable payments to third party consultants. The sale representatives were also demotivated and unenthusiastic about working under the company’s commission structure. During the last quarter of 2011, sales were nearly flat. Trends like online shopping on the internet platform, specialty retailers, etc., gained ground at the cost of traditional door-to-door selling. In April 2012, Sherilyn S. McCoy (McCoy) replaced Jung as the CEO of Avon and found herself facing a number of challenges. She brought about some major operational and financial changes by focusing on the core of Avon’s business — its staff, representatives, and consumers, she also took many cost cutting measures like terminating 1,500 positions and exiting from non-performing markets. Though the company appeared to be on track in 2012, in the third quarter of 2013, it reported lower revenues and net loss of US$ 5.5 million. The results threw up more challenges for McCoy and she needed to come up with plans to put the company back on track.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the various challenges faced by Avon while following the traditional channel of distribution.
• Analyze turnaround plans proposed by Jung and McCoy
• Understand the key challenges faced by Jung and McCoy
• Discuss and debate the efforts McCoy needed to put in to revive Avon
• Discuss the various measures which could help Avon achieve its targets set for the coming years

Keywords

Cosmetics Industry, Avon, Distribution Channels, Direct Selling, Multi Level Marketing, Sales Representatives, Restructuring Initiatives, Turnaround,Retail outlets,Sheri McCoy, Online Selling , Brochures, Foreign Corrupt Practices Act ,Andrea Jung