Abstract

The case discusses the distribution practices of the world’s largest direct seller of beauty products – US-based Avon. Started as a perfume company by David H. McConnell in New York in 1886, it went on to become an international manufacturer and distributor of beauty, household, and personal care products. Over the years, it expanded into several markets across the world like Russia, Brazil, China, and many others. Avon’s business was based on the traditional marketing model of door-to-door selling through a network of sales representatives (reps) who sold the products directly to consumers. Over the years, its direct selling system underwent changes and emerged as multilevel marketing, wherein the Avon reps recruited and trained other reps and were rewarded for doing so. However, the traditional distribution system started facing problems in the early 2000s due to the emergence of specialty retail for cosmetics, the growing popularity of online shopping, etc. Avon tried its hand at retailing and online sales, but this did not yield positive results for the company. Instead, it served to only alienate the reps. In the emerging markets too, Avon faced competition from local players as well as established multinational cosmetic companies. This lead to flat growth and the CEO of the company Andrea Jung, resigning in 2012, paving the way for Sherilyn McCoy. McCoy faced challenges in terms of falling sales, demotivated reps, the direct distribution model, and also growing competition from online businesses. It remains to be seen how she will manage to reinvigorate Avon’s direct distribution model.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Study the distribution channel adopted by Avon
• Discuss the advantages and disadvantages of direct selling for the company and for the customers
• Discuss and debate whether the model is sustainable
• Discuss ways in which Avon can improve its distribution model and achieve better penetration in the US and other countries
• Examine the distribution challenges faced by McCoy

Keywords

Cosmetics Industry, Avon, Distribution Channels, Direct Selling, Multi Level Marketing, Sales Representatives, Bonus, Commission,Retail outlets, Online Selling, Brochures, Foreign Corrupt Practices Act, Beauty products, Online retail