Post on 19-Jan-2016
description
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