Avon Brand Wobbling on a Shaky Foundation

Seems like the iconic Avon Lady needs to wed the skills of door-to-door digital sales with a dash of machismo to survive.

Yes, the fabled Avon Lady is struggling. New Avon CEO Sherilyn McCoy, who replaced Andrea Jung, has her hands full just turning around the company's operations. In a world dominated by e-commerce, Avon products aren’t even carried by drugstore.com, one of the largest online beauty products retailers.

Making McCoy's job tougher: Coty’s $10 billion unsolicited take-over bid, which saw Avon stock slip and attracted a "credit negative" assessment according to Fitch analysts.

“We believe the time for Avon shareholders to act is now,” commented Bart Becht, Coty’s chairman, to the New York Times. “Door-to-door is a growth industry in the U.S. Avon isn’t. There’s something wrong with Avon operationally.”

Coty is asking Avon shareholders to pressure their board to agree to a deal, creating a company that would leverage Coty’s celebrity and fashion brands with Avon’s global army of door-to-door sales representatives. And therein lies the rub.

While door-to-door sales is still a vibrant model, both domestically and in countries like Brazil, 85% of Avon's sales in 2011 came from outside the U.S. On top of that, the Avon Lady needs to spend more time on social and digital marketing, as per rep operating profits in the U.S. fell 75% in the last ten years. 

According to the BIGinsight research, Avon skews too old to be a sustainable business model: “women spend an average of $16.22 a month on both skin care and cosmetics combined. That equals out to about $195 a year…Cover Girl is ranked as the most popular cosmetic line for all age breaks, followed by Maybelline in most instances (women 65+ seem to rely pretty heavily on their Avon lady). Revlon comes in at #3 for women ages 25-34, 35-44 and 55+.” 

The Avon brand, as the Wall Street Journal notes, has been too slow to develop digital sales tools to help their reps woo new business through Facebook, Twitter, smartphones and tablets.

“The company's sales representatives still find themselves left to their own devices when it comes to the Internet. Local representatives get credit for an online sale only if shoppers use a drop-down menu to identify them. Some sign up for social-media classes, others seek out online tutorials and many discuss tactics on message boards,” reports the Journal.

“Avon's door-to-door sales force in the U.S. is competing against a growing online channel plied by rivals like LVMH Moët Hennessy Louis Vuitton SA's, Sephora.com and Walgreen Co.'s Beauty.com and Drugstore.com. At $3.5 billion in sales last year, Internet retailing accounted for 5.7% of the U.S. market for beauty and personal care, up from 5.4% in 2010, according to Euromonitor International,” the WSJ report adds.

Coty, meanwhile, is committed to digital. Chairman Becht says he is committed to spending more money on systems and support, R&D and training and technology. "There should be greater investment in IT to create digital toolboxes to assist their account reps," he stated flatly.

Richard Levick's Forbes piece, “Avon Calling When It Should Have Been Clicking,” summarizes the brand's challenge: “Coty’s offer is just another reminder of how time-honored companies must somehow find a way to transform fabled legacies.”

Adding insult to injury and fabled legacies, 20th Century Fox’s Avon Man movie is looming, with producers reportedly in talks with Mark Wahlberg to take on the title role that was abandoned by Hugh Jackman.

The script follows a group of men laid off from an auto dealership and one (according to New York magazine's Vulture blog) “reluctantly becomes an Avon salesman. He survives the emasculation, relies on his charm and becomes a top seller. He then tries to save his town and help his struggling family by pulling in his macho unemployed pals to hawk beauty products so they can win a regional contest.” That's the kind of chutzpah Avon's C-Suite needs, too.