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  • http://www.chinaretailnews.com/2007/07/04/724-chinas-cosmetics-market-could-eclipse-united-states-in-2009/ October 30, 2006 | By ChinaRetailNews.com Editor |   Print |   Email Avon says its revenue in China grew 9%, despite the exit of company-run store counters, which had a negative 10-point impact on the company's quarter's revenue growth. Growth reflected the continued roll out of direct selling. At quarter end, Avon China had over 236,000 certified Sales Promoters registered with the government and was engaged in training these Sales Promoters to become active Representatives within Avon's direct-selling model. Units were 1% higher versus the prior year in the third quarter. China had an operating loss of US$3.0 million in the third quarter, versus operating profit of US$1.6 million in 2005's third quarter, due to increased expenses associated with the launch of direct selling and fees paid to service centers. Operating margin was (6.1)%.
  • Avon1

    1. 1. <ul><li>Presented By: </li></ul><ul><li>Steven Doman CGA080079 </li></ul><ul><li>Lim Kim Leong (Thomas) CGA 080077 </li></ul><ul><li>Retailing CMGB6305 </li></ul><ul><li>Dr. Yusniza Kamarulzaman </li></ul>
    2. 2. Avon China Video <ul><li>http://www.youtube.com/watch?v=80naK4NyMZk&feature=related </li></ul>
    3. 3. <ul><li>Leading Global Beauty Company </li></ul><ul><ul><li>$9 Billion in annual revenue </li></ul></ul><ul><ul><li>Markets to women in over 110 countries </li></ul></ul><ul><ul><li>Direct selling, 5 million independent sales </li></ul></ul><ul><ul><li>representatives </li></ul></ul><ul><ul><li>Beauty products, jewelry and apparel </li></ul></ul><ul><li>Customers, most employees are women but </li></ul><ul><li>company has traditionally been run by men </li></ul><ul><li>Poor strategic decisions in 1980s led to change </li></ul><ul><li>towards increasing diversity </li></ul>
    4. 4. <ul><li>1970’s Management was solely men </li></ul><ul><li>Ignored their own research that more women </li></ul><ul><li>were entering their workforce and professional </li></ul><ul><li>careers </li></ul><ul><li>Sales growth slowed and sought unrelated </li></ul><ul><li>diversification as area for growth </li></ul><ul><li>Brink of bankruptcy </li></ul><ul><ul><li>CEO Jim Preston refocused on its roots </li></ul></ul><ul><ul><li>Developed strategies to reach women in the </li></ul></ul><ul><ul><li>marketplace </li></ul></ul><ul><ul><li>Realized customers needed to be recognized in senior </li></ul></ul><ul><ul><li>management </li></ul></ul>
    5. 5. <ul><li>Now a leader in management diversity </li></ul><ul><ul><li>CEO and Board Chairman is Andrea Jung </li></ul></ul><ul><li>86 percent of management is women </li></ul><ul><ul><ul><li>More than any other Fortune 500 Company </li></ul></ul></ul><ul><ul><ul><li>Half of Board of Directors are Women </li></ul></ul></ul><ul><ul><ul><li>Many programs to make sure women and minorities have opportunities for development </li></ul></ul></ul><ul><li>Networks </li></ul><ul><ul><ul><li>Hispanic, Black, Asian Gay and Lesbian </li></ul></ul></ul><ul><ul><ul><li>Act as liaisons between management and associates </li></ul></ul></ul>
    6. 6. <ul><li>Turned to Foreign Markets for growth </li></ul><ul><ul><li>2006 the company earned first foreign direct selling license in China </li></ul></ul><ul><li>Current management launched new growth </li></ul><ul><li>initiatives </li></ul><ul><ul><li>Private label brands </li></ul></ul><ul><ul><li>Jewelry and apparel </li></ul></ul><ul><ul><li>High performance hair products for every hair </li></ul></ul><ul><ul><li>type/ethnicity </li></ul></ul><ul><li>Avon wellness promotes balanced healthy </li></ul><ul><li>lifestyle for women and their families </li></ul><ul><li>Strategic Partnership with Curves </li></ul>
    7. 7. <ul><li>Started to offer grooming products and accessories in a Men’s catalog </li></ul><ul><li>Technology to support efforts of 5 million reps </li></ul><ul><ul><li>Reps can manage business electronically </li></ul></ul><ul><ul><li>Personalized web pages </li></ul></ul><ul><ul><li>Place and track orders online </li></ul></ul><ul><ul><li>Target specific groups and customers </li></ul></ul><ul><ul><li>Track orders </li></ul></ul><ul><ul><li>Use e-mail to share product information, selling tips and marketing incentives </li></ul></ul>
    8. 8. <ul><li>2008-(In millions) </li></ul><ul><li>Total Revenue $10,690.1 (8% increase) </li></ul><ul><li>Cost of sales $3,949.1 (no significant change) </li></ul><ul><li>Net Income $875.3 (65% increase) </li></ul><ul><li>Earnings per share $2.04 (69% increase) </li></ul>
    9. 9. <ul><li>Why is Avon so committed to diversity? </li></ul><ul><li>Primary customer is female, need to have females in leadership role </li></ul><ul><li>More women and minorities are entering the workforce </li></ul><ul><li>Networks allow minorities to interact among each other since they do not report directly to an office </li></ul>
    10. 10. <ul><li>Select another retailer that also values diversity. How does this commitment also affect its financial results? </li></ul><ul><li>Amway provides opportunities for more than 3 million people worldwide. </li></ul><ul><li>Operates in over 80 countries and territories </li></ul><ul><li>Annual turnover exceeding USD $8.2 billion </li></ul><ul><li>Where you find Amway, you'll discover people sharing the entrepreneurial spirit </li></ul><ul><li>Amway is the global leader in the direct sales business sector </li></ul>
    11. 11. <ul><li>Amway Malaysia </li></ul><ul><li>Began with five employees, in a small office facility in Jalan Ipoh in 1976 </li></ul><ul><li>Amway Malaysia was one of the pioneers in the direct selling industry at that time. </li></ul><ul><li>Today, Amway Malaysia is the leading direct selling company in Malaysia with a core distributor force of 195,000 and a sales revenue of RM645.5 million for 2008 </li></ul><ul><li>Profit after tax of RM95.1 million </li></ul>
    12. 12. <ul><ul><li>AMSB and ABSB provide direct employment to 359 employees throughout Malaysia </li></ul></ul><ul><ul><li>They have a core distribution force of 195,000 </li></ul></ul><ul><ul><li>Distributors are independent business owners. Amway products and services are marketed solely through independent Amway Distributors </li></ul></ul>
    13. 13. <ul><li>Amway's direct selling approach offers three important advantages, including a diversity focus: </li></ul><ul><li>An opportunity for anyone to own a business </li></ul><ul><ul><li>Low entry cost and high quality products </li></ul></ul><ul><ul><li>no sales territories, an Amway business that starts locally can grow as large as desired, even worldwide </li></ul></ul>
    14. 14. <ul><li>In 2001, Amway Malaysia was honored for its corporate leadership by making the top 10 list in these categories: </li></ul><ul><li>Overall Best Managed Company - ranked 7 th </li></ul><ul><li>Corporate Governance - ranked 5 th </li></ul><ul><li>Treatment of Minority Shareholders - ranked 3rd </li></ul>
    15. 15. <ul><li>Make a projection for the results of the test market of Avon’s direct selling strategy in China. How did you develop this projection? </li></ul>
    16. 16. Make a projection for the results of the test market of Avon’s direct selling strategy in China. Year 2006 2007 2008 2009 2010 China Cosmetic Market Size US$2,200M US$2,600M US$3,200M US$3,800M US$4,600M Avon China US$212.0M US$280.5M US$350.9M US$438.6M US$548.3M Avon Beauty Category US$152.6M UD$202.0M UD$252.6M US$315.8M US$394.8M Avon Direct Selling $$ US$106.0M US$140.3M UD$175.5M US$219.3M US$274.1M Distributor 200,000 400,000 600,000 1,000M 1,600M Concept Store 6,000 7,000 7,500 8,000 8,500 MSS % 6.94 7.77 7.90 8.31 8.58
    17. 17. Principal market drivers <ul><li>Strong economic growth and growing awareness of personal well-being </li></ul><ul><li>The fast expanding rural market </li></ul><ul><li>The rise of the middle-class </li></ul><ul><li>Women fueling the market growth </li></ul><ul><li>The emerging markets </li></ul><ul><ul><li>Babies & Children </li></ul></ul><ul><ul><li>Men </li></ul></ul>
    18. 18. Principal market drivers <ul><li>Mainland people are now better-educated, better-paid and they attach more attention to fashion and their personal image. </li></ul><ul><li>They not only focus on improving basic living conditions, but are also keen to enhance their overall quality of life. </li></ul><ul><li>Their increasing awareness of health, hygiene and appearance has made cosmetic products one of the consumption hotspots. </li></ul><ul><li>In fact, the pursuit of beauty and health is no longer confined to young women only. Cosmetic products are gaining popularity among men, children and the elder people. </li></ul><ul><li>The cosmetics market is getting bigger and bigger embracing consumers from all ages and from all walks of life </li></ul>
    19. 19. China Cosmetic Distribution Channels <ul><ul><li>Department stores – most popular among more affluent consumers </li></ul></ul><ul><ul><li>Supermarkets, hypermarkets and grocery stores – major distribution channels for mass </li></ul></ul><ul><ul><li>Products Pharmacy chains – an emerging channel for medicated cosmetics </li></ul></ul><ul><ul><li>Specialty stores – providing professional services and full range of merchandises of a specific brand </li></ul></ul><ul><ul><li>Professional stores – dominated by numerous small players but some big ones targeting at mid- to high-end segment emerging </li></ul></ul><ul><ul><li>Direct selling – awaiting market liberalization </li></ul></ul><ul><ul><li>Online sales – in initial stage of development </li></ul></ul><ul><ul><li>Cosmeceutical stores – selling pharmaceutical products with cosmetic benefits </li></ul></ul>