Case Avon.com


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The Company

Established 1886

ValuesBased on Direct Selling

Close Customer Approach

Strong Company Identity

History1886 Launch of California Perfume Company

1939 Company name changed to Avon1964 Avon went public

David McConnell

Market PositionWorlds largest direct seller of

beauty products

Fifth largest beauty company


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Increased Rivalry

ConsumerPreferenceChanges

New MarketChannel

TechnologicalDevelopment

Personal Selling

Customer Loyalty

Flexibility forEmployees

High EmployeeTurnover

High CommissionFees

Weakness Strengths

ThreatsOpportunities

SWOT Analysis


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Problem Identification

How AVON can keep its corporate identity throughemergence of e-commerce

How a new Web Strategy can be distinguished from

the first low-profile launch of Avon.com

How to leverage sales representatives in buildingAvon.com

Main Problem

How to keep direct relationship with customers while

enhancing online sales?


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Evaluation of Alternatives

Keep personal selling as the main distribution channeland create a Web strategy only for marketing purposes

Advantages

Corporate identity

Strong customerrelationships

Current representativesemployed

Disadvantages

Inconvenience forcustomers

High commission fees

Loss of AVONs

competitiveness


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Reduce number of representatives and rely on onlinesales

Advantages

Reduced costs

Technologicaldevelopment

New market segment

Disadvantages

Loss of competitiveadvantage

Downsizing

High implementation costsLack of experience in e-commerce


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Create business strategy which would combine both:E-Commerce and Direct Selling

Advantages

Corporate identity

Strong customerrelationships

Current representativesemployed

Keeping up with thetechnology

New market segment

Disadvantages

Not unified businessapproach

High implementation of e-commerce costs

Lack of experience in e-commerce


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Overcoming Negative

Consequences

Lack of experience ine-commerce

High implementationof e-commerce costs

Not unified businessapproach

Hire e-commerceconsultants

Investment in e-commercewill pay-off in the long-run

Position it as competitiveadvantage


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Customer consideration

Since over 70% of the total sales of Avon were throughits sales reps, the company should use the B2B pathand ease the ordering style for the representatives byeliminating the filling of archaic purchase orders

The company should also use the B2C path because asignificant 18% target customers would buyindependently

The website should be more attractive and there can

be a forum so that the sales representative as well asthe customers can discuss about the Avon products


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QUANTITATIVE ANALYSIS

Cost of updating the 1997 version of Avon.com= $5million

Cost of fully functional online ordering system= $60 million over 3-5 years

Total cost= $65 million for 5 years

Present cost of processing orders

Cost of order processing= $1 for each customers order

No. of Avon sales reps= 0.5 million

Each rep participated in 12 campaigns per year

Each rep had 15 customers on her list

Hence, total customer orders in a year= 0.5*15*12 million=90 million

Cost of processing 90 million orders= 90 million*$1

= $90 yearly

For the next 5 years, total processing cost = $90*5 million

= $450 million


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Over a period of five years,

Cost per representative in non-ecommerce case=

450 Mil/0.5 Mil = $900

Cost per representative in ecommerce case=

385 Mil/0.5 Mil = $770

CONCLUSION

Hence, if the company goes ahead with the plan of making

the fully functional ordering system

Cost cutting for the company over 5 years:

= $450-$65 million

=$ 385 million


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Case Avon.com

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Transcript of Case Avon.com