2017-08-10 16:32

 

Why has AVON been challenged by MLM in the digital age?

 

[straight network Beijing, August 10th] [modern story) in 1886, David Brown in New York, the United States founded the "The California Perfume Company."". In 1939, Mcni was named after the name of his hometown, "AVON", which is now the "AVON", and David Mcni is also known as "the father of AVON"".
In 1990, AVON entered China's market in a direct way. At that time, MLM was rampant, and many people felt that direct marketing was pyramid selling. Therefore, AVON first arrived in China and no improvement, can only change the marketing channels, instead of franchised stores to sell.
Until 2005, direct sales began to gradually lift the ban, AVON in the Chinese market to get the industry's first direct marketing license, began to start direct marketing. However, because of the conflict between direct selling personnel and franchised stores, AVON has not been able to come up with a reasonable response policy. After that, AVON's performance in China began to suffer a disastrous decline.
Today, AVON has sold a majority stake in Japan and the United States, and has pulled out of markets like South Korea, Vietnam and ireland. So, in the increasingly high loss situation, once as the world's leading beauty cosmetics Direct Selling Company, but also to reverse the trend, and regain the "world's first direct sales" title?
Performance worse, Sheri McCoy resigned?
In 2012, Mccoy formally took over the AVON group and became a board member. At that time, Mccoy also stepped in, just entering AVON is facing the overseas bribery case against Coty's acquisition and a series of tasks. However, Mccoy since taking over AVON CEO, performance has declined again and again, about Mccoy because of sustained losses and outgoing rumors have been heard.
Recently, AVON released Q2 earnings: sales fell 3% to 1 billion 396 million yuan, operating profit decreased by 63% year-on-year to $31 million 600 thousand, a net loss of $45 million 500 thousand. Its stock, adjusted for the second quarter, was 3 cents a share, down from 7 cents last year, and revenues fell 3% to $1 billion 350 million. From the earnings view, AVON's performance is still going down.
Before the earnings release, AVON has passed a long time senior turmoil rumors have been confirmed, the chief executive of Sheri McCoy (Schelin McCoy) because of the performance of continued losses, under pressure from investors in March next year officially retiring AVON CEO post. Currently, the Avon Co has commissioned agencies to find the new CEO. Mccoy's net loss has reached $1 billion 800 million since it began operating AVON in 2012.
AVON's radical partner, Barington Capital Group LP, and his partnership, Nu Orion Partners AG, both hold 3% of AVON's shares. In fact, after the release of first quarter earnings at AVON, Barington requires the expulsion of Mccoy, and claimed that AVON under Mccoy's management, shareholder value has suffered great destruction, Mccoy does not have the ability to think in a proper way of management of the company.
According to people familiar with the matter, Mr. Mccoy has discussed with the board on issues such as the timing and conditions of leaving the Avon Co before that time, and AVON has appointed some important executives in recent weeks.
The thought that launched last year's revival plan can ease investor concerns, not to the first quarter of this year AVON unexpectedly suffered a loss in the first quarter, its results: AVON's net profit during the reporting period loss of $37 million. See this performance, Mccoy has become the universally condemned objects is not an accident.
Admittedly, Mccoy has rich experience in cosmetic products, after all, worked for many years in charge of Neutrogena, Aveeno and other skin care products in Johnson's marketing work, but the direct model of AVON still lack of experience. Therefore, Mccoy in the management of AVON during the performance of sustained loss of the fact can not erase, and she left the reason may not only be under the pressure of investors, and some are out of their own responsibility.
Arm, Miss new retail, AVON is still unable to get up after a fall
AVON's share price has fallen by 85% since 2012, when AVON's board of directors rejected the olive branch sold by global cosmetics giant Cotti, and its growth in the last 3 quarters was negative. So, what makes AVON step by step towards decline?
First of all, AVON is affected by the environment, quite down on the luck means. In the Chinese market, for example, AVON entered the Chinese market so far 27 years, the initial entry into the Chinese market AVON because of its direct mode and MLM problems, in a long period of time, the direct selling industry are in the gray area. Until 2005, the "direct marketing regulations" promulgated, the direct selling industry has been able to develop rapidly.
At that time, Amway, and other brands have entered the Chinese Mei Kerin direct selling market in succession, when sales began to develop but AVON encountered strong competitors. It is understood that AVON just in China to develop direct marketing, due to the lower quality of practitioners, no sales skills, can only door-to-door sales. However, this kind of sales is not good for the corporate image, and it is not worth the loss in the long run. But AVON's rival, Amway, is different. They organize regular sales training and improve sales skills.
Since then, AVON in the Chinese market has experienced many changes in high-level management, from 2010 to early 2016, five years, has experienced the five head. In such a turbulent environment, AVON's continuous performance is not easy to keep its performance going up.
Secondly, since Mccoy took over AVON CEO, the AVON turnaround strategy has always been to arm to survive. Especially after the revival plan was launched last year, first sold its UK natural skincare brand Iiz Earle, then at the end of the year announced the segmentation of North American operations, 80% North American business to $170 million sale to private Holdings Company Asset Management Co (Cerberus Capital Management) barron.
Prior to this, Mccoy has refused to give up AVON's birthplace of the American market, has been throwing money in the rescue of the local market, without considering the rise in direct sales during the Mexico and Brazil markets. Until the end of 2015, Avon Co decided to sell the business, which had saved the American market money boondoggle.
Not only that, along with the development of the new consumer retail shopping began to enter into the digital era, squeezed by the impact of the electricity supplier and L'OREAL, Estee Lauder and other international brands, in addition to the store rent, labor costs rise, AVON increasingly unbearable.
Thus, AVON from the giant loss to CEO to step down and is not a short duration of time caused by the choice of arm to survive in the environment under the impact may be right, but the strategy may be biased. If in 2012 the Japanese giant Coty olive branch, the results may not be the same, but this is the way you choose AVON.
Revival plan may be in the foreseeable future, AVON find his way again?
Currently, AVON is in the performance of falling predicament, rumors Mccoy continued life of James Scully did not play what role, after the delivery of the new season quarter loss was announced to step down, but Mr Mccoy did not seem to change the current AVON faces dilemma.
After Mccoy left office last year AVON launched a three year recovery plan, this plan is the management of AVON and America then set man Cerberus capital to launch. The recovery plan included downsizing, investing heavily, upgrading technology and services, and seeking an alternative to China's business, which accounted for about 1% of its sales.
AVON revival plan is embodied in: in order to complete the goal of cutting $350 million in costs in the planning period, cut the global IT staff; cooperation and technology giant HP in terms of technology; in the business model, the AVON group still maintain a direct sales model for the main play, there is no upgrade.
At this time, AVON's business in China has been in the red for three years. Data show that from 2011 to 2014, AVON's sales in China have been decreasing year by year. In fiscal 2014, AVON earned $8 billion 851 million, down 11% from $2013 in fiscal 9 billion 955 million, and net losses from $1 million to $385 million. In September 2015, AVON has accumulated more than $2 billion in debt, in the Asian Pacific region China led by AVON.
The rehabilitation plan is AVON in the performance of the bottom after a desperate fight, but after the new earnings season, plans to revive AVON radical investors by the partnership and criticism, and in Mccoy stepped down after the revival plan will once again postponed indefinitely.
In short, AVON from the daily chemical giant enterprise development to the present predicament, more likely in the environment and the transformation time caused by the impact. In the eyes of many people, AVON can only be once a great group, and Mccoy is also a victim of the AVON Renaissance program. Now, the industry may be more curious: who will be the next head of AVON?