NEW YORK -- Avon chief executive officer Andrea Jung is pumping reorganization through Avon's bloodstream.
At a meeting for investors at its corporate headquarters Wednesday morning, Jung revealed that the company was adding pressure to its already under way business transformation plan. Along with a team of senior Avon executives, Jung outlined goals through 2004 that are expected to result in a rise in Avon's sales from $6 billion in 2001 to $7 billion. As previously announced, Avon's priority is not only to continue to build sales but to improve the global firm's operating margins.
Avon, which had been grabbing headlines with its entry into retail with the BeComing brand, spent the morning instead talking about how it would strengthen its position as a preeminent direct-selling firm. Plans to expand BeComing into another retail chain have been put on the back burner, while Avon focuses on developing the fledgling business in 92 J.C. Penney doors.
To build Avon's core business, the company has already implemented a beauty adviser program in which sales representatives are coached on selling techniques and makeup application. A goal is to improve recruitment and retention among associates. Brian Connolly, president of Avon North America, said he believes the number of U.S. reps can grow from its current 550,000 to 750,000 in 10 years. There is also an ambitious project to increase the percentage of women Avon calls "career" sales associates, from 18 percent to 30 percent.
Although Avon also sells jewelry and some giftables, beauty will continue to be its primary thrust going forward. Now accounting for 80 percent of all sales, the goal is to increase beauty sales to 84 percent. To make cosmetics more nimble, the stockkeeping unit count is being trimmed from 7,800 to 6,000, along with plans to hasten new product development from 88 weeks to between 12 to 63 weeks. Meanwhile, Jung said Avon's pipelines are "stocked" with new products. Making its debut in the first quarter is Brilliant Moisture lip color and a revamped version of Nailwear. In the fourth quarter, Avon will bring to market Anew Ultimate, an antiage skin cream in a gold-trimmed package. Also coming is a new floral scent, Dreamlife.
Order packing is being scrutinized to improve accuracy from its current 62 percent to 90 percent. Additionally, to streamline order placement, Connolly hopes to increase online ordering of its reps from 23 percent to 50 percent by yearend.To sharpen operations globally, Avon will begin managing regional businesses in clusters, rather than on a market-by-market basis. These clusters will share marketing, administrative and other functions to eliminate duplication. Europe has been operating under the approach for about nine months. A 117-member executive team has been formed from Avon's ranks to implement the changes.
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