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Sheri McCoy is working to bring a sense of urgency to the 127-year-old Avon Products Inc., and with it could come bold changes.
This story first appeared in the February 22, 2013 issue of WWD. Subscribe Today.
Nine months into her tenure as chief executive officer, McCoy is pushing for a more contemporary approach to direct selling that would move Avon deeper into the digital realm. The effort — which may ultimately include makeover tools and online training — could potentially prompt Avon to shift from a monthly new product brochure, down from its current biweekly cycle, McCoy told WWD in an interview on Thursday, following the company’s presentation at the Consumer Analyst Group of New York Conference held Boca Raton, Fla. “It’s a more fundamental change,” she said, adding that the company has tried the approach in some smaller markets, such as Thailand. “It was disruptive in the beginning, but it’s doing quite well now,” said McCoy.
To accelerate its digital capabilities, the company has created a Digital Center of Excellence, which reports to Avon’s newly installed senior vice president and chief marketing officer Patricia Perez-Ayala.
“With the technology today there is a tremendous opportunity for us to make it easier for the representatives to do business,” said McCoy. “In markets like Russia, 100 percent of our orders are online. We are continuing to make [online ordering] easier for people. Ultimately we’d like to have a model where representatives can come online, they can see whether a product is available and get it quickly overnight.”
The changes stem from McCoy’s deep dive into Avon’s underlying troubles, which the company aims to tackle with a three-pronged approach that relies on retooling the brand’s image and its products to more relevant to consumers, simplifying the selling process for representatives and focusing on the greatest geographic opportunities, while fixing ailing markets.
“Part of the turnaround is to simplify our business, make it more efficient, get costs out, and make sure we have the right leaders for the future. It’s really about growth simplification and people,” said McCoy.
Her aim — as she declared to analysts on Thursday — is to return Avon “to its rightful place as an iconic beauty brand.”
She acknowledged that Avon had been underperforming for years, but added, “We are seeing the early signs of stabilization.”
The company has made headway on its plans to cut at least $400 million in costs by the end of 2015. The effort has included trimming head count by about 1,500, closing two distribution facilities in the U.S. and exiting both South Korea and Vietnam.
During her presentation, McCoy outlined plans to improve each of Avon’s product categories, namely color cosmetics, fragrance, skin care and fashion and home, and align them with the company’s beauty strategy, which she referred to as, “Beauty with a capital ‘B.’”
The company sees color as an entry point for consumers and is currently working to update its flagship brand Avon Color, which accounts for 70 percent of the company’s sales in that category. Where there is opportunity, said McCoy, is at the premium, or “masstige” end, which accounts for 5 percent of Avon’s color sales. For instance, Avon plans to expand distribution of Luxe, a premium-priced line developed for the Russian market, to Central and Eastern Europe. Similarly, Avon raised the price of Elegante, a fragrance popular in Brazil, by 33 percent after refreshing the brand’s packaging and positioning and tapping a celebrity spokesperson. In skin care, the company aims to better leverage Anew, its premium-priced skin-care range. “We have great innovation in this space and frankly we should be doing better,” said McCoy, adding that only 30 percent of representatives sell Anew skin care, while 85 percent sell Avon color cosmetics. To bolster sales of Anew, Avon plans to simplify the benefits and technology claims to make them easier for representatives to understand and then sell to their customers.
Referring to the role price plays in Avon’s overall strategy, McCoy said, “At the low, value end it allows people to come into the business and it drives unit growth. But we recognize [to create] the earnings opportunity for the representative, we need to be able to trade up consumers over time and to have a portfolio that allows her to make money.” She noted that although products like Anew have higher price points, Avon was discounting the line in certain markets — like China. “Now we are being much more thoughtful about how we are pricing its different tiers, and managing discounting is important,” she said.
McCoy also is taking a hard look Avon’s global markets, and has already exited several underperforming markets.
The U.S., the U.K. and China remain challenging for Avon. In the U.S., plans call for a more aggressive recruiting effort and an effort to improve the earnings opportunity with improved product and marketing. “Right now, our focus is on stemming decline to a point that it is not a drag on the rest of the business,” said McCoy. “I don’t expect that it’s going to grow as fast as places like Brazil. But we need it to be stable and we need it to be profitable. That allows us to be able to invest in other markets.”
In China, McCoy said the move back and forth from direct selling to retail boutiques has disrupted sales momentum. Going forward, the company will focus its efforts on supporting independent boutique owners, she said. To that end, Avon has helped to upgrade about 3,300 stores in China.