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Avon’s Direct Effect

The company's woes have drawn attention to the direct-sales beauty channel.

Appeared In
Special Issue
Beauty Inc issue 08/10/2012

Avon’s woes have drawn attention to the direct-sales beauty channel, with some industry observers questioning its viability as retail infrastructure has improved in the emerging markets, where the model had long been a good fit. “Direct selling suffered largely on the back of a slowdown experienced in its two key markets of Brazil and Russia,” says Irina Barbalova, Euromonitor International’s head of global beauty and personal care research.

 

“Both countries have seen a continued shift to store-based modern retail, as well as the internet, as those two channels penetrate and evolve further with more sophisticated offerings and continue to grow at the expense of reduced traffic through direct sellers.”

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The person-to-person selling model remains dominant in Brazil, according to Kline Group. That country is Avon’s largest market, generating 20.5 percent of its 2011 sales and where its revenues were flat on a constant-currency basis. For Natura, Brazil’s largest direct seller, domestic revenues grew 6.8 percent and its consultant numbers increased 14.3 percent. Grupo Boticário, which ranks second in Brazil, launched Eudora, a beauty label and multichannel retail concept involving direct sales. Still, it seems some other emerging countries’ direct beauty businesses must be picking up steam and mitigating the slowdown in Brrazil and Russia. “Sales through the person-to-person channel in BRICs were quite robust, growing by a combined average of 22.1 percent between 2010 and 2011,” says Kline Group industry manager for consumer products Karen Doskow. The business in North America remains mixed, meanwhile. There, Avon’s sales declined 6 percent and units decreased 10 percent, while tupperware posted a 2.6 percent beauty-sales drop due to a smaller, less-active sales team. The news wasn’t all grim, though. Also last year, Mary Kay’s global sales grew 15 percent and Alticor’s gained 11.7 percent.