Don’t let Avon Products Inc.’s troubles fool you.
This story first appeared in the April 6, 2012 issue of WWD. Subscribe Today.
The direct-selling business has evolved into a robust, technology-led distribution channel. A number of players — Mary Kay Inc., Rodan & Fields and Nu Skin Enterprises Inc. among them — have replaced the doorbell with e-mail, and the glossy brochure with an iPad app.
Coty Inc., which this week unveiled a $10 billion bid to take over Avon, might well be motivated by the success of these other direct merchants.
Last month, Mary Kay launched one of its most popular online tools, Virtual Makeover, for mobile devices ranging from the iPad to Android smartphones and tablets, said Patricia Wanderley, vice president of corporate digital marketing. Also, in March the company introduced an app called Show and Sell, designed to provide visual selling tools at parties hosted by its sales consultants, said Jamie Schott, Mary Kay’s director of digital marketing. These initiatives are now rolling out globally.
The skin care range Rodan & Fields has been steadily building a direct-selling network in the U.S. since leaving the department store channel in 2008. Thousands of Rodan & Fields’ 20,000 representatives are armed with iPads and nearly 100 percent of its orders are placed online, said a company spokeswoman. She added that the company has an incentive program where reps can earn iPads. With products such as the 60-day regimen Anti-Age Amp MD, priced at $200, Rodan & Fields plays in the premium tier, along with Nu Skin, a company that many on Wall Street point to as the bellwether of beauty direct selling with its luxury price points and multilevel selling model. Nu Skin’s flagship skin care range, AgeLoc, sells for between $50 to $450 for a monthly regimen. The spoils of those double- and triple-digit price points help attracted and retain representatives.
Several Wall Street analysts contend that Avon’s low price points and heavy-handed promotions make its business model more labor-intensive for its representatives. As Stifel Nicolaus & Co. analyst Mark Astrachan pointed out, “You want Avon to be a business where you can earn a living, not supplement a living. It takes an awful lot of lipstick [sales] to equal a $200 skin cream.” Avon does offer reps online tools and an iPhone app.
Nu Skin said it funnels 43 percent of its sales back to its representatives through incentive programs, and Rodan & Fields distributes more than 30 percent of revenue to its sales force, according to industry sources. A source with knowledge of Avon’s business said the company’s U.S. business allotted roughly 20 percent of sales to its representatives.