Avon Products, Inc.
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Avon Products, Inc.
This paper aims to present the two sides of the grand strategy by Avon in increasing its sales through the expansion of its distribution and capturing a large market in the industry. Avon Products, Inc. is a manufacturer and marketer of personal care products, including skin-care, hair care, color cosmetics, fragrances, personal hygiene, and a limited line of non-personal care products such as jewelry, apparel, decorative and home entertainment products and a provider of spa services. The company distributed its products primarily through the direct selling channel. It was considered the world’s largest direct seller of affordable quality beauty products.
In Support of the Grand Strategy Selection by Avon
In 1999, Avon president and CEO Andrea Jung developed a successful grand strategy to expand the companies’ distribution capabilities and attract new customers. The plan was focused and directed on increasing the companies sales and earning. One of the main objectives was to broaden Avon’s retail presence in the United States. By partnering with large retail chains such as JC Penney and Sears, the company would be able to create a store within a store where it could introduce a new and more upscale exclusive product line.
By selling its products in department stores the company would benefit from increased profits, sales, and nationwide exposure allowing the company to continue attracting the baby boomer segment. The plan was financially possible since it would only require the company to invest $15-20 million to launch the products in the retail locations and the bulk of the expenses such as advertising, overhead, and employee salary, would be carried by the departments stores.
The baby boomer segment, estimated at 81 million people was comprised of individuals aged 35-53 years old and the largest demographic segment. The boomers were expected to grow 16 percent over the next five years reaching $1,080 billion by 2003. This segment outspent all age groups in virtually every category including categories not targeted to them. These consumers sought products which could reverse or halt the aging process with hair coloring products and that protected the skin from environment stresses, such as pollution. Many of the products offered by Avon satisfied these needs. Therefore the grand strategy to introduce its products to retail department stores where baby boomers shopped appeared to be a successful solution for the growth of the companies’ revenue. By diversifying its distribution channel, Avon would prevail against its competitors like Mary Kaye and L’Oreal in increasing its customer base.
Non-Support of the Grand Strategy Selection by Avon
There is a different view of the grand strategy selection by Avon. Though the expansion strategy of Avon to retail stores is a great one, the stores targeted to distribute their products are not necessarily the best choices. In fact, the clientele for Sears and JC Penny are much older than the X & Y Generations. Expansion through those stores is not in alignment with the new target market segment.
Since Avon would like to sell more upscale products, stores like Bloomingdales and Macy’s would be a better match. These stores segregate cosmetics specifically by brand and this will allow customers to view Avon’s products independently of competition.