Avon sets heart on China market
By Jiang Jingjing (China Business Weekly)
Updated: 2004-06-29 10:28

"Ding Dong, Avon is calling."

It is the popular slogan of the doorbell ringing in the United States and many other countries, but in China the slogan has hardly ever been heard.

The world's leading cosmetics direct sales firm, Avon Products Inc believes its current sales method in China, through beauty boutiques, is successful and is developing a new strategy to meet the requirements of the country's law on direct selling.

Andrea Jung

The law is expected to be promulgated this year.

Although no details have been revealed, Avon said it is looking forward to resuming direct selling, which has been its core sales tool for 117 years.

"We believe direct selling can bring us new opportunities for more than 5,500 beauty boutiques in China," said Andrea Jung, Avon's chairman and chief executive officer (CEO).

"We are trying everything we can to create more earning opportunities for beauty boutique owners."

Beauty boutiques are independently owned and operated by private entrepreneurs who do business with Avon by selling Avon products exclusively.

During a recent trip to Beijing, the CEO said Avon will strictly abide by the laws and regulations in China, just as it always does.

So far, the company markets its products through direct sales in 140 countries.

Jung said she believes the new Chinese legislation will create a good environment for direct-sales in China.

Avon plans to open 6,000 specialized stores in China by the end of this year. [newsphoto]

The business of direct selling has been developing quickly around the world and had a market value of US$85.58 billion last year.

China imposed a ban on direct selling in 1998, saying it was hard to differentiate from so called "pyramid schemes," which have sometimes led to widespread fraud, consumer losses and social disorder.

Ten foreign-funded direct-selling companies were allowed to continue their operations in China after the 1998 crisis, but they had to shift their sales modes to selling goods through retail outlets and "non-employee" sales representatives.

Avon so far has achieved great success in China with its beauty boutiques, the first of their kind throughout the company's history.

It has so far maintained a 30-per-cent growth rate annually in China, the fastest in the country's global business. Avon predicts its business in China will continue to grow by 50 per cent this year, and its revenues is expected to hit US$400 million by 2007.

"China is the engine for our entire Asian growth," Jung said.

That's why Avon will invest significantly in China in the next couple of years, and the firm's advertising input in China is already the highest among other nations.

"It is just a matter of our own appetite and capacity to expand in China."

But the CEO pointed out China is "the most complex market" in the world and involves tremendous amount of time and effort to develop.

"It reflects from the different level of engagement from CEO to the regional president and a lot of corporate resources. It involves a lot of discussions and proposals with the government, and great effort on the management of beauty boutiques," Jung said.

"The market is huge, but it takes great amount of work to analyze the consumers' segmentation."

Jung said the underlying health of Avon's business worldwide remains "extremely strong," and revenues will reach US$8 billion this year.

"We continue to make excellent progress with our strategies. And China plays an important role in our moves."

The company, which has introduced 70 per cent of its 50,000 product lines to China, will continue bringing more products to Chinese customers.

Recently, it test launched its Avon Life wellness products in China recently.

Avon Life is a unique brand developed and launched in China as a pioneer brand in the Asian market.

Avon markets cosmetics to women around the world through 4.4 million independent sales representatives, with its brand names as Avon Color, Anew, Skin-So-Soft, Avon Solutions, Advance Techniques Hair Care, Avon Naturals, Mark and Avon Wellness.

The company also sells an extensive line of fashion jewellery and apparel.



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