History of Avon
Avon was founded in 1886 as the California Perfume Company by a book salesman named Mr. David McConnell. He got the idea of opening this company when he discovered that the rose oil perfumes he was giving away with the books were the primary reason people were buying his books not the book it self.
In 1914 the first international office opened in Montreal, Canada and in 1916 California Perfume Company first incorporated in New York State and by 1964 Avon stocks have been listed on New York Stock Exchange.
The company changed its name to Avon products, Inc., in 1939 by the new president of the company the son of the founder after the river that runs through Stratford-On-Avon in the English Midlands. The name is a tribute to McConnell’s favorite playwright, William Shakespeare, who hailed from the town.
From only $500 revenues a day, which was recorded for the first time in December 1897, in 1920 the company’s revenues reached $1 million a year and by 1972 it reached $1 billion for the first time. In 2004 the total revenue of Avon was $7.7 billions!!
In 1999Avon names its first-ever female CEO with the appointment of Andrea Jung in November and in 2001Avon’s Board of Directors elected her as the company’s first female Chairman of the Board. She is one of five female chief executives of Fortune 500 companies, and is one of three holding the titles of chairman and chief executive.
Facts about Avon:
Avon is the world’s leading direct seller of beauty and related products. It markets to women around the world through 4.9 million independent sales representatives a number that has grown 11% from 2003.
In addition to be the leading direct seller, it is the sixth largest global beauty company in term of size with total assets equals to $4.2 billions in 2004.
Moreover Avon is expanding in the global market rapidly and it has business operations in 60 markets conducting over 1 billion customer transactions every year.
Avon is achieving notable strategic and financial successes. In 2004 Avon has generated $7.7 billion in revenues with a grow rate of 13% from 2003. Avon is expecting even more grow in the coming years and expects a total revenue to be around $10 billion by the year 2007.
In addition, Avon is achieving even higher success in term of grow in net income and shareholders wealth. In 2004 Avon has generated net after tax income of $846 million, 27% more than 2003. Furthermore stock price reached $38.70, which is 15% more than 2003.
Avon product categories include Beauty, which consists of cosmetics, fragrances, skin care and toiletries; Beauty Plus, which consists of fashion jewelry, watches, apparel and accessories; and Beyond Beauty, which consists of home products, gift and decorative products, candles and toys.
Avon product lines include such recognizable brand names such as Avon Color, Anew, Skin-So-Soft, Advance Techniques Hair Care, Avon Naturals, Mark and Avon Wellness.
Avon is included in fortunes ((most admired companies)) list for over a decade, selected by business week as one of the ((Top 100 Global Brands)) and honored by fortune as one of the ((50 Best Companies for Minorities)). In addition, Avon is a world leader in anti aging skin care products.
Avon is a corporation that is owned by approximately 20,000 record holders who hold 728.61 million common shares valued at $38.7 each in the last day of 2004. Its stocks are listed on New York Stock Exchange. Avon believes that there are many additional shareholders who are not “shareholders of record” but who beneficially own and vote shares through nominee holders such as brokers and benefit plan trustees.
Avon has a total of 47700 employees around the world, 8900 of them in the USA and 38800 in other countries. Its chairman and chief executive officer is Ms.Andrea Jung, who has born in Canada and rose in the US but with Chinese roots. (see her photo)
US Cosmetics, Fragrance and Toiletries market size in the year 2000 was $32.5 billion and was expected to be $39.8 billion in 2005. The size of the global market was $140 million during the same period.
Major competitors for Avon are: L,Oreal of France as the leader in the industry, Procter and Gamble, Estee Lauder, Intimate Brands and Alberto-Culver all from the USA.
Avon is very unique among its competitors in the way that it markets its products. As I mentioned above Avon is the largest direct seller of beauty and related products in the world. Avon uses direct channel for distributing products that are normally marketed through exclusive distribution in longer channels.
Avon products can not be found in beauty shops, fragrance stores, drug stores, supermarkets or any other types of retailers that its competitor products are normally stocked on their shelves. Rather, Avon sells its products directly to its consumers all over the world through its 4.9 million representatives.
As the chart illustrate, the distribution system of Avon is based on employing representatives all over the world, training them and providing support and incentives to them to sell the company’s products. Those representatives, who are mainly housewives looking for extra income by selling Avon’s products to their friends and neighbors, are working on commission based payment.
Those representatives can contact Avon for getting products and for training and support through their wholly owned subsidiaries in the major markets all over the world.
Therefore we can conclude that the channel length of Avon is short (direct distribution) because the firm sells its products through its own representatives, and its channel width is intensive distribution, since anyone can become a representative for the company.