Reference no: EM133088208

Change is the magic word that seems to decide success in most industries today, and the beauty industry is no exception. Avon Products seemed to have learned the lesson too late. Avon was founded in 1886 by David McConnell, a travelling book salesman who found that female customers - who often answered the door because their husbands were at work - were more interested in the free perfume samples he offered as an additional perk. McConnell recruited women to act as sales agents for the products he mixed from an office in New York. Avon's UK business launched in 1959, and the first "Ding dong, Avon calling" TV adverts aired in 1964, and it soon became a British catchphrase.

Restorative Measures

However, after over-70% persistent stock price decline over the years, Avon was unable to recover from its weak state. The company appointed a new CEO in 2012 to turnaround its situation. Even then, nothing seemed to have worked for the company. Additionally, buyers lack interest in buying products through its door-to-door channel in an age when online shopping is the norm. Consequently, Avon's direct selling model seems to be meeting its inevitable end.

Only in 2015 did Avon think about plans to expand its digital channel outside the U.S. and make its representatives sell through social media. However, this was too little too late. The rise of social media had fueled rapid change in the beauty market, helping to launch brands backed by online influencers, such as Rihanna's Fenty Beauty and Kylie Jenner's Kylie Cosmetics, which are now challenging the big, established names.

Avon's Outdated Business Model

Avon's competitors moved ahead in leaps and bounds through their multiple channels. Revlon expanded its fragrance business with acquisitions, and it has made a successful entry into the professional segment through its Colomer Group acquisition. L'Oreal had been advancing significantly through its acquisitions, research and development programs, and digital initiatives. It seems that the business of beauty is all about being dynamic and adapting to changing customer taste. It's more about the power to cope with change than how big an entity is.

Part of Avon's problem had to do with the fact that the company had not kept up with changing consumer behavior. There had been many beauty startups competing for Avon's customer. Glossier, for instance, launched in 2014 targeting millennials with a strong social media presence. It creates product based on the vast amounts of customer data it gathers. It is now worth $1 billion. Beautycounter, launched in 2013, creates products free of 1,300 known toxins or questionable ingredients. It is currently valued at around $400 million.
Avon had been increasingly dependent on the representative form of business. This business model is almost on the verge of extinction with the advent of savvy shopping options such as travel retail and omnichannel. Avon has not been fast enough to take the market cues, and hence, the sad demise of the over 134-year old company was eminent. After years of unsuccessful turnaround attempts at Avon Products Inc. by activist investors, private equity and different leaders, a Brazilian cosmetics company, Natura Cosmeticos has set out to rescue the 134-year-old direct seller.

With reference to the information in the case above, identify TWO external pressure & TWO internal pressures that Avon overlooked. Discuss TWO causes of Avon's resistance. Provide recommendations for future companies facing such resistance issues. Support your answers with relevant practical examples.