By: Dheeraj Tripathi

PGDM 2013-15
Roll no: 1301-065
Section A
Case Analysis: Avon.com
Worlds largest direct seller with over USD 5 Billion in
sales
Worlds fifth largest beauty products company

Established by Donald H. McConnell in 1886 as
California Perfume Company, renamed Avon in 1939

Color
Cosmetics
Skin Care
Fragrance
Fashion &
Home
Hair Care
Personal
Care
Products
Retail System
Direct Selling
Mainly single
level
Full time representatives
Presidents club members
20% of total members (1 Million)
Long customer list
Selling Avon products for a long time
12000 Leadership representatives
Career Avon
Representative
Working in part time
Secondary job
Joined to fill the void of ex-
representative
Majority of Avon representatives
(80%- 4 mn)
Part Time Avon
Representative
26 Avon Campaigns in a
year
On an average , 12
attended by each
representative
Purchase of Brochures
Distribution of brochures
to customers personally, by
mail or left at conspicuous
places
Place an Order by filling 35
page long purchase order
Delivery from Avon in 5
days
Inventory sorting and
delivery to customer
Total no. Avon Customers = 15*5mn= 7.5 Million= 70% of Target Market
Size of Target Market = 10.71 Million
84.40%
15.60%
Advertising Spend
USA ($38 mn)
Overseas ( $7
Million)
39.30%
60.70%
Net Sales
USA( $ 2 bn)
Overseas
($3.2 bn)
Launched in 1997, developed on a budget of USD 400,000
Only for commerce
Beauty products only
Direct sales to consumer, no involvement of representatives
Avon viewed it as a test of potential new channel
Little advertising, insignificant sales volume
Eve.com Strategy
Commerce only site
Traditional online retailer
Fit with Direct Selling tradition
iVillage Strategy
Active online community of women
Information exchange through forums-
chats
Relationships beyond the geographic
confines
Total no. of Avon Customers = (15 customers/representative)*(5mn
representatives)= 7.5mn = 70% of Target Market
So, Size of Target Market = 10.71 Million
No. of customers who would buy from Avon but not through a representative =
18% of Target Market = 1.93 Million
Cost in updating Avon.com = $ 3-5 Million
Cost of shipping the items= $3 per order (No Processing cost)
Assumption: Target to reach 20% of this untapped market
Consumers= 20% of 1.93mn = 0.386 mn
Cost of Shipping= 0.386*3= $1.158 mn
Advertising cost = 4% of sales = $0.30 mn
Total cost= $5mn+ $1.158mn + $0.30 mn = $6.458 mn
Each customer buys on an average of 20$.
Sales = 20* 0.386 = $7.72mn
Profit= 7.72- 6.458 = $ 1.262 mn
Break even point would be 16% of this untapped market
Total no. of Avon Customers = (15 customers/representative)*(5mn
representatives)= 7.5mn
Cost of processing = $1 per order
No. of Campaigns = 26, Avg 12 attended by representatives
Total number of orders = 7.5* 12 = 90 mn
Total Cost of processing the order= $1 * 90mn= $90 mn per annum
Total cost for a 5 year period = $90 * 5 = $450 mn
Cost of developing the B2B project = 60 million over 3-5 years

Savings = 450-60= $390 mn

B2C
Should be implemented to tap the 18%
market of customers who doesnt want to
buy Avon products through
representatives
Developing online communities will also
help the company in connecting to the
consumers
Online shopping is future ready
B2B
Should be implemented as it saves a lot of
processing cost
Fully functional online ordering system
will make it easy for representatives
Online ordering is future ready