Blaming the recession, Avon Products (AVP) today announced it would eliminate 1,200 of its 42,000 jobs over three years as part of a global restructuring that will include closing its Springdale, Ohio, facility. The Springdale plant comprises manufacturing, a returned-goods processing operation, and a customer-call center. The call-center employees will be moved to another site in greater Cincinnati, and 600 manufacturing jobs will be eliminated. The restructuring will end up cutting about 2,300 jobs worldwide.
Last week, I compared the new breed of so-called mommy bloggers, who promote products and services, with online versions of Avon parties as the "new Mary Kay." Evidently, this moniker is apt, as the traditional door-to-door direct-sales cosmetic industry has taken a big hit in the past decade. Avon management has determined this is a result of overall consumer-spending trends; in response, Avon has doubled its investment in recruiting direct-sales agents. The company has 9 million contract sales reps around the world.
I think this is short-sighted. Both the cosmetics business and the sort of enterprising woman who makes up the majority of Avon sales representatives, are changing.
In cosmetics, two sorts of product are becoming more and more popular; the high-end "prescriptive" type, meant to have medicinal benefits in addition to traditional beauty functions, and the natural, organic, and small-batch cosmetics that can be made at home or in a very small operation. As more entrepreneurial sales reps discover these environmentally friendly lines popping up on grocery shelves, they'll be more likely to start their own home-based manufacturing.
Simultaneously, housewives and underemployed moms who make up a large percentage of Avon's sales reps have begun to find a vast universe of opportunities to make cash for their family, through a variety of online methods -- notably, blogging for pay to promote manufacturer's products to their friends, family, and farflung readers. Whether Avon can capture some of this new marketing medium -- before it disappears, and the next big direct-marketing method rises from the peer-to-peer morass -- will determine whether the cost-cutting efforts announced today are only a drop in Avon's bucket.
Introduction to Preferred Shares
Learn the difference between preferred and common shares.View Course »