On February 15th Avon announced it would be closing operations in Australia and New Zealand by the end of 2018.
From the sounds of it, Avon’s announcement came as a complete surprise to the company’s 21,400 Australian representatives.
How many representatives Avon has in New Zealand is unclear.
What’s particularly surprising about Avon’s abrupt announcement is the company’s reasoning.
Although Avon did send out an email to its AU and NZ affiliates, general consensus seems to be most found out through a post made by the “AvonAUSNZ” Facebook profile a few hours later.
As at the time of publication the AvonAUSNZ Facebook announcement has attracted over 10,000 comments, mostly from representatives “disgusted” by the decision.
In a statement quoted by Australian media, Avon further explain why they’re shutting down AU and NZ operations.
As part of the company’s strategy to return Avon to long-term sustainable profitable growth, the focus will be on markets with the greatest potential for future growth to support its vision of becoming the world’s leading social beauty company.
“In line with this, after a thorough deliberation on our performance, the direct selling conditions in the market, and potential for growth, we have considered all options for the business and it is with much sadness that we are announcing our decision to exit the Australia and New Zealand markets.
This statement obviously raises the question of how Avon wasn’t profitable in Australia and New Zealand with over 21,000 representatives.
Perhaps the answer to the question lies in Avon’s focus on “markets with the greatest potential for future growth”.
As per Avon’s Wikipedia entry, the company sold of 80% of it’s US business operations in late 2015.
This followed the revelation that in 2013 88% of Avon’s $10 billion revenue was from overseas markets.
As of early 2016, Latin America accounted for roughly half of Avon’s total revenue.
As at the time of publication Alexa estimate that 44% of traffic to the Avon website originates out of Brazil. Mexico is the second largest at 9.1%.
China was a major source of revenue but after a bribery scandal that culminated in a $135 million dollar settlement, Chinese authorities required Avon to sell its products via retail outlets.
Avon sales revenue in China accordingly plummeted by 41%.
Call me cynical but it seems to me that instead of working to improve a perhaps outdated model that is supposed to be rooted in sales to retail customers, Avon is instead choosing to focus on markets where they can get away with relying on recruitment.
As it stands Brazil is pretty much Avon’s only life-line.
Needless to say if Brazilian authorities were to investigate Avon’s business operations, under suspicion the company was operating as a pyramid scheme, it’d be game over.
When you can’t operate profitably with over 21,000 affiliates selling your product, something is wrong with your business model.
Abandoning these markets and opting to focus on lesser regulated territories might deliver short-term gains, but ultimately you’re running a business on borrowed time.
Pretty much the opposite of the “sustainable profitable growth” model Avon claims it’s chasing.