Avon boots out its boss

Andrea’s adieu

An ugly mess at a beauty firm

Dec 17th 2011 | from the print edition

Oh dear. Look at the share price

“YOU have got to go home tonight, Friday evening, and you have got to fire yourself,” a management coach once told Andrea Jung, the boss of Avon, an American beauty firm. The idea was for her to come back to work the following Monday as if starting her job anew. Alas, this brilliant tip was not enough. As Avon’s share price has wilted like mascara under a sunlamp, Ms Jung is being pushed out for real. On December 13th the firm announced that she will be replaced as chief executive.

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• »Andrea’s adieu
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The makeover will be gradual. Ms Jung, who has run Avon since 1999, will stay on as chairman and help the board find a new boss. It will be a tough job for anyone. Avon is the world’s biggest direct-seller: an army of cheery salesfolk hawk its products door-to-door. The 125-year-old New York-based company has an annual revenue of over $10 billion and operations in more than 100 countries. But it has stumbled badly of late. Its share price has fallen by 45% this year (see chart).

Ms Jung had a glossy start at Avon, presiding over six consecutive years of double-digit growth. Yet she failed to use these fat years to invest in the business. By 2005 the firm was looking blemished. Sales declined in major markets. The share price dropped. Ms Jung laid off 25% of senior staff and cut costs everywhere except for advertising and distribution.

Avon never really recovered. In March 2009 Ms Jung launched the biggest hiring drive in the company’s history and nearly doubled the marketing budget. She saw in the global economic crisis a chance to overtake Avon’s rivals. It didn’t work.

Moreover, the company has spent more than $150m on an internal investigation of alleged corruption among sales representatives in China and Latin America. Several have been dismissed. America’s Securities and Exchange Commission is investigating, too. If Avon is found guilty of anything, the penalties could be steep.

Some problems are beyond Avon’s control. Brazil, a big market, is slowing down. Europe, which accounts for 28% of Avon’s sales, is in crisis: it’s hard to put lipstick on the PIGS. Avon is doing badly at home in America, too. Shoppers are feeling Grinchy about pennies. And the non-beauty products (such as fashion accessories) that account for a hefty third of Avon’s sales in America have lower margins than cosmetics. (In other countries non-beauty stuff represents only about 10% of Avon’s sales.)

Other problems are self-inflicted. Avon made a mess of its new IT system in Brazil. Its working capital is chewing up a third of its gross cashflow, mainly due to poor inventory management. If Avon reduced its working capital, it would have less trouble paying dividends, says Connie Maneaty of BMO Capital in New York. It would also have more cash for acquisitions in fast-growing markets such as Vietnam or India.

Many will be sorry to see Ms Jung tossed overboard. As the Princeton-educated daughter of Chinese immigrants, she embodied the American dream. She was also a role model for women, in particular Avon’s 6.5m sales representatives, most of whom are female. One reason why Avon wants her to stay as chairman is that she is popular with the salesforce.

But Avon is ailing and needs an overhaul. A new boss will be a good start, says Ali Dibadj of Sanford C. Bernstein, a research firm. The list of possible candidates includes Ed Shirley, vice chairman of the beauty and grooming unit at Procter & Gamble, an American consumer-goods giant, and Elizabeth Smith, who was in line to succeed Ms Jung at Avon before leaving the company to take over as boss of OSI Restaurant, a restaurant chain. Whoever gets the job, the changes required will be more than cosmetic.

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Andrea’s adieu

Dec 20th 2011, 18:14

Avon is always seen as the first choice from various kinds of angle in numerous women’s eyes. Retrospecting the process of rise and fall for her 125-year history, several event of AVON are always showing attractively magnum opus one after one, having this brand walking forward.

Interestingly bumping into coincidence, half a year ago, I picked up one book on offer “AVON - Building the World’s Premier Company for Women”, published by John Wiley (in custom, book published by this after two years gives 50% cost), in Taipei’s Sanmin Bookstore in order to know more about luxury brand. This book’s writer is Laura Klepacki, a connoisseur and experienced reporter about beauty and the extensive marketings with consumer products industry for many years. Besides, getting some chances, I went to Taiwan’s branch in Taipei’s Roosevelt Boulevard in last September. At this time, I already found something strange like the location of announcement or the indoor design lacking of co-ordination. Out of curiosity and by the way, I asked some through my letter to Beijing, hearing some confused answers about this company concerned of Asia-Pacific exercise.

AVON started a very assiduous beginning. It has been 125 years since the founder David Hall McConnell began to sell the first AVON perfume door-to-door. Lasting for so long time, AVON always demonstrates its leadership of women concerned, especially by means of ads and slogans like “AVON knows women more than women”, “Ding-Dong, AVON coming” in 1961 and 1999’s world-famous along with eloquent “Let’s talk” advertising campaign spoken by Salma Hayek. Through the introduction of AVON history from 1886 to 2005 in Laura Klepacki’s book, AVON, depending on the highest innovative quality of beauty industry, emphasize her social responsibility for this world more than other company. Moreover, with the release from China’s Communist Party’s ban on direct selling in 1998, Andrea Jung expanded AVON’s territory into mainland China very fast and more deeply, also because of Jung’s parent of Asian-originality.

According to the record on Laura Klepacki’s this book, Andrea Jung has an outstanding talent on research about supply chain and market business, the reason why she succeeded Charles Perrin. Under Jung’s leadership, AVON actively creates many innovative tool to sale the proud product, such as the advanced sales Internet which can get the information of simultaneous markets. In addition, Jung not only continues investing the annul U.S.D. 50 million on Research & Development (R&D) but also emphasizes the connection more tightly between research and sales as well as between stores and each local branch companies. In this way, on the basis of AVON solidarity R&D adding to the well-designed sales strategy, AVON might be hard to fall the benefit. As Jung made a commitment about her job in this book, CEO ”requires motivation and a work ethic and drive that is second to none”. She also expressed her emotion matching up to AVON’s long-term social responsibility using this sentence “You do learn fast that it is a human relationship business”.

Andrea Jung has been chosen as 2003’s one of cover story on Business Week and 2004’s Forbe’s one of world’s strong woman, with the same fame as then Hewlett-Packard’s CEO Carly Fiolina. Owning the leading company special of R&D and innovative sales, Jung stands on much higher position than her counterpart in the world’s beauty industry, so what the very huge and professional firm gets so many trouble lets me wonder if there is other company having the potential crisis. The similar examples of this kind in recent months are Sony’s Howard Stringer and Olympus’ Michael Woodford, both of whom Business Week reported and had sympathy for. After all, I still think that Jung doesn’t need to resign. Also, the majority of women may affects very few concern, including my diligent and high-qualified model wife.

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本篇是圍繞著算唯一一本AVON公司公開授權，由John & Wiley發行的企業傳記「AVON - Building the World’s Premier Company for Women」，以及筆者回想三個月前曾經去台北市古亭站邊，羅斯福路大樓的台灣雅芳公司總部應徵直銷業務的事。時至今日再回想起剛剛退伍時隔天去找工作的樣子，這天去三民書店復北店的外語折扣區，好奇銷售的筆者無意間以五折買了下來。這本全本是聊起研發的努力及似POS的全球存貨及通路系統建立的艱辛，聽起來是純粹靠關係發展起來，但是這個十分尊重消費者的集團132年來這年遇到了衰頹，成也蕭何，董事會就是覺得一定是鍾彬嫻Andrea Jung，一位華裔女企業家的作風導置，她重視供應鏈和市場行銷制度，不過後來她們說也找不到合適的人選，也不一定是個人風格的事。不過後來雅芳是直到2016年的Interbrand公佈前年品牌價值時，才跌出百大品牌以外。這間相對起來還算是世界第一大化妝品品牌。使用雅芳才能在模特兒界過得比較持久喔。

對了，後來筆者聊到回憶中國經濟的政策變遷時，有引用中共在1993年11月十四大三中全會，一般而言常識的中共定義市場經濟的「service pack 1」是這次會議來的，所謂「中共中央關於建立社會主義市場經濟體制若干問題的決定」（https://baike.baidu.com/item/%E4%B8%AD%E5%9B%BD%E5%85%B1%E4%BA%A7%E5%85%9A%E7%AC%AC%E5%8D%81%E5%9B%9B%E5%B1%8A%E4%B8%AD%E5%A4%AE%E5%A7%94%E5%91%98%E4%BC%9A%E7%AC%AC%E4%B8%89%E6%AC%A1%E5%85%A8%E4%BD%93%E4%BC%9A%E8%AE%AE/7236632?fromtitle=%E4%B8%AD%E5%9B%BD%E5%85%B1%E4%BA%A7%E5%85%9A%E5%8D%81%E5%9B%9B%E5%B1%8A%E4%B8%89%E4%B8%AD%E5%85%A8%E4%BC%9A&fromid=2267449）。具體上有包括在1998年中美關係改善後，1999年修憲列入憲法修正案更新憲法第十一條「在法律規定範圍內的個體經濟、私營經濟等非公有制經濟，是社會主義市場經濟的重要組成部分。」「國家保護個體經濟、私營經濟的合法的權利和利益。國家對個體經濟、私營經濟實行引導、監督和管理。」之下，細目有開始保障個體經濟，為WTO入會及銜接世界經濟規則作準備。因此是年開放給直銷業，最大受惠者就是雅芳公司，其直銷和百貨業自由進駐使得全球業績大幅成長，而Jung於1999年11月順利接過CEO職務至2012年底。