Looking to a new 10-year plan to grow business 20-fold, the door-to-door marketer is beginning a manufacturing operation in Poland, slashing prices and tripling the ranks of its "Avon Ladies"army.
The $4 billion New York-based marketer won't reveal local sales but says long-term, it has broad hopes for the region. Robert Toth, general manager, Avon Polska, attributes Avon's stepped-up interest in the area to a recent strengthening of the economy, noting that Hungary's gross national product jumped more than 4% in 1993.
"Over the next 10 years, these [Central European] markets will grow substantially and we could see sales increase by 20-fold or more," Edward J. Robinson, Avon's president and chief operating officer, predicted at recent Avon security analyst meeting in the U.S.
What this means locally is that more Central European women will soon hear Avon knocking. By late 1993, Avon claimed 11,000 representatives, as its Avon ladies are called, for the 65 million inhabitants of Hungary, Slovakia, Poland and the Czech Republic. But by year's end Avon expects to build to more than 30,000 reps selling a full line of cosmetics ranging from powders and lipsticks to skincare lotions. Although Avon sells clothing and other products in the U.S., its Czech line is now limited to cosmetics.
To attract the new Avon ladies, the company will try a two-page print ad in Poland, the direct marketer's anchor in the region, to act as a combination recruitment device and sales tool. Created in-house in Avon's U.K. offices, the ad, headlined, "Your Style," contains a coupon for interested women to fill out. Mr. Toth said if it works well, the ad will run in other Central European markets.
Like other mega direct marketers carving up the former East Bloc-among them Amway, Herbalife, Electrolux and Avon's direct competitior Swedish cosmetics marketer Oriflame-Avon hopes its person-to-person approach will benefit from a lack of effective distribution channels.
Currently, going into a store to buy cosmetics is a confusing experience because shelves are jam-packed with dozens of unfamiliar brand names and staffed with salespeople too harried to keep track of them all. Avon figures its advantage lies in its reps being able to take products into people's homes, reach out into small towns and offer personalized service and product information, thereby creating consumer loyalty to Avon.
"I feel direct sellers right now have an opportunity because of the huge influx of [brands] coming in here," said Mr. Toth.
Avon uses non country-specific catalogues as a sales tool for representatives but doesn't do any direct mailing of the catalogues created in-house. Likewise, the company does no formal advertising or sampling in central Europe.
"I can really penetrate some parts of the country that [retailers] can't get to profitably," Mr. Toth said, "because I own the shelf."
Avon's real competition in the region, however, isn't retailers, but cosmetics direct-marketer Oriflame, which entered Central Europe in 1990 and has steadily grown since then. In 1993, for example, direct seller Oriflame, a marketer of a full line of 200-plus natural cosmetic products available in 40 countries, had about 65,000 representatives throughout the region. Oriflame has an advantage too in that unlike Avon it extends credit, interest-free for 30 days.
Oriflame leads the $50 million direct sales market in the Czech Republic (including non-cosmetics marketers) with $12 million in sales.
Avon hasn't sold as much in part because slow deliveries from its warehouse in Germany meant consumers had to wait weeks for their purchases. Oriflame, by contrast, has a local warehouse and 20 service centers where representatives pick up its products for immediate delivery.
"In direct selling, it's important how quick you are," said Oriflame Prague Managing Director Michal Losek.
Mr. Toth expects deliveries to speed up now that Avon has started contract manufacturing in Poland. A recent drop in Avon's prices by 20% to 30% also has encouraged more trial.
Avon's Accolade Night Cream, for example, priced at $19 last year, has been reduced to $15. While Avon wouldn't comment on its price drop, it's believed the company overestimated how much consumers would pay.
"The company finally understood it should drop the prices to make it affordable," said Daniela Vilimovks , an Avon lady in Prague.
With salaries averaging $200 a month in Poland, Mr. Toth said, it can be difficult convincing consumers to spend an average $10 for skin lotion, the most popular kind of cosmetic sold.
"[Central Europeans] are just as demanding as American consumers," he said, "but they're much more price sensitive, given the lower incomes."
To build awareness, Mr. Toth is planning an unusual step for a company that does not sell its products in stores. An eye-catching Avon storefront will open in downtown Warsaw offering facials, makeovers and fashion advice, but no products. Instead, the parlor will refer customers to local Avon Ladies.
Meanwhile, Avon is looking East. The next Avon Ladies will be from Ukraine and Belarus and Romania and Albania won't be far behind.
" We can easily service those markets," said Thomas Pisano, Avon's VP-global new business development. "Over the next couple of years, I see a tremendous amount of new territory."