Tuesday, September 19, 2000

Avon now calling at Sears, Penney's

The Associated Press

        NEW YORK — Avon Products is still calling, but these days a lot of younger, working women aren't at home to answer.

        So the company, which has built its 115-year-old business on direct sales, is reaching out to a new customer. It will be selling a new line of products, starting in mid-2001, that will be on the shelves at cosmetic counters at J.C. Penney and Sears, Roebuck and Co.

        The goal, in part, is to attract customers who may think that the idea of having one of its 3 million independent Avon ladies come calling is archaic.

        The $5.3 billion company, which announced the venture Monday, said it wasn't by any means retiring the Avon lady, and it emphasized that direct sales will continue to represent its core business, accounting for about 95 percent of overall sales.

        Previously, direct sales accounted for about 98 percent, according to Victor Beaudet, vice president of media relations.

        In fact, Mr. Beaudet pointed out that Avon is investing about $100 million in Avon's core business, including advertising, revamping its Web site, and developing what it calls its Avon Beauty Advisory Circle, which offers beauty certification to its sales representatives.

        The separate line of products, tentatively called Avon Gold, will cost 30 percent to 50 percent more than Avon's traditional lineup, which include skin care creams and makeup. Avon would not elaborate on pricing Monday, but is expected to offer more details about the venture at an investors conference Sept. 27, to be held at its headquarters.

        Amanda Tepper, an analyst at Chase H&Q, estimated that the venture could add an additional $300 million to $400 million in sales, within the next couple of years. She added that Sears and J.C. Penney both have had weak cosmetics businesses, and a new label could help drive traffic.

        Avon declined to comment on sales projections.

        Mr. Beaudet emphasized the venture only complements its traditional business, and will not cannibalize it.

        “There are about 20 million customers who are not buying from Avon,” he said. Mr. Beaudet pointed out that over the past 18 months the company started selling Avon's traditional products at 50 kiosks in malls across the country and found that 95 percent of sales were from new customers. The average age of an Avon customer is about 45, and analysts think that the new target customer will probably be in her 30s.

        Ms. Tepper said Avon's U.S. business had been flat last year, attributing it to the company's difficulties finding new sales representatives in a tight labor market.

        “Avon had been a sleepy company. I think this is an excellent move,” said Kurt Barnard, president of the Retail Marketing Report, Montclair, N.J. “There may be some grumbling among the Avon representatives, but the move will create a lot of marketing clout.”


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