Direct-selling cosmetics stalwarts Avon Products Inc. and Mary Kay Inc. soon will unleash their representatives and consultants online.
The evolution from in-person to remote sales via the Internet marks a big step for both Avon and Mary Kay, whose reps number 3 million and 500,000, respectively. Aware of the reps' established customer relationships, both marketers are working hard not to alienate this vital distribution channel while encouraging them to migrate online.
“Both of these companies tend to appeal to older folks, who, perhaps, are not Internet savvy,” said Alan Alper, senior analyst at Gomez Advisors. “But if these companies are to not only survive but thrive in the future, they're going to have to reach out to younger consumers. And where do younger consumers spend a lot of their time shopping? Online.”
Avon plans to migrate by year-end about 20,000 of its best-performing reps online. Mary Kay, which declined comment, has similar plans to allow consumers to buy directly through reps' Web pages on a Mary Kay site.
Technology partners of both companies stressed that no seismic shift of business model was at hand.
“Importantly, Avon as a direct seller really is not interested in changing the nature of their business,” said Lauren Essex, vice president of marketing at Kinzan. “They're not turning into an e-commerce company, but rather are using the Internet as a way to provide another channel, so to speak, to their direct-selling strategy.”
Kinzan, Carlsbad, CA, provides the Avon SiteBuilder technology that allows Avon reps to create Web pages on their own at www.youravon.com/[rep's name].
Similarly, in Mary Kay's case, the marketer is looking for ways to support the consultant structure, said Christopher Rouse, vice president at Delano Technology Corp. The $1 billion Mary Kay will use the Toronto company's Customer Velocity software to power its rep marketing and service portal.
“For companies like Mary Kay, what we're actually doing under the covers is taking some — not all — but some of the processes that have been part of their sales cycle traditionally and keeping in contact with their customer once they've become a Mary Kay customer, messaging them personally online,” Rouse said.
It is not known what incentives Mary Kay will offer its online consultants. Avon, on the other hand, has offered a leg up for what it calls its eRepresentatives. For $19.95 per month, eReps get a Gateway computer and unlimited Internet access from Covad Laserlink. IBelong will maintain the service.
The Avon rep is at liberty to set her prices and discounts online. Some say this may encourage price-sensitive consumers to shop with a rep offering better bargains and not necessarily from the neighborhood.
While the variable commission rate for online sales will be lower — the rep does not have to go door to door, drop brochures, collect orders and then give bulk orders to Avon — she still will be compensated for consumer purchases from the Avon site.
Once the consumer concludes a transaction, she is asked for the rep's details. If proffered, the rep will get a cut of those sales.
The commission for Internet sales will hover between 20 percent and 25 percent. In contrast, offline commissions vary from 25 percent to 50 percent, depending on the size of the rep's orders.
“The commission is lower because the representative doesn't do anywhere near the same amount of work,” said Stephen King, vice president of e-commerce at Avon.com, New York. “It's also more costly for us to pick and pack Internet orders, [because] they're smaller. They're customer-sized orders, instead of representative-sized orders.”
Plus, King added, Avon has to shoulder the cost of customer care and post-sales issues. Still, Avon aims to lure 550,000 reps online. By next year it hopes to have at least 15 percent to 20 percent of this block selling via individual Web pages on youravon.com. About 11,000 reps already have signed up.
Avon eventually expects the Internet — through sales efforts by reps — to account for 3 percent to 5 percent of annual revenue. Avon last year posted revenue of $5.3 billion.
“The whole value of our representatives is their attachment to their customers,” Avon's King said. “They bring their customers to us. They did that with the brochure, and they'll do that online.”
