Avon to Resume Home Sales in China

01 March 2006

The Avon lady is to call again in China - eight years after the Chinese authorities slammed the door in her face.

The cosmetics commissars have given the go-ahead for the iconic New York-headquartered company to resume direct sales to homes across China. The ban on such sales methods was introduced in 1998, ostensibly from fear of the economic disruption caused failed domestic pyramid schemes.

Since the restrictions were imposed, Avon, which helped pioneer direct home sales, has been forced to sell its products through stores.

The company says it will maintain a mix of retail and direct sales in China, although industry watchers question if this will set up internal rivalries, with direct sellers undercutting store sales.

Avon needs strong growth in developing markets such as China and Russia as it continues a painful restructuring that began last year, involving massive cost-cutting, and a 37% drop in fourth-quarter earnings.

China is the fastest growing cosmetics market in Asia, with annual estimates ranging from around Yuan 60 billion ($7.46bn; €6.27bn; £4.27bn) to Yuan 85bn.

Li & Fung Research Center, based in Hong Kong, estimates cosmetics sales in China will reach Yuan 100bn by 2010.

Data sourced from Wall Street Journal Online; additional content by WARC staff