Avon's (AVP) Open Up Strategy to Drive Long-Term Growth
Avon Products, Inc. AVP is performing exceedingly well on the back of its ‘Open Up Avon’ strategy. This plan mainly focuses on reviving the company’s direct selling business model, renovating the brand, enhancing e-commerce and other capabilities to aid a performance-driven transformation.
Driven by the aforementioned strategy, the company also remains committed to attain its financial targets for 2021. Let’s delve deep.
Avon’s Open Up Strategy & Strengths
As part of the ‘Open Up Avon’ plan, management expects to improve operating efficiency, slash inventory levels and reduce portfolio complexity by certain restructuring efforts including a 25% decrease in Stock Keeping Units (SKUs), a 15% reduction in inventory levels and a 10% job cuts.
These job cuts are estimated to fetch Avon annualized pre-tax savings of nearly $97 million by 2019 end. All these efforts are likely to help the company simplify operations and generate higher cost savings. Backed by the strategy, Avon accomplished cost savings of roughly $40 million in 2018.
In the fast-growing e-commerce realm, Avon has been capitalizing on growth opportunities, making this platform a major growth driver. The company also remains committed to improving digital tools and e-commerce channels to bolster Average Representatives sales. Its latest Avon ON app, which is an end-to-end solution to attract Representatives, is an added positive. This app is a 100% mobile tool, incorporating all the services in one place to simplify and expand Representatives’ business.
The company has also been enhancing the ‘My Avon store’ facility to more markets, while digital Avon brochure is available in almost all markets. Backed by all these initiatives, the company has been steadily expanding the percentage of sales through the online channel. Avon, which shares space with The Estee Lauder Companies Inc. EL, e.l.f. Beauty, Inc. ELF and Nu Skin Enterprises, Inc. NUS, aims to double e-commerce sales in 2019.
With regard to Avon’s 2021 goals, the company intends to generate total cost-savings of $400 million by expanding manufacturing and distribution, outsourcing efficiencies, zero-based redesigning of back-office functions, reducing certain facilities and managing revenue, interest and tax.
Furthermore, management expects to invest roughly $300 million toward commercial, digital & IT infrastructure projects. Investments in the digital & IT infrastructure initiatives include reinforcing the company’s balance sheet, where its cash-generating abilities must exceed the investment plans. By 2021, Avon expects to achieve low-single digits revenue growth and low double-digits margin expansion.
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