1 E-commerce networks and Economic Globalization & Outsourcing Presented by: Tara Dennis Felicia Drew Chuck Menchion Robert Sanders Shawn Williams.

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E-commerce networks and Economic Globalization & Outsourcing

Presented by:Tara Dennis

Felicia Drew

Chuck Menchion

Robert Sanders

Shawn Williams

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General Overview • Started out as the California Perfume Company

• Founder, Mr. David McConnell discovered that the rose oil perfumes he was giving away were the reason people were buying his books

• Named Avon in 1939 after the river that runs through Stratford-On-Avon in the English Midlands. The name is a tribute to McConnell's favorite playwright, William Shakespeare, who hailed from the town

• Women have been selling Avon since 1886

• Primary markets are cosmetics, fragrances, jewelry, accessories, wellness products, home decor items

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General Overview (cont’d)

• Sells in more than 100 countries worldwide.

• Primary distribution channel is direct sales through 4.9 million Independent Reps

• World’s #1 direct sales beauty company

• Constantly developing new delivery\distribution channels such as kiosks, beauty centers, beauty boutiques, outlets and department stores

• Avon Salon & Spa is lavishly appointed, encompassing 4 floors of New York's prestigious Trump Tower

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Analysis of Global CFT Industry • Top 3 US facial skin care competitors increased advertising

spend by 45% 1st half of the year

• Highly fragmented distribution channels (shopping malls, drug stores, department stores)

• Segmented by consumer demographics and geography - country specific differences in consumer preferences

• 21st century growth fueled by product innovation – focus on wellness and youthfulness (anti-aging less important to women of color due to increased melanin & oil in skin – naturally discourages wrinkles)

• Future rests on innovativeness of developing product that improves skin hydration, aromatherapy and herbal products

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Globalization/Outsourcing • In 2000, Avon launched Avon.com establishing a local site in 44

countries.

– Strengths: Its rapid deployment strategy enabled Avon to get foreign sites up and running in a matter of months to gain a quick online foothold in multiple markets

– Weaknesses: Gave overseas representatives creative leeway but created inconsistent brand presentation and different levels of quality: many markets treated the website like brochures rather than mediums to maximize Avon’s message with graphics and animation

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Direct Effects of Outsourcing• Planned to layoff 600 of its customer service executives nationwide in the

next two years and intends to outsource the work overseas.

• At Delaware where Avon has more than 500 workforce plans to reduce the count by 50. An important component of the company’s “turnaround,” first announced in November 2005, is cutting its cost structure by outsourcing its transactional and other services to low-cost countries.

• The company has also decided to reduce the headcount at Ohio but would keep about 300 workers to serve career-oriented representatives who have more complex service needs due to the high volume of their businesses reports Sharon Samuel, spokeswoman for Avon:

• Avon has made the decision to outsource its U.S. contact service operation as part of our four-part, multiyear turnaround plan.

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E-commerce benefits & focus• Avon realizes that there is a place for selling Fast Moving Consumer Goods

(FMCG) online.• E-commerce helps to build the brand • $8.1 billion in sales in 2005 – experienced growth is at 3.9% • Provide information that would be hard to communicate in-store or home. • More functionality – order tracking, find a representative, what's new, and

promotions.• Complementary product offerings allowing exposure to different segments.• Develop a world-wide Intranet for information sharing and an extranet to tie

suppliers, allow order entry quickly, and check product availability in real time and track order delivery.

• Solid channels in place (i.e. field reps, websites, mall kiosks, day spas, and new brick-and-mortar stores) – improve behind-the-scenes function.

• Benefit in changing from a paper-based company to a web-based company.

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The Global Gateway• You can't go far on the Internet today without running into a

"global gateway." A global gateway is an all-encompassing term for the navigation system that directs users to their localized Web sites.

• Web designers and marketers often overlook the importance of the gateways to the success of their localized Web sites. After all, what's the use of localizing a Web site into French if French speakers cannot find it?

• Cosmetics companies are no strangers to globalization. It would take you only a few minutes to round up a half dozen Web sites that rely on some form of global gateway. Even if you have no interest in this industry, it's useful to study how companies address the universal problem of global navigation.

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The Case of the Hidden Gateway

• Home page real estate is precious. Often, the gateway to the localized sites is not given the prominence it requires, as shown here with Avon. See if you can find it.

• The gateway is located on the lower right-hand corner in the "Inside Avon" section. The location and the text itself does not make it clear that this link will take users to localized Web sites. The text could just as easily lead to a global press release section. Instead, a phrase such as "Select your country" would have been more useful, since it's more in line with the majority of other gateways. Don't try to get too creative with your global gateway because your non-English speakers may not understand what you're saying.

• Once you click on the link, you will arrive at another, more detailed, gateway, shown below.

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• Now this gateway is useful, but it comes one click too late. In Avon's defense, the localized sites do have country-specific domain names, such as www.avon.com.au for Australia or www.avon.ru for Russia. It is likely that Web users in Australia or Russia will type in the a country-specific address and skip the gateway altogether. But, once again, that's a big assumption to make. Instead of defaulting to an English-language Web page, many companies now rely on a splash gateway.

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The Splash Gateway

• In order to get to the MAC web site, users will first encounter the splash gateway, shown below. Users have three choices: USA, Canada, or Other. Granted, MAC could work on offering a few more localized sites, but it's a start. What makes a splash gateway so useful is that users know immediately what sites are available to them.

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The Visual Gateway

• The Nivea gateway requires no text at all. Although the "Select your country" button is in English, the map overcomes any language barriers.

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E-commerce networks/net-enhanced organization

Five year projection:

• Strengh: Internet-based sales could easily reach 25% to 30% of the total retail market over the next few decades

• Opportunities: Web-based sales will continue to grow as a natural outreach for larger retailers leveraging off of their traditional showrooms.

• Threat: Even traditional cosmetic retailers like MAC, Clinque Nordstroms, Macy's and others are now starting to take orders via the web. This creates increased competition.