In August 2024, Avon Products Inc, a subsidiary of Brazil’s Natura&Co, filed for bankruptcy. The filing was largely driven by talc-related lawsuits, which caused significant financial and reputational damage. Once a leader in direct selling, Avon has struggled to adapt to the rapidly changing retail environment. This development not only highlights Avon’s ongoing difficulties in a beauty environment where consumers are hyper-concerned about ingredient safety, but also raises long-term concerns about the future of direct selling and prospects for Natura&Co.
Avon’s challenges in the digital era
Founded in 1886 in the US, Avon began as a disruptor, empowering women to earn an income through direct sales, bypassing traditional retail. This model thrived for decades, but large retailers and e-commerce posed significant challenges to Avon’s direct selling model. Between 2014 and 2023, Avon’s sales dropped by nearly 60% as the company’s reliance on its traditional business model lagged behind its more digitally savvy competitors. Avon was late to adopt online ordering and hesitant about an omnichannel strategy, concerned that it might disrupt its traditional salesforce. This cautious approach caused the brand to fall behind competitors. Additionally, constant shifts in consumer behaviour – like the growing demand for green and conscious beauty – have impacted Avon’s appeal in today’s market.
Avon’s key markets are Latin America, Eastern Europe and Asia Pacific and these regions have historically been strongholds for the company but may now face significant challenges.
In Latin America, Avon generates nearly half of its global revenue, with Brazil being its largest market. The company’s bankruptcy could destabilise operations in Brazil, which are key to both Avon and Natura&Co. Competitors like Mary Kay and Belcorp could capitalise on Avon’s weakened position to gain market share. Mary Kay already attracts a younger, more digitally savvy salesforce and offers a well-established online presence, areas in which Avon has fallen behind. Belcorp, through its L’Bel and Esika brands, could also gain ground by offering new products and collections tailored to local preferences.
In Eastern Europe, where countries like Poland, Romania, and Ukraine have strong direct selling cultures, Avon has historically maintained a significant presence. However, sales here are declining as e-commerce options rapidly expand. This trend reflects a broader shift in the beauty sector, allowing competitors like Oriflame and Faberlic to capture market share. Avon’s struggles raise concerns about the sustainability of direct selling in this region, particularly as younger consumers prefer online shopping.
In Asia Pacific, the Philippines accounts for 38% of Avon’s regional sales. Yet, bankruptcy risks could affect product availability, while popular e-commerce platforms like Lazada and Shopee appeal to consumers seeking greater convenience, further pressuring Avon’s market position.
Opportunities for Natura&Co and impact on direct selling channel
Avon’s restructuring offers Natura&Co a chance to refresh the brand by accelerating its digital transformation. To regain relevance, Avon must strengthen its e-commerce and social commerce strategies, especially in regions like Latin America and Asia Pacific, where mobile commerce is booming. Recognising its past slow pace of innovation, Avon has started opening physical stores across Europe, highlighting its commitment to a more robust omnichannel strategy that combines digital and in-store experiences.
Euromonitor International expects Natura&Co to experience a mixed market outlook, with Avon’s success largely dependent on its omnichannel strategy and how well it adapts to the preferences of younger generations. Generations Alpha and Z, set to make up nearly half the global population by 2030, primarily engage with brands through digital channels. To compete with digitally native, mission-driven brands, Avon must modernise its brand positioning and blend its direct selling heritage with a stronger digital presence.
Avon’s bankruptcy does not signal the end of its direct selling model, as its UK branch remains operational. However, its impact on the broader direct selling channel in the beauty and personal care industry will be significant. With more consumers turning to online shopping and niche brands catering to specific needs, direct selling risks becoming less relevant.
Drugstores, chemists, or pharmacies were the top choice for skin care purchases (33.8%), followed by supermarkets (33.5%), beauty retailers (26%), and e-commerce (22.9%), with only 14% of consumers now preferring direct selling for skin care, indicating a shift
Source: Euromonitor’s Voice of the Consumer: Beauty Survey, fielded June to July 2024
Avon’s experience reflects a broader shift in consumer perception of direct selling, especially among younger generations who favour digital channels and clean beauty standards. To stay competitive, direct selling brands must adapt digitally, explore multiple sales channels, and refresh their image. Competitors leveraging omnichannel and social media strategies are positioned to capture Avon’s declining market share.
To further explore direct selling in Latin America, read Carmen Silva’s article, How Pharmacies and E-Commerce are Winning Sales from Direct Sellers in Latin America.