Channel Conflict, The Pain Of AVON'S Pformation

If in April 8th, when AVON global CEO Zhong Junxian announced that AVON was the only direct selling pilot qualification in China, many media had focused on AVON and direct selling. After a few days, AVON's internal dealer "forced the palace" incident, it was once again that the AVON was pushed onto the cusp of public opinion.

Perhaps, in order to "reborn after bathing", even the powerful direct selling enterprises such as AVON will have to face the channel conflict "labor pains" brought about by the pformation of business mode.

Break up the wall

On the morning of April 11th, dozens of AVON dealers gathered at AVON headquarters in Tianhe Times Square, Guangzhou.

But this time, they did not pick up the goods as usual, but because "the direct selling of the company has hurt the sales interests of the franchised stores", so they want to make a "statement" for the survival of AVON stores after the sale of direct selling.

The event of "group visit" of AVON headquarters in Guangzhou means that AVON, the first direct selling pilot, is facing a new pformation.

At present, AVON has more than 6000 stores and more than 1700 store counters, but most of them are invested by distributors.

AVON has taken the early investment of dealers through the profit margins of between 31% and 40%. But since AVON has revealed that it will carry out direct selling, dealers' business has declined significantly, and even in Guangzhou, Shanghai and other places, the business of booming shops has also fallen sharply, resulting in the situation of dealers' "pushing the palace" to AVON headquarters.

This is a typical channel conflict between suppliers and distributors.

To put it simply, channel conflict is a channel of interdependence. Members perceive that another channel member is obstructing or obstructing their goals, thus causing pressure and contradiction.

Channel conflict has become an unavoidable threshold for AVON in the process of direct selling pformation. It is a painful process for AVON to adapt to the new rules of direct selling.

Cheng also Xiao He, chaos is also Xiao He!

AVON (China) can become the first and only direct selling pilot enterprise approved by the Ministry of Commerce and the State Administration for Industry and commerce, which can be said to be the result of AVON's efforts over the years.

AVON was the first foreign company to enter the direct selling market in China.

After the government promulgated the circular on a comprehensive ban on pyramid selling activities in 1998, so that the direct selling industry has entered the cold winter baptism in China, AVON has learned from the bitter experience and decided to make a thorough cut to fit the specific conditions of China.

Through the large-scale pformation, AVON has pursued a single level direct selling mode based on store and cabinet sales products, so that AVON can be pformed into a wholesale and retail shop in China.

At present, its sales network in China has more than 6000 licensed product stores and more than 1700 beauty counters, which contributed about 70% of AVON's sales in 2004.

The Avon Co is the most successful and thorough enterprise in the 10 pformation enterprises that "foreign investment pyramid selling enterprises must be pformed into shops".

In addition, from the government's point of view, at this stage, AVON's single level business model is relatively the best management mode, so the government's choice of AVON mode is more sensible and safe.

The industry speculated that AVON's pilot qualification indicated that the Chinese government at the initial stage of the direct sale law, in order to carry out effective management of direct selling activities, AVON's single level mode may become an important reference for legislation.

It will be considered a major victory for AVON in China's direct selling market.

However, the so-called "Cheng Xiao He, chaos is also Xiao He!"

After the complete pformation of AVON after 1998, although AVON has become the first enterprise to get the direct sale pilot qualification, its harm to AVON has also emerged.

In the eyes of the government, AVON has always been the image of a "good girl", which is one of AVON's external advantages.

However, the price behind the "cute girl" is the huge shops fixed assets investment and a large number of dealer inventory formed by the "6000 shop +1700 counters".

As the interests of the original channel members constitute a realistic and anticipated threat, AVON's pilot qualification for direct selling has also become the fuse of channel conflict, which has directly led to the AVON dealer's visit to Guangzhou headquarters.

AVON executives, of course, are very clear about the huge impact of direct selling pilot business on dealer shops, and on different occasions, they also express the determination that AVON will not let the interests of franchised stores lose. For example, when AVON global CEO announced its direct sale pilot license in Beijing, Zhong Binxian promised to protect the interests of franchised dealers and salesmen. However, AVON did not want to see a dealer who was forced to make a scene.

Root causes of AVON channel conflict

AVON dealers asked for the return of goods and the claim of "forcing the emperor", which is the best portrayal of the channel conflict in reality.

In order to manage the conflict effectively, the author thinks that, first of all, we should explore the root of the root of the conflict and understand what the deep root of the conflict is.

As a matter of fact, the pilot of direct selling is only the fuse of the AVON channel conflict, and the pformation of the AVON for years is the real root of the conflict.

1. goal difference

In fact, the way AVON operates in China is not only a single level direct sale in the pure sense, but more tends to the wholesale and retail shop business mode, because it does not form a salesman team or a salesperson collective incentive mechanism, and its main income comes from the exclusive stores and counters.

Even in the 6000 stores that highlight AVON's "pformation of the most thorough", 95% of the stores are authorized to join the chain store.

That is to say, AVON and dealers form a relatively loose and authorized super organization, which is characterized by a relatively different and relatively independent target system among members.

Of course, because of the efficiency and cost saving considerations, AVON and distributors have made efforts to contribute to the overall goal of the channel.

However, they have their own opinions and requirements on how to achieve the overall goal of the channel.

For example, as the only enterprise in the Chinese market that has obtained the "license" of the direct sale pilot, AVON certainly hopes to expand its market share in China and improve its competitiveness through direct selling pilot, so as to enhance its competitiveness and realize its long-term development strategy. However, the dealers regard the pilot qualification of direct selling as a "bad omen", because the direct selling pilot not only reduces their sales expectations, but also makes a considerable amount of stock become a heavy burden, and the fixed investment of high value in the early days is wasted.

Of course, AVON is more willing to maintain the coexistence of distributors and distributors so as to provide quality services to AVON's terminal consumers.

However, this seems to be the wishful thinking of AVON. The channel conflict between the target difference between the dealer and the dealer will test AVON's marketing skills and channel management ability to the greatest extent.

2. field conflict

Different members in the channel will play different roles.

Each channel member has his own field and scope of activities, and each channel member will strive for an exclusive decision-making field for himself.

At present, AVON's sales revenue mainly comes from the shopping mall counters and stores. They are the main force for AVON to serve customers and promote AVON's development.

However, the launch of the direct sale pilot will have a huge impact on these counters and franchised stores, which may completely break the current division of labor.

As salesmen can get goods directly from the company, direct sales will reduce all kinds of direct or indirect costs, so the salesmen will have more price advantages.

At the same time, because AVON has always implemented a strict performance management system in human resources management and implemented quantitative performance indicators, AVON shop salesmen may take away a large number of store consumers after pformation.

Perhaps in the near future, AVON products will completely jump over distributors and sell through direct selling personnel. Stores and counters may become a place for free display of AVON products and free replacement of problem products.

Although AVON has repeatedly insisted that the direct selling pilot system will be completely independent of the current franchise operation system, the franchised stores will operate normally in the pilot area or in the non pilot area, but it is undeniable that the direct selling pilot has already impacted on the original and clear boundary areas in various aspects.

The re adaptation of the scope of the domain is one of the important causes of the "forced" incident. The dealer's return is only a superficial problem. The deep-seated problem is the conflict of interests between the new and old channels caused by the conflict of the members.

It is believed that the redefinition of member's domain and effective management of channel conflict will be one of AVON's indispensable agenda.

3. multi channel conflict

At present, consumers can buy AVON products suitable for their own from different channels, including shopping malls, specialty stores and online stores. There are also informal channels such as gray marketing channels and underground stores. Many channels facilitate customers' consumption.

Of course, before obtaining the direct sale pilot, AVON was also very reliant on distributors because of the largest contribution from the counters and stores. AVON mainly relied on the high profit of wholesale and retail to maintain the loyalty of dealers.

However, direct selling activities require a large number of salesmen to show their greatest competitive advantage. In order to adapt to the new rules of direct selling game, AVON has to gradually reduce its dependence on dealers and pay more attention to the training of salesmen. This seems to be a "smash up" taste among dealers.

What position will the dealer be placed in?

Do shopping malls and stores only play the role of beauty or product display?

Or is it merely setting up a direct delivery point for AVON?

Dealers who have already invested some fixed capital in the early stage are certainly unwilling to see this happen.

Since the pformation in 1998, AVON's dealers have made an indelible contribution to AVON's development in China.

It is these authorized stores that give AVON China an annual sales growth rate of 40%.

In 2004, AVON contributed 70% of its more than 20 billion sales in China.

AVON, of course, is very grateful to dealers and gives them great rewards.

Just as a dealer who was also involved in the "forced Palace" said: she is very grateful to AVON for giving her the opportunity to make money over the years.

However, the present situation has changed completely.

Direct sale pilot will result in a fatal blow to the performance of stores, and even some salesmen in franchised stores are selling products directly through the exclusive stores.

Direct sellers can now pick up goods directly from Avon Co, which has led to a sharp decline in sales of specialty stores.

The multichannel conflict between personnel selling and traditional distributors is a kind of labor pains in AVON's pformation of business mode, but it is very difficult to avoid it.

In addition, with the in-depth development of AVON's direct selling pilot, it is believed that online direct selling as one of the main ways of direct selling will become an important part of AVON's direct Empire blueprint.

Moreover, the changing Internet technology, modern logistics technology and modern marketing technology also provide strong material guarantee for online direct selling.

However, it is the introduction of online direct selling, while building AVON direct Empire, it also has a sharp impact on existing channels, including sales promotion and shop sales.

In the past few years, AVON's introduction of online stores has caused a lot of dealers' strong boycott, which is a good example.

Because AVON will remain in the pformation stage of business mode in the next few years, and the direct selling process in China is also a gradual process. Therefore, stores, counters, promotion and direct selling will coexist in a certain period of time. In Yu Yafang's sales network, different channels have different interest demands. Therefore, multi-channel conflicts will be difficult to avoid, which is a major test of AVON's marketing and management capabilities.

Where is the way of AVON direct sales?

Dare to ask where the road is?

AVON how to properly handle the current channel conflict situation, how to make full use of the direct sale pilot "license" to achieve the biggest competitive advantage, I believe this is a topic of common concern between AVON executives and the industry.

The pilot qualification for direct selling is AVON's leading sword in the direct selling activities of competitors, but it does not always bring flowers and applause to AVON. The "forced" incident at the Guangzhou headquarters of the distributor makes AVON's direct selling mode face great challenges.