US cosmetics giant Avon has announced that it will close down all of its French operations at the end of this month as the result of declining sales and consistent operating losses.
As a result of this, the company has stated that only current orders from its customers will be guaranteed.
A letter from the president of Avon France to the company’s work council says that Avon has failed to adequately penetrate the French market and has posted a loss during most years of operation.
Rachida Dati, a member of the European parliament, stated in a press release: “Another company is going to close, and other lives are going to be shattered, if nothing is done.”
He also called for the minister of industrial renewal to take over the case and ensure that the firm’s workers remained in employment.
Marlous Kuiper, a Euromonitor analyst, told CosmeticsDesign-Europe.com that Avon’s decision to pull out of France was “unsurprising” given the challenges it faces and its ongoing restructuring to cut costs.
Avon has committed to cutting costs by US$400m by the end of 2015.
She pointed out that the company had already exited from Japan, South Korea, Vietnam and Ireland, and planned to close plants in Ohio and Germany in 2013.
Kuiper commented: “It’s recent announcement of exiting the French market isn’t therefore a big surprise, especially when looking at their sales…Avon generates fairly small sales in France, US$29mln in 2012 (and actually even less in Ireland) with both markets declining in sales in 2012.”
“These sales are very small compared to Avon’s global beauty sales of US$ 12 billion in 2012, making it the largest beauty direct seller globally and 8th largest beauty player globally in 2012.”
Low penetration, low profits
A letter from the president of Avon France to the company’s workers points out that despite numerous restructurings, Avon France has operated at a loss every year from 2000 to 2012.
In addition, the company had never achieved more than 0.2% market share in cosmetics, in part due to its failure to adapt to the peculiarities of the French market.
Avon's sales have also declined from €38.8m to €20.9m between 2000 and 2012, partly because the firm being hobbled by competition from the internet in its reliance on direct sales.
127 employed workers and 11,000 representatives are likely to lose their jobs as a result of this development.
In an interview with the BBC, Estelle Croissant, an Avon employee responsible for supporting direct selling representatives, said that a worker’s council representing Avon staff was challenging the company for not following correct redundancy procedures.