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Cosmetic giant Avon Inc is planning to add another 500 boutiques to its sales network in China over the next few years, in a move to further cement its leading position in the market.
This is one of many strategic steps taken by the firm to make China its fastest growing market among its global business segments.
The company is also planning to introduce new product lines to the Chinese market in 2005, and possible investment for new production bases in the future.
"We still have many other opportunities to penetrate more cities and more towns, and we will be opening at least 500 beauty boutiques a year for the foreseeable future," said Andrea Jung, Avon's chairperson and chief executive, who was on her first trip to Beijing.
"We would identify this market as a global powerhouse for us in the cosmetics industry, and we view this as the fastest growing market in the next 10 years," added Jung.
As a leading direct seller of beauty products, the company today has 5,500 beauty boutiques across the country covering both business hub cities as well as smaller urban centers, and it has more than 700,000 members making up its clients club.
"We are working for a strategy that places China at the center of our growth, and we have done very well in this market for the last several years," said Jung.
"The Chinese market has been growing at over 30 percent a year, and the business in China will be at 25 to 30 percent this year in spite of the SARS (severe acute respiratory syndrome) epidemic," said Jung, a Chinese American.
"Our brand is very affordable and accessible to all Chinese women, not just women in major cities. Most of our competitors do business in large cities, while we do business in every single market in every province," said Jung.
Sales in large cities, such as Beijing, Shanghai and Guangzhou, have seen rocketing growth. And in Beijing and Shanghai, sales have grown by some 40 to 50 percent annually over the past several years. The company's network already covers almost all of China's provinces, and it even has six boutiques in the Tibet Autonomous Region.
"We are already very successful in department store counters and hypermarkets, and as they grow in China and Avon will be there," Jung said.
Avon seems to have been more aggressive than just selling cosmetics in the Chinese market.
"We are also evaluating the opportunity to enter some new categories of business, and we are working for a product line specifically for China, which will be a business opportunity for 2005 and beyond," said Jung.
"I think continuing to expand across the country will be the primary source of growth, and there will be US$150-200 million (in revenue) over those two years.
"By 2007, this market will double to US$400 million," she added.
Talking about the company's global business, Jung said that Avon is looking to have another very strong year in terms of sales and profits, while momentum is continuing to grow even stronger in some regions.
This year will be Avon's fourth consecutive year of strong two-digit earnings growth since Jung was named to her current position.
The company also has many strong growth options in China, central and Eastern Europe, Russia and other markets, as well as some new customer segments.
(China Daily October 28, 2003)
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