Avon is one of the world’s best known brands. In Northampton, where it has its UK headquarters, the company is known locally as ‘ding dong’ a reference to its 1960s and 70s iconic advertising campaign. In spite of being associated with 1960s it is a massively successful organisation and has effectively used technology in the evolution of its business model.
It is now the world’s leading direct seller of beauty products with an annual turnover of $7.7 billion. It markets to women in 143 countries globally through 4.9 million independent sales representatives – ‘Avon ladies’ as they used to be known. In the UK alone, there are 160,000 Avon representatives, selling to nearly 8m customers. The company was founded in the US in 1886 and introduced to the UK in 1959. Avon’s distinctive selling method, using reps selling to work colleagues and friends, took the UK cosmetics market by storm.
Kevan Moorcroft has spent his entire career at the cosmetics company and has seen Avon evolve from a paper and punch card-based business to an innovative web-based one. He has worked all over the globe for Avon, starting out as a trainee programmer, spending five years in its headquarters in Rye, New York and three years in Japan. In fact, he has been posted to a new location every three to five years. In his 30 years at the company he has seen Avon change its processes but not its core proposition.
“Avon has changed a lot or a little depending on your view,” he says. “There is a great heritage and a great relationship between the business people at the company working together. It is essentially a sociable business and all of our people have a good sense of the business model.”
The company has modernised and evolved gradually. “On the brochure side, Avon is no longer all about ‘my mother’s’ company. It has younger customers and representatives now but it maintains the consistency of its business model. It has shown a lot of resilience and technical forethought on that,” says Moorcroft. When he began at Avon, the purchase orders were processed using punch cards and then corporate invoices were laboriously printed out. Today the internet handles the bulk of the traffic. “For invoicing, 50 per cent of Avon representatives are online and for the others their paper invoices are scanned into the system,” he says. “IT works as the marketing and commercial engine of the business. Avon has a unique business model and this is reflected in all that we do.” At the end of last year, Avon launched a new web shop in a bid to grow its UK online sales by over 200 per cent over the next five years.
It was the first cosmetics company to sell its products online, beginning in 1997, and there has been an 80 per cent year-on-year increase in global web sales for the last five years, notching up to sales of $2bn a year. The UK is the first territory in Europe to adopt the new Avon web shop model, taken from the US blue print and the company wants to expand the web offering across Europe.
The new UK web shop was developed as part of a global e-commerce strategy and Moorcroft believes it has radically improved customer service offerings for its direct customers. Moorcroft is now vice-president, regional IT services EMEA. In the early 1990s he became involved in strategic planning and business development. He believes that the IT development has made real progress and the company as a whole has seen some massive improvements in business processes since he was a trainee programmer. “The move in 1997 to the internet was significant. Avon has used the same operating model for 100 years,” he says. “Moving to do business direct with customers is about the critical mass of the business. Technology is key to it.”
The EMEA region is very diverse, with Avon operating in 31 different markets with 25 different languages and different fiscal rules. “Because of this we have to design in a great deal of flexibility,” says Moorcroft. “The content management has to be straightforward, with a large proportion of non-IT content on the site, so that the marketing people in each of our regions can work easily on it.”
The move to the internet meant a lot of internal systems planning and work on the supply chains at the regional level, all the while taking into account the multiple languages and currencies. This year, Avon is focusing on a major upgrade of its systems. “Hungary in now a centre of excellence for us, carrying out work on our global internet,” says Moorcroft.
“In 2002 it was regional initiative, more like an outsourcing model. We worked on project and outsourcing management. Since then we have worked on more explicit methodology systems and development lifecycles. Budapest was a fairly pioneering move and it still has a very reasonable talent pool.”
He adds: “We have some work done in India and the US but the ERP system is being developed in EMEA and Oracle E1 in Germany. Because we are ‘insourcing’ we primarily still use Avon employees. It is a virtual organisation with the right balance of using the best value location. This will be valuable in the long term and we have more control this way.”
The systems at Avon have evolved to support the business as it has changed. “Consequently we have a huge mix of technology including mainframes, legacy systems and AS400s,” he says. “We are in legacy replacement mode but business is vibrant and remaining externally business focused is key. Technology must be an enabler,” says Moorcroft.
Avon has global supply chains so its ERP system is a big investment and goes across the whole company.
Moorcroft believes in a ‘surround and shrink’ strategy and is currently working on the ERP systems. “The supply chain and financials are being developed and we can retire the older billing and invoicing – five years from now it will be all gone,” he says.
In 2005 Germany, UK, Poland and Russia began Manugistics implementations and the vast majority will be done by the end of this year.
The finance element will be tackled in 2007. The IT supply chains were legacy systems with Manugistics sitting on top. The sheer size required overnight batch processing and a lot of complexity, plus it was continually adding more layers and volume.
Data which was decentralised is now being brought together in a standard data structure, which takes account of Avon’s coding structure, functions and geography. “We are gaining business advantage from the systems and technology refresh. We will then package individual best practise in areas like the supply chain, where there is a lot of change and volatility,” he says.
“It is not NASA but the representatives side is complex – we change the product offering every three weeks. We also go through the whole cycle from product development of global offerings, to manufacturing and distribution. Our competitors like Unilever and Procter & Gamble only do a part of it,” says Moorcroft.
IT includes Avon’s own IT organisation of 90 people, plus consultants from Deloitte. “We have hired technical leaders which is a big investment but we wanted to do it properly. We got senior management support and investment and then did it. We spent the time and focused on the solution to make sure we got it right.”
Avon has handled regulatory compliance in a similar, methodical way, which is not easy given its market coverage. “Governance and compliance have gone from being in the background to being part of everything we do. We hired a full time person to deal with Sarbanes-Oxley because it is extremely complex for us with our 31 different markets. The thresholds in each market are different. For example, in Russia the user access controls and data centre level and access controls are totally different from other markets.”
Moorcroft says the goalposts for Sarbanes-Oxley have changed each year. “2004 was the first year, 2005 it was better and by 2006 the workshops had different templates. It is somehow turning into a repeatable process.”
“Despite that we are having to be careful,” says Moorcroft. “We do find things that don’t work but the whole bureaucracy of Sarbanes-Oxley is distracting. There must be a better way of balancing it all. It is doing some good but sometimes we feel like we are being hit with a blunt edged instrument.”
He says he loves learning on the job and has taken opportunities when they came. “There is a certain amount of career restlessness but Avon provides very diverse opportunities. At Avon we put the business first and IT second and as a result, the IT function is now adding value to the business.”
Moorcroft adds: “It is the diversity of working at Avon that I really enjoy. The IT has really evolved with the company and it is exciting to see what happens as the business and the technology changes.”