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Logistics of Avon and Chanel

Logistics of Avon and Chanel

Introduction As an essential component of marketing, logistics is the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to point of consumption for the purpose of conforming to customer requirements. Logistics’ making extensive use of human and material resources can have influence on national economy.

A research conducted by Michigan State University indicated that logistics could represent between 10 to 15 per cent of the gross domestic product of most major North American, European and Asia/Pacific economies (Rushton, Oxley and Croucher, 2000). Therefore, many brands take account into logistics management and design. Avon and Chanel are two main brands in Australian cosmetic market. These two companies all have very long history and large numbers of loyal customers. They both have their own particular channels of distribution, which will be researched in this study.

Avon and Chanel’s channels of distribution Avon is the largest direct seller of cosmetic products in the world, whoes independent sales representatives, usually known as Avon Ladies build up Avon’s marketing network covering more than 150 countries (Avon Australia offitial website). The channel of distribution of Avon could be described as “manufacturer directly to customers”. In this channel of distribution, consumers purchase and get the products directly from the manufactory, which means no intermediaries—wholesalers, retailers, or warehouse are needed.

The products of Avon are in storage in the warehouse in distribution centres and be sold to the customers via alone representatives, who get the produchs from distribution centre. Avon’s representatives provide the customers with everything about the beauty— knowledge of health and cosmetic, the latest information of products. They make beauty plan for each costomer and recommend the cosmetic product that fit for their personal situation. The customers purchase the products via Avon ladies and gain the persistent service and suggestions form Avon ladies after purchasing. For 125 years, Avon ladies have brought beauty into the lives of women— first at home through door-to-door sales, then in the workplace to colleagues and friends, and now online (Avon Products Inc. ) Luxury brand is the first impression of people when talking about Chanel. Chanel produces a variety of produces: fashion, accessories, fragrance, fine jewelry and watches, besides, cosmetic including make up and skincare is a significant component as well, which is sold normally in upscale shopping districts, upscale department stores and malls, and inside major airports.

In Australia, cosmetic products of Chanel usually can be purchased on its counter in David Jones and MYER. “Manufacturer via retailer to customer” basically is the channel of distribution of Chanel. Manufacturers supply products to national distribution centres or regional distribution centres, and then, these products are delivered to Chanel’s counters located in shopping stores and malls. The customers go to these counters to purchase the cosmetic products and get service from the shop assistants. Service Output Demand in Avon and Chanel’s channels To satisfy the demand of customers is the key point for a brand to get success.

Service-output-demand analysis can help the marketing channel managers to get to know what end-users really want and subsequently make a proper decision. The first step to conduct service-output-demand analysis is to segment the market. The target market of either Avon or Chanel is mostly the female customers. The demands of this target market may be slightly differentiated depend on the customers with different ages, areas, level of income and so on. The next step is to describe each service-output-demand, such as bulk breaking, spatial convenience, delivery/waiting time, assortment/variety, customer service, information provision and price.

The service-output-demand in Avon and Chanel’s channels based on identified segments will be discussed in the following study. 1. Bulk Breaking Customers of both Avon and Chanel, no matter how old they are or how much they earn have medium to high demand in bulk breaking because most of them do not need to buy too many cosmetic products once. They usually buy one product in different kind like eye cream, day and night essence or cream, body lotion, and so on.

However, sometimes they also have relatively low demand on bulk breaking, for instance, when there is sales promotion like discount, premium offers customers may prefer bulk than bulk-breaking. Besides, some kinds of gift-box are also good choice as a present given to friends. 2. Spatial Convenience It can be found that customers of Avon mostly have high demand on spatial convenience as Avon representatives call on the customers and offer them service or products, therefore, customers can save time and money to go to the store.

On contract, it seems that Chanel does not offer its customers such spatial convenience. They have to go to the counter in mall to purchase the products. The customers of Chanel can be estimated having medium to low demand on spatial convenience. 3. Delivery/Waiting Time Customers of Avon have medium demand on delivery/waiting time. In most cases, customers are able to get the products from Avon representatives soon. Even though the products cannot be delivered at once but delayed in several days, the customers will not complain. Customers of Chanel also have medium demand on delivery/waiting time.

Usually they can buy the products in the mall, and do not mind to wait for several days if the products they want are not in storage and need to be delivered from the distribution centre. 4. Assortment/Variety Assortment/variety is important to the customers of cosmetic products because people with different demands need different functions of cosmetic. Aged people require the products to conquer the wrinkle and bring their youth back, while middle-aged customers hope the products in possession of the efficacy as prevent wrinkle and keep youth, and the young people need some cosmetic products to cure acne or make their skin whiten.

As a result, both Avon and Chanel ought to satisfy the customers’ high demand on assortment/variety. Obviously, these two brands never stop to innovate and enrich the variety of their cosmetic products. 5. Information Provision Both Avon and Chanel’s customers demand highly on information provision. As people always have different requirements in different time and most people are not professional in beauty, either Avon ladies or Chanel’s sales assistant have responsibility to provide the customers with the knowledge of beauty and informationg of their cosmetic products. Furthermore, due to the ast innovatin of cosmetic products, customer need to be supplied the latest product introduction. 6. Price With a long history, Avon has good reputation in the secondary line of cosmetic products marketing. The moderate price and good quality is one of the mian advantages of Avon to attract customers, especially those who are not willing to spend much money on cosmetic products. Consequently, the consumers of Avon normally have medium to high demand on price. Comparatively, as a luxury brand, Chanel provides those consumers who have low demand on price but high demand on excellent quality and outstanding reputation.

Power lies in Avon and Chanel’s channels 1. Reward Power Avon’s alone representatives are rewarded by the company to be praised and encouraged. They can get the products with a discount price and then sell in a relatively higher price. They can also get reward if they make more people join in and enlarge the Avon representatives’ team. Chanel also has the reward power to give discount and reward to the retailers. 2. Co-ercive Power Both Avon representatives and Chanel’s retailers have to hit the sales target instituted by the company.

If they fail to achieve the goal, they will be punished. 3. Expert Power Every Avon lady can be called expert in the area of beauty. They need to not only know each detail of Avon’s product information but also know the related knowledge of health and beauty. Avon ladies have capability to answer every question of the customers and give them the latest and poroper advices. It can be dared to say that Avon would not be so successful without these professional representatives. Meanwhile, the retailers also give Chanel professional support.

They offer its products locations, most of which are upscale shopping malls that have top-ranking environment and service, which fit for Chanel’s luxury brand image. 4. Legitimate Power Avon and Chanel both have legitimate power to legalize their patent and trademark, and sign the contract with their representatives and retailers in a formal and legal way. Solidarity, role integrity and mutuality are the core value of both two brands. At one time, an Avon’s representative was exposured offering customes overdue products, hence this representative was dismissed by Avon.

Sources of Potential Conflict Avon The first potential conflict is the diversity of resresentatives. Avon owns over 1. 5 million independent representatives. Such an enormous quantity indicates the difficulty of management. Avon is responsible establish a set of standard to discipline their representatives. Once a representative disobey the standard or cannot achieve it, the brand image and reputation is probably destroyed. The second potential conflict is the restructuring of distribution. It is well known that Avon has a 125-year long history.

Many of its distribution systems have been outdated and many warehouses are too old to use. Therefore, the innovation and restructuring is necessary. However, some problems may exist during this process. It was once reported that Avon Product in USA restructured the distribution facility in the Midwest, but led to the consolidation and closure of two distribution centres in Delaware and Illinois (Pitman, 2007). Chanel One of the potential conflict of Chanel’s distribution is that the customers may get service from one part but purchase the products from the discounter.

With the online business becoming more and more popular, such conflict emerges gradually. Some online cosmetic stores offer discount on many big brands including Chanel, which attracts a great quantity of customers who are fond of big brands as well as looking forward to the affordable price. Hence, some customers go to the counter in the mall to get the information and suggestions from the assistant and moreover to try the cosmetic products, and then purchase on those discounting online stores. As a result, the profit of these entitative stores are badly affected.

Another conflict is the wrong estimation of service-output-demand. Some distribution managers may make a wrong estimation of the regional purchasing power hence lead to a failure of marketing. Suggestions for Improvement in the Channel Design In order to increase the competitive power in the cosmetic market within which always exist keen competition, Avon could consider the multiple channels instead the sole direct sales. Specialty sore, counter in shopping mall and online store are all potential choices.

Chanel could open an official website to sell cosmetic products online to provide the customers more spatial convenience. Conclusion This study compared the channels of distribution of Avon and Chanel, two major brand in Austrlian cosmetic market. Avon has a typical manufacturer direct to customers distribution channel, while Chanel, like the most luxury brands, adopts manufacturer-retailers (set up counters in upscale shopping districts, upscale department stores and malls, airport). Reference Avon Australia. About us.

Retrived March 15, 2011, from http://www. avon. com. au/PRSuite/whoweare_main. page Avon Products Inc. About Avon. Retrived March 15,2011, from http://www. avoncompany. com/aboutavon/history/avonlady. html Pitman, S. Avon distribution restructuring leads to closures. Cosmetics Design. Com-USA. 2007. Retrived March 16, 2010, from http://www. cosmeticsdesign. com/Business-Financial/Avon-distribution-restructuring-leads-to-closures Rushton, A. Oxley, J. and Croucher,P. Logistics and Distribution Management. Londen. 2000.