Early Learnings from Natura’s Acquisition of Avon: A Stronger Amazon Strategy?
Following the announcement of Natura&Co’s acquisition of Avon back in May, reporting focused on the synergies between the two companies as traditional direct sellers. While the two complement one another, there are also valuable lessons to learn.
In the UK especially, the traditional direct selling model is in dire need of reinvention. Both Natura&Co and Avon rank in the top 15 beauty and personal companies in the UK. Yet the market share of direct selling in beauty and personal care declined by 7.5% since 2013 in this market, while beauty specialist retailers grew by 2% and online by 5.5% over the same period. In line with this, Avon’s market share in the UK declined from 2.1% to 1.3%, signalling an urgent need to rethink business, including reassessing its channel strategy. So how could the acquisition influence Avon to prioritise pushing forward with a stronger omnichannel strategy?
Given Natura&Co’s experience building a physical presence through Aesop, The Body Shop and the Natura brand, it’s a possibility that Avon could again explore physical retail to offset some of the losses in direct selling. But a savvier and more immediate priority for Avon would be to replicate some of the steps Natura&Co has already made in expanding e-commerce operations.
From the start of 2019 to the day of the acquisition announcement, double the number of Avon SKUs were available online compared to Natura&Co brands in the UK. Yet despite Avon’s seemingly visible online presence, Natura&Co shows signs of having made more considered moves towards a sharper e-commerce strategy.
So far, Natura&Co has embraced omnichannel in different ways. For example, Natura Ekos products can be found on curated digital platforms, such as Birchbox and Fabled. But, most crucially, Natura&Co has recognised the power of Amazon and appears to be experimenting in the UK as a third-party seller, with Natura Ekos, sold on the platform by Natura&Co and fulfilled by Amazon. Meanwhile, the company’s acquired portfolio, The Body Shop and Aesop, both have solid omnichannel strategies via monoband outlets and beauty specialists both on- and offline, but lack a centralised Amazon strategy, in the UK at least.
Over at Avon, the digital strategy is considerably less focused right now. Among the 1,600 SKUs sold online from the beginning of 2019 to the day of the acquisition announcement, there were five times more SKUs available on Amazon, compared to Avon’s own website. The catch being that Avon does not appear to work with Amazon in an official capacity, with Avon exercising little control over brand image or pricing.
Whilst the products have presumably been bought from Avon by licensed reps and therefore not to the detriment of the company’s topline, the reputational risk is a concern. Amazon is known for policing counterfeit goods and unauthorised sellers, but it’s also no secret that Amazon looks after its own. As a minimum, Avon needs to ensure it is enrolled on the Brand Registry and may want to negotiate with Amazon to clean up the marketplace to retain pricing control and reputation. Another less attractive option would be to hire lawyers to monitor listings and police it themselves on the grounds of copyright infringement.
Amazon is also increasingly carving an identity for itself as a discovery tool and broader media platform, therefore telling a compelling story through this medium is of growing importance. Amazon’s sales growth remains strong, but there’s also a large subset of consumers who use the platform to research but not to purchase, and so content creation and exploration is only going to improve on the marketplace. This shift in direction for Amazon could be the catalyst for change that convinces Avon of the merits of its worth, expanding Avon beyond its own e-commerce activities without losing the authentic word-of-mouth storytelling element that the company prides itself on.
Reviews are particularly important in the path to purchase on Amazon and these reviews could act as virtual reps for Avon. The Early Reviewer Programme may be a consideration to ensure an impactful roster of word-of-mouth recommendations that mimic the Avon rep model for 2019.
The biggest challenge for Avon would be how to protect its reps whilst benefitting from Amazon’s reach – but now is as good a time as any. Many seller tools, such as analytics and storefronts, are migrating from first-party on vendor central to third-party on seller central. Third-party selling, with more influence in controlling pricing, would allow Avon greater protection over the livelihood of its reps rather than going wholesale.
Considering that Amazon is an increasingly lucrative marketplace for beauty brands in both the mass and luxury space, many are adopting an “if you can’t beat them join them approach”, and Avon is the perfect case study. Bearing in mind the sheer volume of Avon products already available on Amazon in the UK and given Natura&Co’s apparent experimentation with third-party selling on Amazon marketplace, prioritising building a stronger Amazon strategy is looking like the first port of call in the immediate months following the acquisition.