Avon to cut 600 North American jobs

Avon Products said Monday that it will cut another 600 jobs as it tries to reduce its spending.

Cosmetics giant struggles with sliding sales, bribery probe

The 128-year-old cosmetic company known for its door-to-door team of Avon ladies is laying off 600 employees as it faces new and intense competition 2:21

Avon Products said Monday that it will cut another 600 jobs as it tries to reduce its spending.

The company said most of the eliminated jobs will be in its corporate organization and its North American business. Avon had 36,700 employees at the end of 2013.

A company spokeswoman said "only a handful" of the layoffs would be in Canada, but declined to give a specific number.

"The majority of the headcount reductions are at the corporate level and in the North America business, which largely is centred in the U.S.," she said in an email. "Of the total number, only a handful are in Canada."

Avon Products Inc. is the world's largest direct seller of cosmetics, but its sales have been steadily dropping. Under Sheri McCoy, who became CEO in 2012, Avon has cut costs, slashed thousands of jobs and left unprofitable markets.

Avon is trying to trim $400 million US in spending by 2016 and said that the latest cuts should contribute $50 million to $55 million in annual savings.

It said it expects to take $45 million to $50 million in charges as a result of the cuts, with most of those coming in the second quarter.

Sliding sales have not been the only problems at New York-based Avon. In May the company said it would pay $135 million to settle a long-standing U.S. government probe into whether it paid bribes in China and other countries to gain favours.

Avon has been losing business in North America for years, despite experiments in jewellery, clothing and  online selling.

Noreen Flanagan, editor-in-chief at the fashion magazine Elle Canada, says the Avon business model no longer appeals to consumers.

"An at-home representative coming into your house. That just seems charming but very dated," she told CBC News.

“It’s not that their products aren't good or their products are not innovative but they're not seen as very modern. It’s sort of your mother’s or your grandmother’s line.”

Led by makeup supermarkets like Sephora, younger consumers are increasingly spoiled for choice at every price level. Drugs store chains and department stores have expanded their offerings.

But the company does have prospects outside of North America, where the kinds of choice it offers seems rich, says Rotman School of Management marketing professor David Soberman.

“In many developing countries, you have people that previously were sort of on subsistence lifestyles and now they actually have disposable income and for them something like a door to door or direct selling can be very effective and a growth industry,” he said.

As of 2011 Brazil overtook the United States as Avon's biggest market.

With files from CBC News


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