“I think this year will be better than 2011 but a correct estimate may be achieved mid-year. If we do register growth, we expect it will be single-digit,” said Bogdan Muraru, Avon Romania’s sales manager.
He added cosmetics sales in the first two months of the year were hindered by bad weather. “Those few weeks of really bad weather affected our transport department and it was a big challenge to deliver our packages to counties such as Ilfov, Tulcea, Constanta, and Calarasi,” Muraru explained. Romania was hard-hit by snow and blizzards throughout February.
Despite the harsh weather conditions, consumption has increased quite significantly in January, when overall retail sales picked up about 10%. The first signs of a recovery in consumption became apparent in the fourth quarter of 2011. But Muraru thinks the 10% growth in retail sales is not a relevant indicator for the full-year outlook.
Regarding last year’s sales, Avon’s sales manager declined to provide any figures but said the first half of the year was affected by the difficult economic situation and sales recovered in the second half, when the average value per order increased. Avon has a monitoring system that allows it to analyze its sales daily.
Avon currently has around 140,000 salespersons countrywide, a number that has remained constant over the past two years. Each of these buy an average 15-20 products per order, for EUR40-50, meaning a product costs an average EUR2-3, according to data obtained by Ziarul Financiar. There is no information as to how often salespersons place orders with Avon.
Why the slump in sales?
“In hindsight, I’d say the slump in sales in mainly due to people’s lack of confidence in the economy. Romanians have stopped buying goods that are beyond strict necessity because they are worried for their future,” said Muraru.
The pick-up in sales in the second half of last year was due to an increase in volume, as Romanians remained sensitive to prices, which are the ultimate decisive factor in the decision to purchase.
“In the past two years, people have grown more sensitive to prices and more reticent in buying very expensive products. This trend is still going on. To boost, consumption, we’ve used promotional offers,” said the Avon official.
The cosmetics company plans to use the same strategy this year and will come up with offers for all its ranges and categories of products.
Far from the best year
Despite the unfavorable economic context of the past three years, Avon Romania had managed to keep its sales fairly constant until last year.
According to the latest available data, Avon Romania posted sales of EUR114 million in 2010, up nearly 2%, and a net profit of about EUR18 million, from EUR17 million the previous year. According to Finance Ministry data, which synthesizes information starting 1999, Avon’s best year for sales was 2010.
“2012 will be a year of transition and adaptation to a new economic climate. It will certainly not be our best year in terms of profits or sales but we’ll do our best to respond to consumers’ needs under these economic conditions,” Muraru adds.
(English version by Oana Gavrila)