Avon 2013 Annual Report Download - page 13

published, in which new products are introduced and selected items are offered as special promotions or are given particular prominence in
the brochure. A key priority for our merchandising is to continue the use of pricing and promotional models and tools to enable a deeper,
fact-based understanding of the role and impact of pricing within our product portfolio.
From time to time, various regulations or laws have been proposed or adopted that would, in general, restrict the frequency, duration or
volume of sales resulting from new product introductions, special promotions or other special price offers. We expect our pricing flexibility
and broad product lines to mitigate the effect of these regulations.
Competitive Conditions
We face competition from various products and product lines both domestically and internationally. The beauty and beauty-related products
industry is highly competitive and the number of competitors and degree of competition that we face in this industry varies widely from
country to country. Worldwide, we compete against products sold to consumers in a number of distribution methods, including by other
direct-selling companies, through the Internet, and against products sold through the mass market and prestige retail channels.
Specifically, due to the nature of the direct-selling channel, we compete on a regional, often country-by-country basis, with our direct-selling
competitors. Unlike most other beauty companies, we compete within a distinct business model where providing a compelling earnings
opportunity for our Representatives is as critical as developing and marketing new and innovative products. As a result, in contrast to a
typical CPG company which operates within a broad-based consumer pool, we must first compete for a limited pool of Representatives
before we reach the ultimate consumer.
Within the broader CPG industry, we principally compete against large and well-known cosmetics (color), fragrance, skincare and personal
care companies that manufacture and sell broad product lines through various types of retail establishments and other channels, including
through the Internet. In addition, we compete against many other companies that manufacture and sell more narrow beauty product lines
sold through retail establishments and other channels, including through the Internet.
We also have many global branded and private label competitors in the accessories, apparel, housewares, and gift and decorative products
industries, including retail establishments, principally department stores, mass merchandisers, gift shops and specialty retailers. Our principal
competition in the fashion jewelry industry consists of a few large companies and many small companies that sell fashion jewelry through
department stores, mass merchandisers and specialty retailers.
We believe that the personalized customer service offered by our Representatives; the amount and type of field incentives we offer our
Representatives on a market-by-market basis; the high quality, attractive designs and prices of our products; the high level of new and
innovative products; our easily recognized brand name and our guarantee of product satisfaction are significant factors in helping to
establish and maintain our competitive position.
International Operations
Our international operations are conducted primarily through subsidiaries in 61 countries and territories outside of the U.S. In addition to
these countries and territories, our products are distributed in 43 other countries and territories.
Our international operations are subject to risks inherent in conducting business abroad, including, but not limited to, the risk of adverse
currency fluctuations, currency remittance restrictions, the ability to procure products and unfavorable social, economic and political
conditions.
See the sections “Risk Factors - Our ability to conduct business, particularly in international markets, may be affected by political, legal, tax
and regulatory risks” and “Risk Factors - We are subject to financial risks related to our international operations, including exposure to
foreign currency fluctuations” in Item 1A on pages 7 through 17 of our 2013 Annual Report for more information.
Manufacturing
We manufacture and package the majority of our Beauty products. Raw materials, consisting chiefly of essential oils, chemicals, containers
and packaging components, are purchased for our Beauty products from various suppliers. Most of our Fashion & Home products are
purchased from various third-party suppliers. Additionally, we design the brochures that are used by the Representatives to sell our products.
The loss of any one supplier would not have a material impact on our ability to source raw materials for our Beauty products or source
products for our Fashion & Home categories or paper for the brochures.
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