Avon 2015 Annual Report Download - page 17

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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 broad product
lines and pricing flexibility to mitigate the effect of these regulations.
Competitive Conditions
We face competition from various products and product lines. 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. We compete against
products sold to consumers in a number of distribution methods, including direct selling, through the Internet, and through the mass market
retail 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 a typical CPG company which operates within a broad-based consumer pool, direct sellers compete for representative or
entrepreneurial talent by providing a more competitive earnings opportunity or “better deal” than that offered by the competition. 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, 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 and skincare 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, specialty retailers and e-commerce.
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
During 2015, our international operations were conducted primarily through subsidiaries in 57 countries and territories outside of the U.S.
Our products were also distributed in 15 other countries and territories. In addition, our North America business (which has been presented
as discontinued operations) had sales operations in 2 countries and territories outside of the U.S., and distributed our products in 27 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
foreign currency fluctuations, foreign 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 in our international markets may be affected by political, legal, tax and
regulatory risks” and “Risk Factors—We are subject to financial risks as a result of our international operations, including exposure to foreign
currency fluctuations and the impact of foreign currency restrictions” in Item 1A on pages 8 through 22 of our 2015 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.
A V O N 2015 5
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