Avon And Silpada: A Network Marketing Match Made In Heaven?

Avon and Silpada have joined ranks. How will this affect network business for women working from home?

Avon Products recently announced its acquisition of Silpada Designs. At a purchase price of about $650 million, the price tag alone speaks volumes about their business success. Hard to believe Silpada got its start when two school moms met at their children’s classrooms.

The move evidences Avon CEO’s dedication to expand the company’s line beyond beauty products even though those sales netted 70% of Avon’s $10 billion sales in 2009.

Silpada Designs’ annual sales are estimated at approximately $230 million.

At the acquisition announcement, Avon’s stock rose by 15 cents a share. The shares had been down more than 9% last year. Clearly its fans were pleased by the news.

Avon is not going out on a limb financially to purchase Silpada. Avon cash inventory was greater than $1.1 billion as of the end of March, 2010. Cash reserves will remain strong.

Current press indicates that the two businesses will continue to operate separately. Avon has previously promoted a fashion line which consists of jewelry, watches and footwear in addition to its beauty products. The fashion line represented about 17% of Avon’s total sales for 2009.

Avon is alive in over 100 countries. Silpada will certainly benefit as it is not known to this degree.

Citigroup has expressed its approval of the move, suggesting that it would definitely be beneficial for Avon.

The economy of distribution should be good for both companies. Cost savings can be obtained by connecting the lines. One would expect to see this happen shortly.

Deutsch Bank was less favorable in its view. These types of corporate connections are rare for direct sales company. Some uncertainly is understandable since this is somewhat unprecedented.

Overall, how the new connection works out is anyone’s guess. Logic would suggest that the partnership makes sense on a number of levels.

It will be interesting to see if the new ‘mates’ decide to combine their sales forces, unify their compensation packages or combine their sales techniques and training.

Connecting sourcing and distribution first seems sensible. These issues are less concerned with consumer perception and quality than quantitative logistical maneuvering.

The new connection would appear to be coming from a position of strength. This is a positive time that heralds good times for direct distribution and network marketing. Women working from home should give this a ‘thumb’s up’!

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