Revlon the New York based world renowned cosmetics manufacturer, announced on 31 Dec 2013 a corporate restructuring plan that will see some 1,100 positions axed. The majority of cuts will take place in Revlon’s Chinese base of operations with the writing on the wall that Revlon will inevitably fully exit China.
The downsizing is part of Revlon’s unspecified corporate restructuring plan and is estimated to save 11 million US dollars on Revlon’s general yearly expenditure. The adoption of leaner manufacturing principals and downsizing is necessitated by the fierce competition inherent in the cosmetic industry and a global downturn in Revlon’s cosmetics sales ultimately requiring the company to make up 22 million US dollars in cuts.
Revlon entered the booming Chinese cosmetics market as early as 1976, when they began to sell lipsticks in Guangzhou Friendship Store. However, the past two years have seen a fall in their Chinese market share which now represents a dismal 2% of Revlon’s total global sales.
Critics believe that it was Revlon’s inability to address the needs of Chinese consumers that ultimately lead to its downfall. It is difficult to disagree with such a viewpoint considering that Revlon failed to hire a dedicated Chinese marketing team with insider knowledge of the eccentricities of Chinese consumers and the nuances of doing business in China.
A similar situation is occurring in Avon, the world’s fifth largest beauty manufacturer also headquartered in New York. It is reported that Avon’s revenue in China has dropped from 2.4 billion in 2003 to less than 1 billion in 2012 all compounded by the occurrence of numerous regulatory violations and corresponding punitive rectifications issued by the Chinese authorities.
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