Expert: Avon "does not understand" MLM model

By Chris BARKER

- Last updated on GMT

Related tags: Sales

Expert: Avon "does not understand" MLM model
Cosmetics company Avon "does not understand" the MLM model and is dangerously trapped between two different strategies for selling, according to an expert in multi-level marketing.

Robert Fitzpatrick, an author and strategic guidance coach who manages the website 'pyramidschemealert.org', also noted that due to advances in technology there is now very little need for face-to-face retailing, leaving Avon in danger of being stuck with an "obsolete"​ strategy.

Fitzpatrick says that the company is “dipping its toe” ​into the field of multi-level-marketing - a controversial company structure in which recruiters are paid for recruitment in addition to performance. However, he notes that the company has failed to take full advantage of the MLM structure, not making a success of the purchased MLM company Silpada and suffering from financial losses in China particularly.

The author told CosmeticsDesign.com USA : Avon is caught between the two worlds -- authentic direct selling and the MLM enterprise, which is only a facsimile of direct selling.”

“In the MLM model, the income opportunity has nothing to do with retail selling of products, but rather in selling the income opportunity to friends and family, i.e., recruiting others who recruit others, etc.”

Beyond face-to-face

Avon’s strategy is based on face-to-face selling, and says it began its multi-level marketing business in the U.S. in 1992, while Silpada’s business is based on a party plan.

It is Fitzpatrick's belief that there is less need for a personal salesperson to sell cosmetics: "Many alternative products and more convenient sales channels exist. Avon is half-way out of direct selling when it should be further out, due to increasing obsolescence of that business model.”

However, the beauty behemoth insists it has moved beyond face-to-face sales, with Lindsay Blaker Fox, a Manager of External Communications at the company commenting:"Our Representatives can sell face-to-face, over the phone, or through their own personalized  Avon websites. In recent years, the company has integrated an omni-channel experience with multiple touch points for our Representatives including e-commerce; social media sites; and mobile web and apps."

She also disagreed with Fitzpatricks assessment of Avon's MLM strategy, stating: "The sale of Silpada was a management decision to free up Avon resources and attention in the U.S. to focus on the U.S. Avon business." 

Success story

Debbie Davis, a UK-based ‘Avon lady,’ recently hit the headlines as the company’s first millionaire through direct selling, but statistics reveal that she is the rare exception to the rule.

According to Fitzpatrick, the Avon’s last SEC filing for the 3rd​ quarter shows that it had net sales of $2,322,900,000 and a total of 6 million salespeople, giving them a mean income of $129 per month.

Multi-level marketing schemes have been accused by some experts of generating extremely low profits for their salespeople- according to the author, around 90-99% of those involved with full-blown MLM schemes do not make a profit, although these schemes differ from Avon's model in that they are not limited to three 'levels' and have higher start-up costs and generally less competitive products.

Related topics: Financial focus, Business & Financial

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