Last week I wrote about Good MLMs Versus Bad MLMs. The truth is that there is no such thing as a “good” multi-level marketing company. Oh sure… MLM supporters will tell you that some “direct sales” companies are doing it right, and some are doing it wrong. They will tell you that every company has “bad apples,” but that you have to look past those and see the good people.
These arguments are all false. Companies call themselves “direct selling” in order to direct attention away from the fact that they are recruiting schemes. MLMs are all endless chain recruitment schemes in which 99% of participants are guaranteed to lose money. That is not a business… it is a game rigging in favor of the owners of the company, and participants are guaranteed to lose no matter how hard they try. Promoting this as a “business opportunity” is unethical and immoral.
It therefore follows that if the company and the opportunity are unethical and are not a business, the people promoting the company and opportunity cannot be good. A horrible, deceitful “opportunity” does not change into something right, moral, and ethical, no matter how “good” the person promoting it is.
Recently Avon resigned from the Direct Selling Association, citing ethics concerns. The company says that the DSA does not protect consumers enough, and that Avon does protect consumers by:
- Not encouraging the sale of inventory or business support materials to distributors
- Having reasonable return polices, so distributors are not left with excess inventory
- Limiting commissions paid to three generations, rather than infinite
Sounds great, doesn’t it? Except Avon is really no different than any other multi-level marketing company…. they just don’t do MLM very well. Robert FitzPatrick analyzed Avon in an article on Seeking Alpha. He says that Avon is really no different than Herbalife, an MLM that has been heavily criticized over the last two years.
For years, Avon was a true “direct selling” business, with no connection to the recruiting into multiple levels that is at the heart of multi-level marketing. FitzPatrick explaines, however, that in 2005 Avon changed to the MLM model of business because its sales were lagging. The company introduces a “Sales Leadership” program described as:
“…a multi-level compensation program which gives Representatives the opportunity to obtain earnings from commissions based on sales made by Representatives they have recruited and trained, as well as from their own…”
That, my friends, is classic multi-level marketing. Your hint is the multiple levels of commissions. FitzPatrick writes:
Within a few years, the hallmark MLM emphasis on financially rewarding salespeople to recruit still more salespeople, ad infinitum, was full blown at Avon. In the largest ad buy in Avon’s history and delivered to the largest American television audience of the year, Avon’s 2009 Super Bowl television commercial featured, not its cosmetics, but its MLM business opportunity. “To find out more about the “opportunity” the Avon ad advised, “contact an Avon representative.”
In the midst of the Great Recession, while the cosmetics industry was contracting along with national job opportunities, and while Avon’s own revenue was declining, Avon used the Super Bowl to claim it could solve consumers’ income problems. Avon had truly entered the world of Amway, which for years had been claiming to offer “the greatest income opportunity in the world” that was “recession proof.” That Amway “opportunity” turns out to be the opportunity to recruit recruiters who gain the opportunity to recruit recruiters, etc., with money flowing from last to first.
Avon started leaning more and more heavily on recruitment, with a North American executive saying, “Right now, our direct-selling opportunity is really the No. 1 product that we have to sell.” So the company’s number one product was no longer any sort of cosmetic, it was the “business opportunity.”
Avon would have you believe that it is better than Herbalife, but the companies have much in common. FitzPatrick discusses in detail the recruiting numbers for Avon, the discrepancies in figures it reports to the media versus figures reported to the Securities and Exchange Commission, and the heavy reliance on exponential recruiting.
The bottom line is that Avon is not a “good” MLM. There is no such thing as a good MLM, and the endless chain recruitment scheme of Avon is no different than that of all other MLMs…. all of which are bad for consumers.