Multi-level marketers like Mary Kay, Avon and Amway have been recruiting new associates from the ranks of the laid-off with promises of "unlimited income" and a job that can't be outsourced. The Dallas Morning News recently reported that "Mary Kay is reporting a significant increase in the number of independent beauty consultants joining its sales ranks. Avon, another at-home makeup sales heavyweight, is also seeing a jump – as are other direct sales companies, which rely on independent workers to sell their products."
Puff pieces about the opportunities offered by direct selling are everywhere right now, but just how good is the opportunity? The financial results of direct selling companies tell a very different story:
This morning, Avon Products reported that "First-quarter revenue in North America declined 11% (10% in local currency). . . Although Active Representatives were flat with the prior-year quarter, the company's recruiting efforts gained traction through the quarter leading to 51% growth in Representative additions in March." More recruits chasing fewer sales can only mean one thing: fewer sales per representative.
Usana Health Sciences, which sells vitamins and other health-related products through a multi-level marketing structure, reported that "During the first quarter of 2009, net sales in North America decreased by 10.2% to $55.9 million, compared with the first quarter of the prior year"
PinkTruth.com reported that the ranks of Mary Kay distributors fell by 14% in 2008.
"Be your own boss" and "control your destiny" are nice slogans that have tremendous appeal during tough times. But before you get your hopes up of making some extra cash, remember that the problem is that the products sold by so many of these companies -- cosmetics, vitamins and supplements, high-end cooking gadgets, etc. -- are highly discretionary and therefore hurt by the same downtrend in consumer confidence that effects traditional retailers.