The Avon lady hits the infomercial circuit
With rising unemployment economic uncertainty presenting an opportunity, multi-level marketers are looking to capitalize. The company explained in its latest earnings release that it spent $78 million on marketing in the first quarter, "with a shift toward representative recruitment advertising from product advertising." Infomercials are now airing on networks, including the Food Network, Hallmark, ABC and Lifetime.
But the infomercial is also available online -- and I sat through it so you don't have to. If you want to, you can watch it online here. The infomercial is low-tech and emotional, featuring the stories of a handful of Avon reps who built successful businesses There's also the ubiquitous Suze Orman, waxing about how her mother sold Avon to help provide for her family when she was a child.
But how much does the average Avon distributor really make? According to its latest 10-Q filed with the SEC , Avon Products had sales of $2.15 billion in the first quarter of 2009. Later in the document, the company notes that "Sales are made to the ultimate consumer principally through direct selling by approximately 5.8 million independent Representatives, who are independent contractors and not employees of Avon."
To save you some calculator time, that works out to quarterly sales of about $372 per distributor, with actual earnings per distributor making up a fraction of that amount. But even if it were the full amount, it would hardly be a life-changing income stream for most people.
In fairness to Avon, the phrase "Your individual earnings may differ" does appear on the screen when the income claims are made. But as far as I can tell, the earnings of the admirable women featured in this infomercial are exponentially higher than the average -- "You will likely earn only a tiny fraction of this amount" would be a more honest disclosure.
But then again, it is an infomercial: And for an infomercial for a money-making opportunity, it's reasonably low on outlandish claims and shots of luxury homes and completely devoid of yachts and sports cars, so thumbs up on that.
The problem for people looking at Avon as a possible future source of income is that the company is recruiting aggressively and its revenues aren't keeping pace. Avon can recruit all the distributors it wants, but how many people are looking to buy anything in this economy?
"Right now, our direct-selling opportunity is really the No. 1 product that we have to sell," Geralyn Breig, president of Avon North America, told the USA Today, in a fit of candor. But if the direct-selling opportunity is the company's growth category and the product isn't, how will new distributors make any money? Equally troubling: The investment in recruiting new distributors is, by the company's own admission, coming at the expense of product advertising.
None of this is to say that people looking to make extra money shouldn't take a look at Avon. The company has a strong reputation and its products are easier to sell in this economy than the higher-priced ones offered by direct-selling hotshots like Monavie and Herbalife. But the shift away from product and into recruiting can't be seen as a good thing.