In 1886 a door to door book salesman named David McConnell had an idea. He thought thought he could make more money door to door selling perfume than books, and he was right! More than a century later, his vision lives on as the company we know as Avon Products (NYSE: AVP).
Today, Avon is one of the best known self employment opportunities in the world. Mums, (and some dads) all over the planet have considered Avon as a way to earn some extra cash. Here at The Finance Guy, we decided it was time for a streetonomic review of Avon. We will find out if this is an opportunity for financial freedome, and will see how much the average Avon Representative earns.
Avon have a global network of close to 6 million Representatives who are contracted and paid through a network marketing system. Here at TFG, we believe that you can't make money with mlm, but we will review the Avon numbers and find out if Avon representatives are turning a profit.
How Much Do Avon Representatives Earn
Like all MLMs, Avon offers representatives the chance to work for themselves and control their own income. Avon is presented as an opportunity to take control of your financial future. Members will stand in line to sign you up, but our Avon review suggests that most Avon representatives are not making money!
After multiple Google searches, we were unable to find a valid link to any version of the Avon income disclosure statement. This made us ask if Avon is intentionally hiding the income details from the public. Therefore all the information in this review is based on the 140 page long, very publicly available 2015 Avon Annual Report
Our financial math review of Avon found that in 2015 most representatives did not earn much income. A summary of the maximum earnings per Avon representative, is shown below:
As we were unable to find an Avon income disclosure statement, we gave them the benefit of the doubt, and assumed that all Avon representatives were earning the maximum 50% commission on all campaigns. At maximum commission, the Average Avon representative earned less than $1,100 in retail commission in 2015.
Our calculations were based on the assumption that Avon had approximately 6 million representatives world wide (as stated in their annual report), and that all reps earned 50% on every sale from every campaign (so total commission earned by reps would be equal to the total revenue reported by Avon ). Even with maximum commission, the numbers suggest that Avon Representatives are not making a profit
Our calculations found that on average, Avon representatives made less than US $25 per week in retail commission. Does this sound like an opportunity for financial freedom? Let's not forget that we have not included any expenses. Avon reps need to pay for all the time, effort, brochures and materials used for promoting and delivering Avon products to their customers.
Retail profit is not the only way for Avon representatives to make money. Those who recruit and build a team of Avon Represents below them will qualify for incentives or 'Leadership Bonuses'. The amount of these payments depends on how much Avon products your recruits sell.
We once again used information found in the 2015 Avon annual report to estimate how much Avon representatives are earning from these incentives. Our findings are shown below:
Avon did not include the leadership program incentives as an item in their annual report. We have therefore assumed that these payments are included in total 'selling and admin costs'. Once again we decided to be as generous as possible and we assumed that this entire amount was paid out to Avon representatives. We estimated that Avon representatives earned average incentives of $590.53 during 2015.
Our review of the2015 Avon Annual Report found that after sales commission and leadership incentives, average Avon Representatives earn less than $135 per month from Avon. That is total income, not profit. To find the profit, we'd have to deduct all the time and money they spend in order to stay active and promote Avon. Our review suggests that after costs, most Avon Representatives are losing money!
Are Any Avon Representatives Making Money?
We have read posts which claim that some high level Avon representatives are earning upward of $2 Million per year. While we were unable to verify any of these earnings, we believe that they are true. Just like all MLMs, there is a small percentage of Avon representatives, who are earning a lot of money!
If you attend an Avon recruitment presentation from Avon, you will hear stories of high income earners. The presentation will claim that they are an example of what is possible for anyone. The truth is, that those who make money are the rare exception. Jon Taylor has proved that 99.7% of people who join network marketing companies, will lose money. This is shown in his free book 'Multi-Level Marketing Unmasked'.
Network marketing companies want you to believe that they offer the path to financial freedom. When they are prospecting for new recruits, they will focus on the 0.03% of people who are making a profit. These success stories are presented as an example of 'what is possible' if you join. These claims are true, it is possible to make a fortune through MLM, but it is highly improbable. Only 1 in 333 MLM members will ever turn a profit. Why would you invest yourself into a business with a 99.97% failure rate?
Is It Easy for Avon Representatives to Build a Team?
In any direct marketing system, the best way to make money, is to build down line. This is done by recruiting new members to the system. Once the people you recruit start making sales, you start earning commission from their sales as well as from your own. When your down line start recruiting new members, you will earn from all their sales, as well as from the sales of any new members they have sponsored.
If you join Avon, and you successfully recruit a team of new representatives, then you will qualify for Avon's Sales Leadership incentives. They will tell you that building a team is as easy as sharing the opportunity with a few friends and having them tell all their friends. In reality building a network marketing team is very difficult.
Avon claims that 2015 was a good year for team building. The annual report states that they made 'significant progress' by achieving ' Active Representative growth of 1%'. This was considered a success because they were able to 'reverse declines in Active Representatives'. This is not good news for Avon Representatives who are trying to become sales leaders. The annual report shows that during 2015, there was one new Avon Representative for every 100 existing Avon Reps.
Would you want to join a system if your chances of growing your team by just one new member per year is 1/100? Even if you manage to recruit lots of new members, there is no guarantee that your team will grow. Another major problem with Avon and most MLMs, is the extremely high turn over rate. In previous years Avon experienced 'declines in Active Representatives', which means that even though new recruits might be joining, there were more people quitting. If you want to be a sales leader with Avon, you will need to constantly recruit new members. Your first goal will be to replace all the members who quit or become inactive, your second goal will be to try and grow your team.
Why Is It So Difficult To Make Money With Avon?
Avon was once considered a great way for stay at home moms to make some extra money in their own time. Selling home delivered cosmetics from catalogues, was a great business model. It offered people the convenience of shopping from home, and allowed representatives to earn a living without venturing too far from their local neighborhood. Unfortunately Avon has not kept up with the times
Shopping from home is no longer a unique value added service. Thanks to the internet and companies like Amazon, there is very little we can't buy from home and have delivered within a few days. Avon's catalogue model is not competitive in the modern market.
It is possible to buy Avon online. Their website offers customers the option to purchase either 'directly from Avon', or 'with a local online representative'. Avon members can become 'online representatives' buy paying Avon extra fees. This will provide them with their own referral link so their customers can buy from them online.
The problem with being an online representative, is that Avon still requires you to deliver the goods to your customers. This means that unlike other online businesses, you will only be able to sell to customers who live within delivery distance of your home. You can't use the internet to promote your Avon business to new customers from all over the world. This is perhaps why most webpages run by Avon Representatives are designed to recruit new members, not to sell product.
If customers buy directly from Avon, they will pay the same price for the products. Avon will keep the commission instead of allowing a sales representative to earn it. This means that unless online representatives ensure that their customers use their specific links, it is possible that they will lose commission because of direct purchases. This means that instead of supporting members, Avon is competing with their own representatives for online sales.
Does Avon Help You Promote Your Business?
Avon does not do any marketing to the public. This task is delegated to the army of Avon Representatives. There is a wide range of promotional brochures and other marketing tools, but like the website, they all come at an additional cost to the Representatives. If you decide to become an Avon Representative, then you will be able to purchase products at wholesale prices, but will need to depend on your sponsor for any additional support.
Before you join Avon, you should ensure that you have a sponsor who is already successful, and can show that they are supporting their team. The 'upline' will be your main source of knowledge and support. For example if you join Avon through a website, it is quite likely that you will never meet your sponsor in person, and will probably not get a lot of support. Essentially you will be working on your own from from day one.
Why Do Avon Representatives Want to Recruit You?
If you speak to a current Avon Representative, they will do their very best to convince you to sign up and become an Avon Representative. They will parrot all the standard MLM claims about why Avon 'is the key to your future financial freedom'. It's unlikely that they will mention the fact that they are currently earning less than $25 per week from this 'key to financial freedom'. This does not mean that they are intentionally lying. Most active MLM members believe the that they are on the path to financial freedom, despite the fact that they are losing money!
According to the indoctrination, the key to success with Avon is in becoming a sales leader and recruiting new Avon Representatives. You earn income when your recruits make sales, so in theory, the more you recruit, the more you can earn. Avon Representatives want you to join their team so that they can make money from your sales. To be more precise, they are recruiting you to try and reverse their losses.
Avon Representatives are taught that recruiting new members is the key to success, ironically, the more they recruit, the less likely they are to succeed. The MLM model used by Avon, encourages constant recruiting of new Representatives with no regard to the existing market. When companies hire new salespeople, it's usually in response to a marketing strategy. They are either trying to grow into new areas, or they are reacting to strong demand from customers.
MLMs could learn something from the corporate world. As a corporate sales representative you'd be allocated an area or a specific product, or even given a portfolio of customers to look after. As an Avon Representative, you are selling the exact same products as all the other Avon Reps, and it's possible that they will competing with you for the same customers.
If you become an Avon Representative, you will essentially have your own duplicate version of an Avon sales business, offering identical products for sale. It's like going into a McDonald's, no matter where it's located, you know what you're going to get from the fixed menu. In this sense Avon is similar to a franchise. New entrants have a carbon copy of an existing business.
MLMs often claim to be similar to franchises, but they are not. Franchises are careful about opening new branches. They make sure that applicants are qualified to run the business and they will only allow new branches to open in approved locations. If McDonald's used the MLM system of expansion, they'd allow 7 new franchises to open in within 100m of an existing outlet. Then they'd tell the owner of the original one to be happy because they now have a 'down line'. In this example, we'd expect that the original outlet would see their sales fall by 87.5%, or 7/8, and all 8 shops would lose money.
By encouraging constant recruitment of new members, Avon is creating an unsustainable system. There are simply too many Sales Representatives, and not enough customers. If you are an Avon Representative, you should not consider recruiting any new members unless you have so many customers that you can no longer service them alone anymore.
Our Final Say
As an Avon Representative, you will have the opportunity to sell their products for commission. How much you earn is entirely based on your ability to make sales. If you are exceptionally good at selling, then it is possible that you can turn a profit with Avon, but you are more likely to make money from regular sales job. Very few people turn a profit from any MLM system. Unless you are near the top of the system or extremely lucky, then it is highly improbable that you will ever make a profit.
Avon has one advantage over most other MLMs in that they actively sell to retail customers. This means that Avon Representatives know right away that making money involves selling product to customers. Our review found that in 2015 the average Avon Representative earned less than $25 a week in commission. This should be a major red flag to anyone who plans on earning a living selling Avon
People join Avon with dreams of financial freedom and the hope of earning a little extra money. Unfortunately the vast majority of them will not make any money, and after time and expenses, most Avon Representatives will lose money.
If you are looking at joining Avon, or are already a Representative, we'd love to hear from you in the comments section below. Especially if you can share any success stories or advice for new Reps.