Tuesday, 13 October 2015

Robert FitzPatrick's comparison of 'Avon' with 'Mary Kay.'

Although 'Avon' has not been as overtly cultic as 'Mary Kay,' whilst reading the following article by Robert FitzPatrick, bear in mind that 'Avon' has lately exhibited some of the identifying characteristics of a 'MLM income opportunity' cultic racket. 

The key-information which 'Avon's' bosses haven't publicly disclosed since the company began offering a so-called 'MLM Income/Business Opportunity,' concerns:

  • the overall number of individuals who have signed take-it-or-leave-it 'MLM Distributor/Representative' contracts with 'Avon.'
  • how many of these non-salaried commission agents (arbitrarily defined in their contracts as 'MLM Distributors/Representatives' or 'Business Owners'have remained active in 'Avon' for more than; 1 year, 3 years, 5 years, etc. 
  • how many of 'Avon's' constantly-churning army of non-salaried commission agents have actually generated an overall net-profit from their so-called 'MLM Distributorships/Businesses' via their regularly retailing 'Avon' merchandise to members of the general public (based on value and demand).

David Brear (copyright 2015)


See original image
Robert FitzPatrick

MLMed: Why Avon Is Fading Away


Avon's recruiting and revenue trends portend the end of this American icon as we know it today.
Wall Street ignores the causes of Avon's downfall due to aversion to looking into Avon's "multi-level marketing" status, even to not comparing it with Mary Kay, Avon's closest peer.
A recent ABC 20/20 News show on Mary Kay offers insight into Avon's woes and by extension, the fates of other MLMs, such as Herbalife and Nu Skin.
Avon adopted MLM partially. It now suffers from refusing to apply all MLM recruiting methods and utopian promises; it also suffers from MLM's inherent march to recruitment saturation.
Analysts of large publicly-traded MLMs need to study only two factors: China expansion and the intensity of focus on recruiting. All else is irrelevant. Avon falls short on both measures.
The data on Avon's recruiting and revenue trends point toward the possible end of an American icon, the doorbell-ringing Avon Lady. It is not necessary to recount Avon's (NYSE:AVP) downhill slide to near penny stock status. It is useful and important, though, to recognize the role of Avon's "multi-level marketing" status, since it sheds much light on the downfall, and it is shared with Herbalife (NYSE:HLF), Nu Skin (NYSE:NUS), Primerica (NYSE:PRI), and Usana (NYSE:USNA), among others on Wall Street.
Strangely, few analysts have examined Avon's misfortune from the MLM perspective or related its fate to any others in that sector, even its closest peer, Mary Kay. Indeed, they have not identified any specific causal factor for Avon's disaster. The usual factors such as poor branding, obsolete technology, uncompetitive pricing, or inferior product cannot be cited as causes.
I have been examining the revenue and recruiting trends of Avon and 11 other publicly traded MLMs, with special attention to the larger ones such as Herbalife (already in the spotlight), Nu Skin, Usana and Primerica. In particular, I have explored the factor of recruitment saturation of these companies, based on their insatiable need for new "business opportunity" recruits, 50%-80% attrition rates, ever-growing negative consumer experience with the "business opportunity," piracy of recruits from start-ups, and exhaustion of geographic expansion. Avon is at the top of the list for exhibiting saturation. Avon's experience casts light on the fates of others such as Herbalife.
Whereas insightful analyses have been offered on other iconic declines, such as Kodak's or Encyclopedia Britannica's, analysis of Avon's downfall is conspicuous by its absence. Hope seems to remain among some investors for a miraculous turnaround, but factors generating such a change are unstated, since the factors that caused the downturn are said to be unknown.
My own approach of examining Avon in terms of its MLM business model has generally been ignored; not surprisingly, since Wall Street did not even acknowledge the MLM sector existed until very recently. Even the most obvious approach of comparing Avon's business to its closest MLM peer, Mary Kay, has not been treated as relevant. It is the obvious place to start.

Mary Kay as Mirror

Though Mary Kay is private and thus data is sparse and unverifiable, its marketing practices are on garish display, as are Avon's. The October 2, 2015 feature on Mary Kay on the investigative news show, ABC 20/20, raised obvious issues relevant to Avon.
  • ABC News reported Mary Kay's annual revenue at $4 billion with 3.5 million "salespeople" worldwide including 600,000 in the USA.
  • For 2015, Avon's may come in around $8 billion based on revenue for the first half of the year, down from a revenue peak of $10.8 billion five years earlier, with a reported 6 million-person sales force, which is also declining, with about 280,000 in the USA, drastically reduced from five years ago.
  • One year before, in October 2014, Forbes put the total for Mary Kay's 2014 revenue at $3.5 billion. In 2010, Mary Kay claimed $2.5 billion in sales to its "consultants," a self-reported global rise of 60% in five years.
  • Avon during this time has shown double-digit global losses in revenue. In the first six months of 2015, Avon reported a 17% YoY loss. Drops in revenue for Avon in the USA over the last five years can only be called catastrophic -- minus 46%.
This is superficial and raw data and provides no indicators as to why Avon is declining and Mary Kay expanding. To gain that visibility requires a dive into their shared business model, multi-level marketing, but MLM remains unstudied. It is conventionally accorded the official identity of "direct selling" though it is acknowledged that almost no one actually earns a net profit in MLM just from personal selling. Making money requires "building a team." A team to do what? A team to build teams that build teams. Get it?

Genetic Modification

More than 15 years ago, Avon undertook a conversion from traditional direct selling, its 100-year-old hallmark business model and cultural identity, to a controversial, relatively new and legally ambiguous identity, called "multi-level marketing." This move shifted compensation and incentives and made structural changes to motivate its salespeople to recruit more salespeople, with all, hopefully, buying Avon goods. Implicitly, the MLM transition emphasized internal purchases of salespeople over external retail sales bysalespeople.
The move was never critically examined by Wall Street, perhaps because it did appear to help revenue. After a 2005 push forward with the transition, Avon achieved a remarkable spike in revenue in the depth of the Great Recession. Revenue peaked in 2010 even as the cosmetics industry slumped. A televised Super Bowl ad by Avon never actually referenced Avon's cosmetics, only its "business opportunity" for financially distressed women, that happens to involve buying Avon goods.
But whether Wall Street took notice or even understood or not, Avon's conversion to MLM was a profound change, not just a tweak in marketing. Avon had entered a dark and uncharted forest, in which Mary Kay, Amway, Herbalife, Tupperware, Holiday Magic and Koscot Interplanetary had been hatched and developed specialized skills, including how to evade regulation. In the 1970s, the FTC had tried to kill this new model in its infancy as an "inherently deceptive" and destructive pyramid scheme that was poisoning "direct selling." The FTC hunted down and successfully eliminated several of the largest incipient MLMs. Then, the FTC vs. Amway court decision in 1979 enabled the survivors, including Mary Kay, to genetically evolve further with extraordinary power to recruit, persuade, and always sell. Global expansion and clone replication followed. FTC oversight or prosecutions all but disappeared for 15 years. MLMs exploded in numbers, scale and international reach.
Avon, on the other hand, after more than a hundred years as a traditional direct seller, in 2000 sought to transform itself into an MLM through a financial laboratory process known as corporate reinvention, overseen by its famous CEO, Andrea Jung. Ms. Jung thought she could select which genes from MLM to introduce into Avon to stimulate revenue, and others it would eschew due to their perceived unsavory, ugly or unethical nature. Eventually,Avon would resign from the Direct Selling Association, which is dominated by Amway, Herbalife and other pure blood MLMs over these genetic differences that Avon felt inherently led to unethical practices.
While it transitioned and adopted its MLM persona, Avon sought to compete for recruits against other MLMs in their own forest, while lacking some of MLM's inherent parts, powers and habits. It continued to advertise its products. It maintained staff to oversee sales. It still sought to focus its salespeople on personal selling by limiting downline rewards to just three levels, whereas natural-born MLMs offered "infinite" downline levels that promised "wealth beyond your imagination." Unlike most MLMs, Avon's pay plan assigned more reward, per transaction, to the person closest to the sale, not the distant "upline." This policy is based on the notion of supporting sustainable retail sales, which is Avon's legacy. Full-blooded MLMs do the opposite, transferring most reward, per transaction, to the upline, thus directing recruits toward "team building" and away from personal selling, which is sabotaged anyway by the constant proliferation of more and more salespeople per area.


History and sales data are now showing Avon's demise is largely due to forces related to the MLM model, both those arising from Avon's not fully embracing the model and those inherent to MLM, which Avon did adopt. In trying to become a "good" MLM, Avon revealed that only one MLM species can survive, the fully formed, genetically pure model with its awesome countenance. (All true MLMs were spawned from other MLMs and now more than 1,000 have bred in the USA.) MLM's tribal face and native rituals were on exhibition in the ABC 20/20 show on Avon's rival, Mary Kay, including the ubiquitous charges from ex-members of financial entrapment, high pressure recruiting for new members, deceptive promises, false income claims and cultism. This show revealed how Mary Kay's superior recruiting ferocity out-MLMed Avon's.
Avon, the oldest of all direct sellers, has also been whacked by the terminal fate inherent to its adopted model, recruitment saturation. Avon has to maintain and constantly replenish a six-million strong sales force, the largest of all such MLM armies. All the while its ranks are being pirated by other MLMs that are constantly increasing in number and promising miraculous benefits superior to Avon's modest claims. Like all MLMs that live off distributor purchases and base their "opportunity" lure on downline recruiting, not personal selling, Avon operates in a constant search of new bodies in new areas. Like other MLMs, it experiences the inevitable pattern of pop-and-drop. Avon was among the first to pop in China, the final MLM frontier, and there it met a premature drop, the fate that awaits other mature MLMs that, like Avon, have exhausted other areas. Thus, Avon was hit for being an MLM and for not being MLM enough.

Oblivious Wall Street

Wall Street has shown little capacity or interest to analyze MLMs for insight into Avon's downfall or Herbalife's current regulatory and short-sale morass or the damaging "brainwashing" charges against Nu Skin in China. Such an investigation leads inevitably to those Main Street charges of pyramid scheme fraud, mind-control, endless chains, saturation, advance-fee scams for leads or training, and the consumer calls for greater regulation of all multi-level marketing enterprises, which today are regulation-, disclosure- and oversight-free.
In the recent Mary Kay story on ABC News, an ex-salesperson described her personal financial success as a Mary Kay "director" as "on the backs" of her recruits who were all losing. Serious inquiries into MLM always turn up such claims, all negatives for bullish investors.
Mary Kay, Avon's closest relative, has spawned a powerful online resistance and whistle-blower movement, cited in the ABC News story, called "Pink Truth". Mary Kay was also the focus of a Harper's Magazine investigative article by Virginia Sole-Smith, entitled, The Pink Pyramid Scheme: How Mary Kay Cosmetics Preys on Desperate Housewives. The article led to author interviews and commentary on NPR, CBS and other outlets, but resulted in not a peep on Wall Street related to Avon or other publicly-traded enterprises employing Mary Kay-type marketing. Wall Street seems to have decided no good can come of stirring up things with research, except for short-sellers.

Economic Mysteries

But ethics, fraud charges, and regulation issues aside, there are also formidable problems for a Wall Street analysis of a purely economic nature. It starts with the most basic factor of all, identifying the MLM company's actual product. In MLM, there are always two products, which to millions of people are sold simultaneously and inextricably. There is a publicized commodity, like lipstick, sold in a traditional transaction between a distributor and retail customer. No one knows how many transactions of this product occur. But for millions of consumers, their MLM product purchase is wrapped inside the other MLM product transaction, effectively, the purchase of a "distributorship," so called. This is an unstudied and completely unregulated transaction, with no financial disclosures of any kind required of the seller. It is a black-box proposition to invest money and time in a business opportunity whose costs, requirements and risks are purposefully not disclosed while its benefits, based upon success at recruiting other investors, are cast as the last best answer for the struggling consumer.
To examine Avon's needs or deficiencies as an MLM would require a close-up examination of how it sells its "distributorships" and the interplay of thatfinancial proposition with the purchasing of Avon products, based on price, quality and customer demand. Such an analysis would require on-the-street investigation and would also quickly reveal the need for greater disclosures from MLMs, of the kind normal companies make.
Other than researchers at Pershing Square Capital, and a few other short-sellers, who else on Wall Street has made any such investigation into any MLM or ever asked MLM companies for more data? It would seem Wall Street does not want to know, hence Avon's demise as a great American icon shall remain unexamined.
MLMs also confuse the other basic factor for analysis, that is, who the actual customer is. MLMs claim that most of those solicited to invest in the "income opportunity," offering "unlimited" wealth, are actually just ordinary end-user consumers making ordinary consumer purchases, not at all influenced by the MLM's electrifying financial promises they are eligible to pursue. But since they are always legally authorized to pursue the "business," the MLMs give these "customers" distributor pricing, but also collect sales taxes based on the significantly higher suggested retail price, as if they will resell their products to actual customers! If the consumers can't find such a customer, then the MLM will proclaim the distributor to be the "end-user" with a discount.
Without clear metrics for a product identification or a customer base, the business model remains as a mystery requiring "belief" in its "direct selling" identity and in its hallmark claim of unlimited expansion and unlimited rewards to those that recruit downlines. Rejecting the mystery explanation or seeking hard data leads to earthly theories of fraud and pyramid schemes, and so Wall Street remains content only with superficial measurements of gross revenues while blissfully ignoring the entire MLM process of sales and marketing.

Secrets of MLM Revealed

Fortunately, despite the drawbacks to conventional business analysis, significant information has been gathered from unauthorized sources such as consumer advocates, writers, bloggers, attorneys, the occasional academic, short sellers, investigative reporters and insider MLM whistle-blowers. Independent examinations of MLM "income disclosures" have also been aided by data obtained in class action lawsuits and from state and federal prosecutions of genetically pure MLMs such as Vemma and Fortune High Tech Marketing.
These analyses, data compilations, and court-related investigations point to only two significant factors for evaluating the current status and future prospects of "mature" MLMs like and Avon, Herbalife and Nu Skin. These are:
  1. Expansion in China.
  2. Focus on Recruiting
All the rest is irrelevant or unknowable, including the quality of the product, competitive pricing, intricacies of the pay plan, philanthropic activity, celebrity endorsements, Direct Selling Association Membership (some of those prosecuted are DSA), large distribution centers and impressive headquarters buildings, putative scientific studies, photos of labs with women wearing hair nets, videos of bottles being filled on an assembly line with pills or powders, years in business, hundreds of laudatory websites and or the market trends of the products offered. None of that says anything about the impending fate of the larger MLMs, just as it is also irrelevant to whether they operate legally or not. Companies such as Vemma, now under cease and desist court injunction, exhibited all of those traits. Donald Trump's MLM, Trump Network, also looked brilliant and substantial for a short while, before it disappeared.

MLM Analysis Factor #1: China Expansion

Avon's China debacle is well documented. Faced with charges of bribery, Avon's China revenue peaked in 2009 at $353.4 million and then began a disastrous slide. By the end of 2014, Avon's presence had dwindled to about $61 million. According to Avon's 10K disclosures of China revenue:
  • 2009: $353.4 million
  • 2010: $229 million
  • 2011: declined 35%,
  • 2012: declined 22%,
  • 2013: declined 42%,
  • 2014: declined 10%
Mary Kay, meanwhile, reported that by 2010, 20% of its global revenues were already in China, which equated to $500 million, relying on Mary Kay's self-reporting of global revenue. So from 2009, when both companies were possibly about even in China revenue, by the next year, Mary Kay was reportedly more than twice as large as Avon. In 2011, Mary Kay's CEO told Bloomberg News there were 600,00 Mary Kay "consultants" in China. He said sales were expected to rise 30% that year and climb to over $1 billion over the next two years. That was four years ago.
Since Mary Kay's global revenue had reportedly moved from $2.5 billion in 2010 to $3.5 billion by 2014 and now it tells ABC News the total is $4 billion, it may be reasonably concluded that virtually all of Mary Kay's recent growth occurred in China, if the CEO's numbers and projections are to be believed. This "pop" in China would make up for flat recruiting or "drops" in other countries.
Avon is the first major MLM to fail in large part because it is the first to fail in China. It is the harbinger. Though regulatory and other matters were at work, nevertheless, Avon's China experience portends the future of all other MLMs, including Mary Kay, who are touting "global growth" that turns out to be almost entirely a "pop" in China.
China officially prohibits the MLM model. It has the most explicit anti-MLM-anti-pyramid scheme law in the world. Nu Skin has already been seriously wounded by running afoul of China's anti-pyramid regulators. Others also risk catastrophe by basing their business on this last frontier market for recruiting. After years of exponential expansion, Amway reported a significant decline in China, its largest market, in 2014, causing an overall 8% drop in global revenue.
Ironically, it is not unreasonable to theorize that Avon's downfall in China was because it actually tried to adhere to the law's requirement for only true retail selling, without a "multi-level" pay scheme. None of the other MLMs has any experience anywhere on earth with actual direct selling. Avon has more than 100 years of experience. True direct selling is in its DNA. Short-sellers have sent researchers to China who claim Herbalife and other MLMs are in fact running the very same multi-level pay and purchasing incentive system in China as everywhere else, which is strictly prohibited; only they are using different words to describe it. True retail selling of MLM commodities in China, as everywhere, will never produce the volumes that MLMs can with their "unlimited income" benefit attached to buying.
Despite the pitfalls, China is MLM's only remaining place on the globe to find the amount of new blood it requires. Sustainable businesses can thrive in home markets or elsewhere, whatever happens in China, but MLMs require consistent expansion due to constant attrition and pop and drop revenue patterns.
In my research, I have explained that data showing the MLM saturation scenario is a way to examine whether MLMs are sustainable or not. If they are not, then the MLM value proposition, based on "extending the sales chain," is inherently false. It is impossible to promise income based on recruiting, and also have no capacity to expand.
Expansion in China not only forestalls total saturation for recruitment, but it also helps MLMs in exhausted markets such as in the USA. Recruiters can point to global increases (based only on faraway China) and tell recruits in all other depleted areas that "there has never been a better time to join." The MLM value proposition existentially requires expansion. China is the last place on earth for MLMs to achieve expansion for a while.

MLM Analysis Factor #2: Recruiting Focus

Recruiting incentives are less quantifiable but nonetheless identifiable and they are the heart and soul, the defining trait of MLM as it is universally practiced (regardless of whatever the courts or the FTC conclude is legal or illegal). To measure an MLM, measure recruiting levels. Recruiting and revenue metrics perfectly match. There are several key recruiting elements:
  • A totalistic narrative promising a happy and fulfilled life for believers and followers who successfully recruit, and a corresponding narrative that prophesies a life of failure or quiet desperation for all others, i.e., quitters and losers. There is no middle ground and never an admission to the limits of business or the historical facts of massive losses among the members.
  • Deep, even "infinite" recruiting chain structure, promising "unlimited" wealth to recruiters based on "exponential expansion" and a plan that pays escalating and aggregating rewards from the bottom all the way back to the top.
  • More payments, per sale, accruing to top level recruiters, through commission rates and special bonuses reserved for the top levels, accompanied by intense messaging to "go Diamond", i.e., recruit your way to the top.
On these key MLM metrics, Mary Kay clearly out-MLMed Avon. Avon, it must be remembered, believed it could take what it thought was useful and discard the rest of the MLM model, as unethical, distasteful or maybe even illegal. Reality shows that MLM is totalistic, not a cafeteria. Limiting downlines and paying less to uplines, per downline sale, is a throwback to traditional direct selling. Such measures are not only irrelevant in MLM, theyinhibit its fearsome power. Focusing on mundane and labor-intensive retailing over limitless recruiting defeats the model and confuses the messaging.

The Way

As the 20/20 ABC News show on Mary Kay dramatically revealed, MLM promoters are not purely driven by money. Money is symbolic of a wondrous new identity and utopian life that the MLM claims to provide its followers. MLM, for many thousands, is The Way.
(click to enlarge)
The utopian MLM vision is founded upon the fabled MLM "business opportunity," presented in terms as dramatic, life changing, and totalistic as any fundamentalist religion. It is a doorway to not only financial salvation, but also complete personal fulfillment and ultimate validation of one's worth as a human being.
Correspondingly, another message is repeatedly drilled into each recruit immediately after signing up. It is that failing to reach the goals of the program or not following all its rules as presented by the leaders -- including avoiding doubters or critics -- or, worst of all, quitting is a fateful sign of poor character, fear, intransigence, or incapacity to reach one's potential.
Those who accept this message of the opportunity to redeem their lives in MLM and who then fail or drop out will often experience intense shame and, for some, despair. To pursue that vision and to evade that shame, many will sacrifice almost everything, family, job, and former life.
The best advertising and branding produced on Madison Avenue does not even come close to the kind of persuasive power MLM wields over millions of people, which leads to their buying MLM products and providing free labor to the MLM companies. That power and its link to the crafted recruiting tools and structures that Avon watered down when it adopted the MLM model were clearly not understood by Avon.
When asked about their incomes on the ABC 20/20 show, three Mary Kay speakers said they did not even know what their own annual take-home pay is. What they did reveal, however, showed they were likely receiving meager wages indeed. To clarify herself, one of the Mary Kay speakers stated, "At Mary Kay, P&L means People, not Profit and Loss." Each drove a monthly-leased pink Mary Kay Cadillac, which one called a "representation of the American Dream." Another speaker said she is not focused on income, but "What my day is like (doing Mary Kay) and do I love my (Mary Kay) life."
With fixed smiles, the Mary Kay speakers excitedly told ABC News of the gratifying recognition, a haven from oppressive job conditions, and a supportive sisterhood provided by Mary Kay. At one of Mary Kay's gigantic sales pageants filmed by ABC News, thousands of Mary Kay recruits lavished smiles, applause, and a seat upon an actual throne for a "queen for a day" sales rep who had reached a sales goal.
In business language, the MLM promotion of a branded personal identity, promising life-affirming recognition and a complete "way of life" might be called a unique type of "marketing." It is aimed only at those who invest in the MLM "business opportunity," not "customers." Since MLMs are based entirely on "distributor push," this psychological seduction and manipulation of the opportunity-seekers must be regarded as MLM's primary, indeed its only, way to sell goods. Its utopian vision is based on the promise of extraordinary income, and that promise is based on the magical powers of the "endless chain," which "self-generates" and expands forever, even "while you sleep."
By the measures of messianic marketing, Avon is lackluster and insufficient. There is no iconic car at Avon or even a special "look" to its sales force, and no exalted role model comparable to a Mary Kay Ash. The Avon lady was not a stereotype or a member of an exclusive sisterhood, but more in the tradition of the Fuller Brush man or Encyclopedia salesperson.
In the ABC show, intense MLM marketing at Mary Kay is disparaged by one ex-salesperson as a "cult," a charge heard throughout the MLM world, but seldom about Avon. Her depiction of a day in Mary Kay mode, far from utopian, involved intrusively approaching strangers in malls and coffee shops to recruit them, pressuring friends and relatives, personally buying unneeded inventory to meet monthly quotas, long days and nights and very little net reward.
In this arena of marketing, termed a cult by some and a sublime membership status and new way of life by others, Avon is clearly out-MLMed by Mary Kay and other red-blooded MLMs that have honed this specialized expertise for more than 40 years.

The Secrecy Code

There is one area where Avon does exceed Mary Kay in the MLM culture. This is in maintaining secrecy around the terrible realities of the MLM income opportunity. Even more than other MLMs, Avon has given the recruits almost no information on which they could evaluate whatever income promise was made. It requires a frustrating web search to find the paltry Avon income disclosure, but once discovered, here is what it offers:
"The 2013 Earnings of a typical Avon Leadership Representative after one year, including commissions, bonuses and profit on personal sales are: 48% earn $0-$7,999, 11% earn $8,000-$9,999, 19.2% earn $10,000-$14,999, 16.5% earn $15,000-$29,999, 5.4% earn $30,000 and above."
This is classic MLM. Note that it does not offer a median or a mean average for any level. Income for about half of all the "leaders" -- who themselves are only a small sector of the total sales force -- is reported in a wide range from $0 to $7,999. How many earned zero? And note also that it limits the data to those "after one year." What about all those who did not last a full year? In MLM, that is usually the majority. The most glaring omission is that Avon offers no data at all on the income of the non-Leaders, the great majority of the sales force. How much are they making, on average? How much did they purchase? The disclosure appears to state that virtually no one makes any significant money. Of course, costs of doing the business are not even mentioned, nor the average income gained only from retailing.
Mary Kay offers no disclosure at all to USA consumers but, as required in Canada, it does provide a bit more information than Avon does, which can be applied to the USA. The analysis and disclosure can be seen here. The results are typical of all MLMs that have been studied, and indeed such dire results can be accurately predicted, because they are pre-determined by the incentives, structure and pay formula. Mary Kay's disclosure shows that 93% earn less in commissions in a year than the cost of a minimum purchase quota for becoming "active" and eligible for commissions, about $200 US. The most relevant of all data is not disclosed by Mary Kay or Avon or any other MLM: the average income and the tenure rate for the latest recruits who joined during the last two years. This is the truest measure for a person joining today. Another crucial data point: of all the consumers who have ever joined the MLM since it opened its doors, what percentage of them earned any net profit at all? The answer would be so close to zero it could not be illustrated on a chart or graph.
For Avon, getting this one part of MLM culture exactly right -- the income secrecy code -- is of little use without gangbuster expansion in China and a totalistic culture with concentrated recruiting rewards to drive purchasing by the recruits and to fully replenish the chain from massive attrition. Lacking those, it is likely that Avon will be the first MLM to achieve global saturation status. It already has, and soon to be followed by others.

Robert FitzPatrick (copyright 2015)


  1. So is Avon a pryamid scheme ?

    1. Anonymous - If your question was directed at Robert FitzPatrick, then I suggest you re-read his article, but here's a little guidance for you:

      Robert's own analysis of the 'MLM' phenomenon is increasingly coming into agreement with my own analysis - as merely the latest reality-inverting camouflage for the age-old problem of totalistic or criminogenic cultism. To many observers (particularly journalists) 'Avon's' appearance in the midst of more-obviously dangerous groups (like 'Amway', 'NuSkin', 'Forever Living' and 'Herbalife') has confused the issue, when (in truth) the 'Avon' example actually clarifies it.

      A significant fact in Robert's article, is 'Avon's' recent withdrawal from so-called 'Direct Selling Associations.' This US-controlled labyrinth of corporate structures has effectively become an organised crime syndicate.

      Robert's evidence-based analysis of 'Avon,' is easily the most comprehensive and accurate. This is a long-time-failing traditional 'direct selling' company, eclipsed by social changes, and resulting trends.

      In its death throws, 'Avon' desperately sought to survive by partially adopting the so-called 'MLM' model, but without adopting the related advance fee frauds and totalistic thought reform programs.

      In other words, 'Avon' proves that taditional 'direct selling' (or what used to be known as door-to-door peddling) has had its day, and cannot survive in the USA and elsewhere, no matter how it is dressed up.

      Robert rightly compares 'Avon' to once-iconic enterprises like Kodak and the publishers of traditional Encyclopedias.

  2. I wouldn't have believed this but for the 'Avon' recruitment video. It could easily be from 'Amway' or 'Herbalife.'

    1. Anonymous - If you go back to the late 1980s, you will find that the management of 'Avon' had to fight-off a hostile take-over-bid from the 'Amway' bosses who previously had been hiding behind another corporate structure to acquire a significant percentage of the 'Avon' company.

      At that time, 'Avon' was still an iconic traditional door-to-door direct selling company deriving the majority of its profits lawfully from its non-salaried commission agents regularly retailing products to the general public.

      When you know these facts, the latest 'Amway'-style 'Avon MLM' ('anyone can have their own business and become a millionaire') propaganda, is even more ironic.

  3. So David both you and Fitzpatrick are still claiming that everyone who signs up with an MLM expects to make money and that no one signs up to get the products at a discount? You critics just don't want to understand MLM do you !!!!!

    1. Anonymous -Thank-you for posting the classic reality-inverting 'MLM' propaganda.

      What you are actually saying is:

      'if you read the word, seller, as, buyer, then fraud becomes legal

      Unfortunately for you, Robert FitzPatrick and me are not the only people who understand exactly how 'MLM' cultic racketeering has functioned, and been hidden, by the constant repetition of reality-inverting words and images.

      It's interesting to note that, for decades, all the transient adherents of 'MLM' cults have been arbitrarily defined in their take-it-or-leave contracts as 'Distributors', 'Representatives', 'Business Owners', etc., but never as 'Discount Customers.'

      Not even the most inflexible 'MLM' propagandists (like yourself) deny that countless millions of individuals around the world have all been trumpeted by various 'MLM' racketeers as: 'Direct Sellers', not as 'Direct Buyers.'