Is Avon A Pyramid Scheme or Scam? [2023]

Is Avon a pyramid scheme or any other type of scam? 

In this post, I’m going to share with you my finding after reviewing Avon Products Inc or shortly Avon. 

I found out about this company while reviewing another cosmetics company called the body shop at Home. 

Apparently, both companies are under the same umbrella but when I first heard about it it didn’t produce controversial google searches.

Over the last few years, there was an increase in searches about lawsuits, pyramid schemes, scams, and more. 

This motivated me to take a look at all of this and see for myself if these searches are warranted or if people are a bit paranoid.

So if you’re just as curious about Avon as I was you’re at the right address because after reading this post you’ll know everything needed to decide if you’d want to invest in their “opportunity” or run away.

Let’s get into it!

What is Avon?

Avon is a network marketing company that was founded by David H McConnell Sr. in 1886.

Before starting the company David used to be a door-to-door salesman selling books.

They’d give perfume as a gift to potential customers. He soon realized that people were more interested in the perfume than the gifts.

Seeing a possible market for selling perfume and registering the business under the name The California Perfume Company.

In 1939 they changed the name of the company to Avon Products Inc. or short for Avon.

It’s the fourteenth-largest beauty company in the world with 6.4 million representatives. It’s not only one of the oldest but also one of the largest network marketing companies that’s currently active only second to Amway in age.

In January 2020, Natura &Co; bought Avon Products, Inc. 

This group also includes Natura, Aesop, and The Body Shop, and with the acquisition of Avon has created the world’s fourth-largest pure-play beauty company.

Avon has representatives all over the globe but their 2 main locations are in London & Scottsdale, Arizona, USA.

Is Avon An MLM And How Does It Work?

Avon is an MLM company that distributes beauty and skin care products. Up until 2005, they sold it mostly directly to the consumers but they made a drastic change during that year.

Avon has chosen to restructure the company and invest more focus into their Sales Leadership program.

They also were commited to focusing on the attractiveness of its “Representative earnings opportunity” as stated in an announcement to the United State’s SEC (Securities and Exchange Commission).

This means adapting a business model that gives members the choice to earn money by:

• Selling the products for a commission
• Recruiting people to earn bonuses.
• Earning residual commission through your recruits

This is exactly how you earn money when joining an MLM. Avon can be considered an MLM when looking at these 3 ways to earn money and the business model as a whole.

What is MLM?

MLM (a.k.a network marketing) stands for multi-level marketing.

According to Wikipedia, multi-level marketing is a marketing strategy for selling products or services where the revenue is derived from a non-salaried workforce.

As a part of this workforce, you sell the products from the company and recruit people to do the same thing. This group of people you recruit will work under you and is called your downline.

The bigger your downline is the more money you can earn passively (technically speaking) because you’re getting paid a percentage based on the performance of your downline.

This also means the person that recruited you which is called your upline is making money based on your performance.

The act of recruiting turns an MLM company into a pyramid-shaped organization where the first people to join make the most and are on the top of the pyramid and those last to join are at the bottom.

Source: Wikipedia

MLMs have been around for a long time. There are Multi-level marketing companies active today that were founded in the 1900s.

MLM has a lot in common with pyramid schemes, so scammers often use MLM to disguise their pyramid schemes.

Is it absolutely necessary to recruit people as multi-level marketers? No. not in a legitimate MLM company.

You can also stick to just selling products you can order at wholesale price and re-sell to make a profit.

This is easier said than done for multiple reasons which is why most members try to recruit others so they can earn more money.

How to join Avon

Most people get referred to Avon but you can also sign-up through their website.

After that, you can become an Avon representative by following these 4 steps.

Step 1: Sign-up 
Step 2: Purchase a starter kit
Step 3: Recieve training
Step 4: Start selling and recruiting

Is Avon a pyramid scheme?

To answer this question we need to know what a pyramid scheme is.

What is a pyramid scheme?

A pyramid scheme is a type of scam where people are promised money for joining the scheme and recruiting other people instead of selling products and services. 

No selling of a product or service is involved whatsoever.

So you might be wondering where the money comes from in a pyramid scheme.

The people that join are expected to pay a one-time or a monthly fee and in exchange for that, they get a percentage of the fee of everyone they recruit after.

The remaining money goes to the creators at the top of the pyramid.

The problem with this model is from a mathematical standpoint it’s impossible for everyone to make money because you simply run out of people.

Take a look at this picture below showing how it’s impossible for everyone to earn money.

Source: Wikipedia

As you can see, in this pyramid model it’s required to recruit 6 people to earn money. You’ll notice from the 12th level and further, it’s not possible anymore for everyone to earn money.

The 2.2 Billion people on the 12th level need 13.1 billion recruits in total for them all to make money which is more people than there are currently on Earth.

When people can’t be recruited anymore, the pyramid collapses because not enough money is coming in to pay members and sustain the pyramid.

Looking at the description of what a pyramid scheme is, Avon can’t be classified as a pyramid scheme from a legal perspective. Avon products have given people a method to make money without recruiting people.

That being said, there are pyramid schemes that disguise themselves as MLM companies because MLMs also use a pyramid structure but sell products and services. 

Jon M Taylor. a prominent figure in the research of MLM’s and Pyramid schemes calls these product-based pyramid schemes.

He came to the conclusion that this variant is a lot more dangerous than its predecessor.

A few examples of these can be found on the FTC website,  such as Vemma an  “MLM/Direct-selling company” that supposedly was selling liquid nutrition products but turned out to be a pyramid scheme.

Ultimately they settled and had to pay a fine of $238 million and were suspended from partaking in recruiting practices to distribute their products.

These pyramid schemes offer products that are almost impossible to sell with the goal of pushing you to recruit people because you supposedly can get higher commissions.

These pyramid schemes bring in money by the members paying for a membership and them purchasing products.

From that point on it’s the same as a traditional pyramid scheme but is this the case with Avon? 

I have already mentioned that Avon adopted the MLM business model in 2005 but I haven’t talked about the events leading up to that point. 

Before 2005, Avon made its money through direct sales by going door-to-door and using other traditional sales strategies and they profited from it for a long time. 

During that time they became one of the biggest companies not only in their sector but in the world. 

As soon as the 2000s came around Avon experienced a significant decline in Sales. 

A 2004 article in the New York Times referenced a conversation Avon higher-ups had with Bloomberg News that stated the forecast for declining sales was more than expected.

In 2005, sales decline even more because the demand for lipstick in the US was weak but they expect to be profitable in 2006 by cutting out products like toys.

Evidently, during that time, they leaned hard on promoting the Avon “opportunity” to women in an attempt to have them promote their products in households. 

This didn’t have a great effect in the long term.

Total revenue of Avon Products Inc. worldwide from 2011 to 2022(in billion U.S. dollars)

source: Statistica

While revenue is shrinking every year because of the low demand for products, the number of reps is increasing. 

This tells us that people are busier with recruiting than selling products with the hopes of earning bonuses and residual income. 

This could indicate that there is a big emphasis on marketing the “Avon opportunity” instead of the products they sell and as a result, get most of their income from members investing money in the opportunity.

Is this enough to call it a pyramid scheme in disguise? No. 

They’ve made a lot of changes in 2021 when it comes to what they market. 

An example of that is the title tag and meta description which is the first thing anyone sees when they look up Avon on Google the largest and most used search engine in the world.

There also aren’t any crazy income claims on the website but that doesn’t mean the MLM program can’t be promoted in other ways.

The 5 red flags of a product-based pyramid scheme a.k.a. a pyramid scheme in disguise

Now that we know that pyramids in disguise are a real thing, it’s important to be able to recognize them. 

The Federal Trade Commission has often referenced the works of a man named John M Taylor the president of the Consumer Awareness Institute and Advisor, Pyramid Scheme Alert. 

His findings have been used as sources for multiple articles on the website of the Federal Trade Commission.

He has a report named THE 5 RED FLAGS: Five Causal and Defining Characteristics of Product-Based Pyramid Schemes, or Recruiting MLMs which is an excellent reference for spotting red flags. 

This report was put together after researching over 500 MLM companies, their members, and how they do business.

Here’s a brief summary of the red flags he names in his report:

1. Recruiting of participants is unlimited in an endless chain of empowered and motivated
recruiters recruiting recruiters. 
2. Advancement in a hierarchy of multiple levels of “distributors” is achieved by recruitment,
rather than by appointment. 
3. Ongoing purchases (products, sales “tools,” etc.) by “distributors” are encouraged in order
for them to be eligible for commissions and to advance in the business (“pay to play”). 
4. The company pays commissions and/or bonuses to more than five levels of “distributors.” 
5. For each sale, the company payout for each upline participant equals or exceeds that for the
person actually selling the product.

The key thing to be focused on when spotting a product-based pyramid scheme is if selling the product is more of an afterthought.

We’ll be looking at the compensation plan and products from this point on to spot any red flags.

Avon products

A legimate MLM should have products that are saleable. This is why it's important to take a look at the quality, the price, and the safety of the products Avon offers. 

Below I'll go deeper into this. 

What are the products does Avon sell?

Most of Avon’s products are in the beauty and skincare niche but they also sell fragrances, hair care products, and even jewelry.

They even have a few products geared toward men and they sold children’s toys in the past.They have a large variety of products in some of the biggest and most competitive niches that exist.

Are Avon products aligned with the market?

According to their website, Avon has a top 10 best-selling product. Here’s an example of 1 of their top 10 best-selling products called Skin So Soft Bonus-Size Original Bath Oil.

This bath oil cost $30 for non-members. This seems to be a lot higher than most of the bath oils that are sold online. I can imagine this makes it harder to sell the products. 

You can even find Avon products at a reduced price on merchant websites.

An example of that is the Wild Country Roll-On Antiperspirant Deodorant

On the Avon website, it costs $3,60 for 1 roller at $1,38/ ounce and $2,69 per roller at $1,03/ounce.

When you look on Amazon you can get entire packages for $0,73/ounce.

It seems like people are trying to unload their products at a cheaper price than even the Avon wholesale price. 

I wouldn’t be surprised if these were all ex-representatives that couldn’t sell the product but I can’t say that for certain without proof.

Looking at this distributors aren’t only competing with brands and distributors but also merchant websites offering the products at a lower price.

This isn’t the case with all Avon products but enough to make it a bit problematic.

Not all but a lot of products on the websites don’t seem to be aligned with the price of the market.

Are Avon products FDA-approved?

According to their website, Avons products are compliant with all regulations of the FDA and according to the FDA website, they do have some product filings which are mentioned in an FDA report.

That being said, there are some pending cases in regard to harmful products.1 of those is the $40 million verdict in the Talc lawsuit.

An article on the Bloomberg news website mentions a story about a woman who blamed her cancer on the talc in the product she used and got awarded $40 million and had to pay $10.3 million in punitive damages.

I’m sure they’ve taken the safety measures to prevent this from happening again but it is something to take into account when joining Avon that this might be a story that can scare potential people you might want to recruit. 

Source: Bloomberg News

This all sounds a bit grim but there also seems to be a huge group of people that seem to be satisfied with the products. It differs per country.

I don’t really know what to think about the products but I do think taking into account the competition, declining demand, and Avon’s digital footprint being a bit messy it’ll be hard to sell Avon products.

Avon Compensation Plan

Let’s take a look at their compensation plan to get more insight into the business model that Avon uses. As you can see below, Avon uses what seems to be a traditional MLM compensation plan in which you earn money through:

• Selling products 
• Recruiting people and receiving residual commissions
• Earning personal and team bonuses

[compensation plan]

The compensation plan divides all members into different groups with a specific title depending on their performance. The higher your title the more you get compensated in commissions and bonuses.

You advance in ranks based on how many products you and your team “accumulate”.

How much does it cost to start an Avon “business”?

At the start of this post, I mentioned that pyramid schemes use recruiting as a method to bring the majority of the money into the pyramid by having people pay to join. 

So when you look at Avon’s initial price you might come to the conclusion that it can’t be a pyramid scheme in disguise but is that really the truth?

You still have minimal sales quotas that you need to fulfill to earn money. If you can’t fulfill these quotas you’re basically working for free or worse losing money by purchasing products you can’t resell for profit. 

$40 might not seem that much but according to multiple Facebook groups, a lot of people seem to have trouble reaching this point which could be because of the decreasing demand for Avon products and the high price.

What also is interesting about their compensation guide is that they mention that personal orders are included in campaign sales meaning you can pay money to maintain your title if necessary.

I’ve had more than a few friends who would create what John M. Taylor calls “fake distributors”. They’d buy the products themselves to maintain their rank and if they could resell the products they’d lose money.

In this case, for all members, this would be somewhere between $50 and $200 a month at the minimum.

There are also some standard MLM operational costs and advertising you’ll have to take into account to reach people beyond your social circles and get to the higher ranks.

Without a doubt, Avon falls in the high-risk, high-reward category.

How much can you earn with Avon?

There are multiple bonuses and commissions you can earn according to the Avon compensation guide. 

• Representative commissions
  A Commission based on personal sales that starts at $40 in sales on a monthly basis.
• President’s Recognition Program Commissions
  A Commission based on personal sales that starts at $10.000 in sales on a yearly basis.
• Generation Bonuses
  Bonus based on personal and team sales resulting in residual commissions based on your downline
• Leader Bonuses
  Bonuses for mentoring your downline to reach Bronze Leader and higher titles.
• Sponsor and Lifestyle Bonuses
  When you sell $50 or more in a campaign, you’ll earn the 3% sponsoring bonus on the Personal Sales of all Representatives you recruited.

In theory, the sky is the limit when you look at their compensation plan but I suspect in reality the majority of representatives aren’t earning any money.

Avon doesn’t publicly share the numbers of its representatives but since it’s a traditional MLM the chances are high it shares the pitfalls of all other companies that use the MLM strategy. I’ll share a few of these MLM pitfalls right now.

Why aren’t people earning decent money with MLM companies like Avon?

I have summed up the reasons why it’s hard to make money with Avon and MLM companies in general into 3 points. As an Avon representative, you’ll have to deal with the 3 points mentioned below.

1. MLM companies are often associated with pyramid schemes
MLMs have a pyramid recruiting structure that you often have to join to be able to make decent money or at the very least not lose money. The problem is a lot of pyramid schemes disguise themselves as MLM programs making it difficult to differentiate the two.

This is the biggest problem why most distributors have a difficult time recruiting people. The moment people hear about how you can make money by recruiting people red flags appear in most people’s minds.

This isn’t good for your sales.

2. You have to invest your money to earn commissions consistently
You’re only eligible for bonuses and commissions if you resell their products. The bigger the bonuses, the more product you have to buy and resell.

You do get discounts but if you can’t sell the products I can see you easily fall into a financial deficit (which happens to the majority of distributors of MLM companies).

3. The price of the product often isn’t aligned with the market
It’s hard for a multi-level marketer to sell products because most MLM products are much more expensive than similar products sold by non-MLM companies.

This means even if you’re really good at recruiting your downline still needs to sell those same expensive products for you to make decent money.

You can see that translated in these statistics I found about Multi-level Marketing.

• Nearly half (47%) of MLM participants reported that they lost money.
• One in four (27%) MLM participants reported that they broke even (made no money).
• MLM participants are 7% more likely to declare bankruptcy during their lifetime.
• Direct sales have risen 79% in the last decade, but MLM participants continue to lose money.
• 90 – 99% of distributors in multilevel marketing only receive a couple of hundred dollars in commission per year.
• Out of the 33,000 interviewed, 90 people made enough money to cover the costs of building their businesses.
• 50% of the people who start a network marketing enterprise abandoned it in the first year.

Sources:
FTC
AARP
Jobsinmarketing.io

It isn’t often that an MLM company doesn’t publish an income disclosure but looking at the declining revenue numbers and the high prices of the products I can’t imagine the majority of Avon representatives earning more than pocket money.

Let’s go back to Jon M. Taylor’s 5 red flags with the information we gathered.

1. Recruiting of participants is unlimited in an endless chain of empowered and motivated
recruiters recruiting recruiters.  
The majority of Avon rewards are geared towards creating a team and mentoring them to get to at least the Bronze ambassador level which is the lowest level at which recruiting is required. 

There’s a cap to how much you can earn based on multiple generations without stimulating your downline to also recruit people.

Psychologists experimenting with both animals and people learned decades ago that you get the behavior you reward. This is something that possibly could be at play here. 

Rewarding recruiters to get their downline to recruit others.

2. Advancement in a hierarchy of multiple levels of “distributors” is achieved by recruitment, rather than by appointment. 
Advancement at Avon is based on a combination of both recruitment and sales. I wouldn’t say Avon 100% falls under this red flag.

3. Ongoing purchases (products, sales “tools,” etc.) by “distributors” are encouraged in order for them to be eligible for commissions and to advance in the business (“pay to play”). 
You do have to “pay to play” to stay eligible for commissions. From the Bronze ambassador title, you do get points that can replace your minimal quota for 1 month but after that, you lose eligibility for commissions.

This is a lot better than most MLMs I’ve encountered in the last 5 years but overall I still think it falls under the red flags mentioned in John’s report.

4. The company pays commissions and/or bonuses to more than five levels of “distributors.”  
Avon doesn’t pay commissions or bonuses to more than 5 levels of distributors. They go as far as the third generation according to their compensation plan.

5. For each sale, the company payout for each upline participant equals or exceeds that for the person actually selling the product.
No. This doesn’t seem to be the case at Avon. At the most, they get a commission based on 8% of the products their downline sells.

Avon FAQ

Is Avon a scam?

They don’t make false statements as a company so I can’t consider it a scam purely based on the information I have but its obvious a lot of important information is withheld when it comes to the reality of working as an Avon representative.

I wouldn’t say it’s impossible to succeed with Avon but the deck is stacked against you in the current situation where demand is dropping yearly.

Is Avon an MLM?

Yes. Avon uses the MLM business model to distribute its products.

Is Avon going out of business?

Despite global revenue dropping there’s is no news of Avon going out of business as a whole. 

There has been some news about Avon’s facilities Suffren closing down and moving them to Brazil and Poland to be closer to their representatives.

Conclusion: Is Avon A Pyramid Scheme?

It’s hard to say with the information that’s published. 

There are some red flags that worry me a bit but not enough to say that it’s a pyramid scheme. 

That being said, if you’re trying to earn a decent income this might not be the best opportunity to jump at the moment considering the declining demand for Avon products.

Avon Alternative

Unfortunately, Avon isn’t for everyone. 

It comes with significant financial risk and it’s hard to sell products this expensive.

This is why I suggest to those that don’t want to deal with that an alternative.

It is called affiliate marketing. 

It’s the method I use to earn most of the money I earn online.

How do you earn money with affiliate marketing?

You don’t have to sell products or services, you don’t deal with monthly quotas, and you don’t have to recruit people.

The only thing you’ll be doing is referring people to merchant websites such as Amazon, Walmart, and eBay. 

When people buy something based on your recommendation you’ll get a percentage of the purchase.

My #1 recommendation for learning affiliate marketing is an affiliate marketing training platform with more than 1.5 million members. 

Memberships are basically an all-in-1 package that comes with expert-level training, resources, and support from a community of people doing the same thing. 

Want to learn more? Take a look at my comprehensive review of the affiliate marketing platform.

Do you have any experience with MLM or Avon let me know in the comments!

That’s all for today. 

See you in my next post!

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