Wednesday
April 29
2009

David Lehr

Revisiting the Avon Lady Poverty Reduction Debate

Oxford business professor Linda Scott is trying to verify something that many BoP business models are based on: the idea that becoming an Avon lady could help poor women in developing nations get out poverty. Her research in South Africa, which is not yet complete, indicates the Avon model might be what some need to get out of poverty; and in South Africa, Avon’s approach seems more accessible and better matched to community interaction than does microfinance.

Avon was established in the USA in 1886 and today works in over 100 countries through more than 5.8 million independent sales reps. Key to the Avon mission is empowering women to achieve economic independence by offering them a superior earnings opportunity as well as recognition, service and support – a mission statement echoed by many of the businesses discussed here at NextBillion, in particular those that have adopted a microfranchising or business-in-a-box approach.

Mainstream companies like Avon Products, Herbalife and Amway have built armies of part-time sales representatives selling everything from insurance plans to anti-aging creams. Those reps, in turn, are encouraged to recruit others and are promised that they will receive a portion of new enlistees’ profits. The companies profit, at least in part, by collecting increased revenue and fees paid by new sales representatives.=

At the base of the pyramid, variations of this approach can be seen in Living Goods (Health Promoters) VisionSpring (Vision Entrepreneurs), Hindustan Lever (Shakti entrepreneurs), Grameen Phone (Village Phone Operators), Freedom From Hunger (Health Keepers) and many others. Similarities with Avon include:

  • reliance on a network of sales reps, often working only part-time
  • a relatively small up-front investment to become a licensee (or franchisee)
  • a majority of goods sold on consignment
  • marketing that relies on word of mouth, and at least initially, tapping into the seller’s network of family and friends.
  • a personalized shopping experience of selling to peers, often within the buyer’s home

In these models, women are the target market for franchisees, although, as with Avon, men are not off limits. And like Avon, the BoP models also promote self-reliance and economic empowerment.

What is different among the BoP models, however, is their clear emphasis on protecting the entrepreneur from bad decisions and financial exposure through training, almost no emphasis on multi-level marketing, and a strong focus on products that have significant social value for their purchasers at prices generally affordable to the poor. Products are often packaged in single serving quantities to meet cash flow needs, and BoP models also often have a microcredit component as well to help meet initial start-up or licensing costs.

As Avon and their counterparts focus increasingly on the developing nations, competition for the best sales reps and consumer’s scarce dollars is certain to increase, as is the debate over whether those living on just a few dollars really need deodorant and beauty products

It is this argument – that consumer products have limited social impact at the BoP – that tends to stir the passions of pundits, academics, activists and businesspeople. However, if Scott’s research findings are indicative, there are measurable social benefits from the sales of consumer products in low-income communities. Are those benefits as great as providing healthcare or clean water, for example? That is for the reader to decide. But given a choice between having little or no access to services and having some access to basic services, Avon and their counterparts may be the right choice.

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