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Avon Products Inc
Lipstick may be the newest weapon in the fight against global poverty. A recent study (PDF) by University of Oxford researchers suggests that selling Avon (AVP) cosmetics have helped women in South Africa become financially independent. Other businesses are mimicking Avon’s model of direct sales as a way to alleviate poverty in developing countries.
Oxford business school professors Linda Scott and Catherine Dolan spent three years surveying poor black women who worked as Avon representatives in South Africa and found that nearly three-quarters made their primary income through the company, which sold more than $11 billion in cosmetics worldwide in 2011. Of the 300 women surveyed from 2007 to 2010, those who sold Avon goods for at least 16 months made enough money to purchase necessary “survival” goods on a monthly basis for their families. The earnings placed the South African “Avon ladies” in the top 10 percent of self-employed black women.
The researchers called the women’s enthusiasm for Avon “lipstick evangelism.” Many women told traumatic stories about their lives before Avon and discussed the drastic improvements they enjoyed after becoming representatives. “The most important thing about this is that it’s not some joke about lipstick,” Scott says. Direct sales “is helping more than some of the other things being done, like microfinance,” she says.
The study was commissioned by the United Kingdom’s Economic and Social Science Research Council, and Scott says Avon did not sponsor the research. (Avon didn’t respond to a request for comment on the study.)
Living Goods, a San Francisco-based social enterprise, borrows the Avon sales model to reach poor women in Uganda. Instead of selling cosmetics, the company employs 900 women who travel door-to-door selling malaria treatments and clean-burning cook stoves.
Founder Chuck Slaughter signed up to be an Avon rep in the U.S. when he launched Living Goods in 2008. Though he managed to sell cosmetics only to his wife and her friends, he found the direct-selling model to be so promising that he adapted it to his own business.
“We’re asking not just how can we improve the livelihood of entrepreneurs in our network, but also how can we improve lives of our customers,” Slaughter says. “In emerging markets, the direct-selling model is a proportionately more meaningful source of income than in the U.S. or in Europe, and it can make a very meaningful change in lives.”
In South Africa, the median monthly income of women Scott surveyed was 900 rand, or about $110 U.S. dollars at current exchange rates. Those who sold Avon products for at least 16 months made 1,400 rand per month. That put them “within reach” of the middle of the country’s income scale and among the highest-earning self-employed black women, according to the study.
Avon has found a way to penetrate markets that otherwise would be inaccessible. The company employs women who network within their communities to place bulk cosmetics orders in exchange for a discount and cut of the sale. Most of its revenue derives from Latin America, with the region that includes Western Europe and Africa making up 13.5 percent of revenue last year.
Encouraging entrepreneurship, particularly among poor women, has long been championed as a method to reduce poverty. Microfinance—the practice of lending small amounts to impoverished entrepreneurs to start businesses—has won similar praise as a way to lift incomes, but the results have been mixed. Scott believes that the direct-sales model will live up to expectations.
Annie Duflo, executive director for the nonprofit organization Innovations for Poverty Action, says the group’s studies of microfinance has concluded that the loans can have positive effects for individual borrowers but are not powerful enough to alleviate broad poverty. That’s partly because the people who take microloans “are more entrepreneurial to start with and might have had great things happen, anyway,” she says.
Scott argues that direct sales gives women broader benefits than microfinance does, including helping them establish credit, build networks, and develop other job skills. Her study suggests the approach is too new to measure how effective it is in curing poverty, but Scott has high hopes for Avon in South Africa and other developing countries. “I think this is going to be the way to end up reaching rural environments,” she says.