Last night I saw a TV commercial pushing women to become Avon ladies, claiming that in this economy it would be a really good deal and you’d be your own boss. That is, you would make money and no one could fire you. An Avon lady is a network marketer. Network marketers are usually women who mine their friendship and acquaintance connections with other women to sell them things. Things that most of them don’t need and some of them can’t afford. Things like Mary Kay cosmetics, Tupperware, Pampered Chef kitchenware, and many other categories including candles, statuary, lingerie, and more.
How does network marketing work? Friends are invited and encouraged to bring their friends to a party in the marketer’s home. Most people who attend feel obligated to buy something, even though they are always told that there is no obligation to buy anything. It doesn’t feel nice not to buy, so they buy. The marketer makes a commission on these obligation sales. A few people actively want to buy the products, and the marketer may then convince these women to become salespeople themselves, so they can buy the many items they want at extra discounts. The marketer gets a rakeoff on the sales of every customer converted to a saleswoman.
As a volunteer tax preparer, I shuddered at that ad. I’m looking ahead to next year, when a lot of hapless and confused women will come in to have their taxes done, and only then discover that they have been running a home business at a loss instead of at a profit. This is what easily can happen when you are a network marketer. Why? Because you buy inventory from the parent company, and then you have to sell it. If you don’t sell it, you’re stuck with the stock. Sometimes, by the time you have bought the inventory and tried to sell it, the parent company had decided to no longer support that inventory with brochures or other sales devices. So you end up stuck with last year’s catalogue of unsellable inventory.
None of this is illegal. I wouldn’t even call it unethical except that I end up seeing too many confused people who clearly never have understood the network marketing business in which they have engaged. A basic rule of inventory is what’s called turn. In retail stores, inventory is carefully followed to ensure that it sells out, thus turns, in a given period of time. If it doesn’t, the retailer gets rid of it in favor of some other item that will turn faster. So one principle that network marketers often don’t understand is that they must sell out all their inventory, turn it, quickly. A second reason for quick turn in the case of cosmetics is that the products themselves age and become unsellable or unsafe. You don’t want to put eyeliner on that’s over a year old, do you? Not a good idea. The chemicals deteriorate.
So here the poor woman is, having bought sometimes thousands of dollars worth of stuff that she didn’t sell. Why? Maybe she got caught up in the excitement of it all, and ordered too much inventory. A mistake. Retailers keep their shelves full but their back rooms empty, and they get customers all day long, every day of the week. Network marketers, who are usually part-timers, should keep as little stock as possible, and put everything on order. Let the customer wait for the order to come in. The delayed delivery gives the marketer a second opportunity to sell to the customer, anyway.
Another reason the marketer might have too much inventory is that the parent company is insisting on volume buying, or encouraging it with discounts. Discounts are a funny thing. One has to look no farther than the hilarious explanation of how the mother saved money on a hat in the movie “Life with Father,” or one of Gracie Allen’s killer routines, to realize that many women still believe that spending $20 instead of $40 is saving money, when the truth is that spending $0 is the only way to save money. It’s a neat trick, and these network marketer babes-in-the-woods get caught by it again and again.
A third reason a network marketer might get stuck with too much unsellable inventory is that she is not a good saleswoman after all. She might like the social aspect of the business, but she might not be good at pushing the products. This is especially true because it’s typically a part-time business capitalized by other income and thus not truly at risk. What do I mean by that? Most women who become network marketers don’t go to a bank to get a business loan to buy inventory, so they don’t have loan payments looming to push them to succeed at selling. Instead, to capitalize the business, they simply open their personal check books or flash their credit cards, and divert family money. This may or may not be true discretionary income, but the marketer acts as if it is. She does not hold herself strictly accountable to repay the family for every dollar she spends on the network marketing business. And without the incentive of a business loan to repay, it’s easy for the network marketer to lose track of the profit concept. She’s having a good time, or she’s not having one after all, and well...
I’ve bought goods from network marketers, and there was nothing wrong with the products or the prices, or the service for that matter. I even enjoyed the network marketing parties I attended. But I am ethically opposed to network marketing because it preys on the bonds of friendship, it cynically uses the ancient rites of hospitality, and it too-often leaves the network marketer herself under water financially. Anybody considering doing it ought to think very carefully about sales as a career, because the most successful salespeople are always the people who enjoy selling. Anything less, and you could wind up being another unhappy victim of network marketing fever, with a garage full of useless stuff, and a hole in your bank account.