Avon Products Inc. surprised much of the direct selling community with its public withdrawal from the U.S. Direct Selling Association earlier this month.
Avon resigned its membership Sept. 9 with a letter to the DSA executive committee. It was a significant move. Avon is, after all, the world’s second-largest direct selling company (behind Amway) and an iconic U.S. brand. But the real news came three days later, when Avon posted a letter signed by Senior Vice President Corporate Relations and Chief Communications Officer Cheryl Heinonen and addressed to other U.S. direct selling companies on the media center of the Avon website attempting to explain the rationale behind its withdrawal.
“This decision came after careful consideration and more than a year of thoughtful discussion,” Heinonen’s letter says. “This decision was driven by two key issues: We believe the association’s agenda in the U.S. is overly focused on the issues of a few specific brands rather than industry-wide challenges. We believe that the U.S. DSA Code of Ethics requires updating to better reflect the current state of the industry in the U.S.”
Despite these statements, the real motivation behind Avon’s resignation remains unclear. Heinonen’s letter does not provide any specific examples of the issues on which Avon feels DSA is overly focused nor the Code of Ethics updates Avon seeks. On the second point, Heinonen’s letter emphasizes that Avon is not exiting the World Federation of Direct Selling Associations and will continue to abide by the WFDSA Code of Ethics. This distinction is a murky one, because the U.S. DSA Code of Ethics has tighter, more specific controls than the WFDSA Code of Ethics, which was constructed to serve as a model for local market DSA codes. In fact, the WFDSA code calls for companies to comply with the codes of the DSAs in the countries in which they are headquartered.
It also seems clear that Avon had not been actively advocating for change within the association prior to its withdrawal. U.S. DSA Chairman Truman Hunt, President and CEO of Nu Skin Enterprises, has said Heinonen had not raised the concerns she listed in her letter with him, nor with any other members of the executive committee nor with DSA management. In a letter to DSA supplier members, including Direct Selling News, DSA President Joe Mariano said: “The general observations about the Code which Avon described in connection with its decision have not been raised before now; nonetheless, Chairman Truman Hunt has requested further details from the company and specific suggestions that might be considered by the Ethics Committee, and if appropriate, by the Board.”
We can only guess as to why Avon really resigned from the largest and most valuable organization that works to support the direct selling model in Washington. But by doing so in such an inflammatory way, the company has succeeded in, at least momentarily, keeping the focus on external factors as detractors look for pockets of weakness or dissent within the direct selling community. And that is a disservice to everyone involved, including the thousands of Avon representatives the company says it wants to protect.
Avon has challenges of its own. Shares in the company (NYSE:AVP) have fallen into the $13 range as it has posted net losses for the past two years and a turnaround effort has failed to reverse declining domestic sales. CFO Kimberly Ross resigned earlier in the month to take on the CFO role at the oil-field services giant Baker Hughes Inc. This spring, Avon agreed to pay $135 million to settle U.S. probes into corruption charges related to its business in China.
In our view, it is unfortunate that Avon decided to walk away from its seat at the industry table. But we remain confident that U.S. DSA will continue to work to foster the best interests of the companies and independent contractors from all walks of the direct selling life.
