Extendible Brushes and Brothers at War

19 Apr 2018

As the news broke last week that Kleeneze and Betterware had gone into administration, it took me straight back to the time a few decades ago when my big brother and I each worked for the other company, going house to house in our neighbourhood distributing catalogues, collecting orders, and then delivering them. It was pretty tense between us at the time, until we finally agreed to work on separate patches. I’m pretty sure I beat him on orders, but he would disagree.

Both companies have been much loved home shopping brands for a number of years. Accrington-based Kleeneze is one of Britian’s oldest catalogue companies founded in 1923, whilst sister company, Birmingham-based Betterware, was founded in 1928.

Betterware had come a long way from its roots selling brushes and polishes door to door. At the time, this sort of trade was commonplace in the United States, but pioneering over here in the UK and the company was an instant success.

The US was about to feature again in Betterware’s history, after a Dallas-based company, CVSL (who later became known as JRJR Networks), acquired the company in 2015 – the same company that had bought out Kleeneze in the previous March. At the time, Betterware’s reported revenue was around £23 million with a total sales network of 13,000 people, 5,000 distributors and 5 million orders per year.

Despite many attempts at reviving the brand, including bringing back some of its best loved and most popular products from years gone by, Betterware has suffered over the past nine months from poor trading conditions. They also cited increased competition online as another reason why they closed their doors (and stopped knocking on other people’s) for the last time on Friday 13th April.

Kleeneze too started showing troubling signs following a major restructure in 2017, but this was not the first time the company had faced struggles. Kleeneze had been associated with Christmas hamper firm, Firepak, which collapsed in 2006. By 2016, Kleeneze had reported losses of £3.3 million on a turnover of £21 million.

In 2017, as part of the restructure, the company moved to a new distribution centre in Manchester. The relocation hoped to cut overheads by bringing together the company’s logistics and distribution operations, but it ended up being the final nail in its coffin.

According to statements made by the company’s administrators, the business suffered from operational issues after Kleeneze’s relocation. Plus, there were logistical challenges and IT issues that took months to resolve. By this time, there were significant lost sales and cashflow problems, which just proved to be just too much, and Kleeneze could not come back from it.

Companies with similar models will no doubt sit up and take notice of this news. For example, Avon, also operating via a network of self-employed distributors, has been reporting hard times in recent times. The fourth quarter of 2017 saw no significant share earnings on the year prior which have remained relatively flat since 2015. In fact, Avon’s revenue and profits have been declining for at least the past decade. In an attempt to revitalise the brand, Avon has appointed a new CEO, but there is clearly a lot of work to do.

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