Harper’s Magazine: Mary Kay’s Pink Pyramid Scheme

Written by TRACY on . Posted in Business Basics, Pink Truth Press

Today the August issue of Harper’s Magazine officially went on sale, and the cover story features the pink pyramid scheme known as Mary Kay. The internet has been abuzz with this story, The Pink Pyramid Scheme: How Mary Kay Cosmetics Preys on Desperate Housewives,  and it has been featured on sites like Jezebel and Andrew Sullivan’s The Dish.

Virginia Sole-Smith went undercover to dig into the world of Mary Kay, finding out the dirty truth about recruiting and inventory frontloading. She found out the sad truth: Mary Kay uses the public image of “enriching women’s lives” as the basis for misleading recruits in a “business opportunity” that almost guarantees they will lose money.

Recruits are told that purchasing inventory is optional, but their arms are twisted until they “opt” into purchasing it. Virginia writes:

The first step on my Mary Kay to-do list was making my initial inventory investment. Of course, Antonella was quick to work in the standard caveat, necessary because it’s the technicality that separates Mary Kay from a pyramid scheme: “Buying inventory is always optional with Mary Kay, and if anyone has told you otherwise, they were lying to you. You do not have to buy products in order to be a Mary Kay consultant.”

There was a slight pause. “But there are some advantages.”

It was true, Antonella acknowledged, that some consultants preferred to wait to order products until after they had made some sales using the catalogues and samples in the starter kit. But she didn’t think it was the best course of action for me, because she could tell I was so serious about my Mary Kay career. “I was just like you, Virginia—terrified to place my first inventory order.”

After telling her recruiter that she didn’t have $1,800 lying around waiting to be used to purchase Mary Kay inventory, it was suggested that she use a credit card to purchase inventory, because it was an investment and NOT debt:

When I delicately conveyed that I didn’t have $1,800 on hand, Antonella was unconcerned. “I actually don’t suggest that my consultants use personal funding to buy their inventory, even if they do have the money,” she said. “I find that unless someone holds you accountable, consultants forget to pay themselves.” Instead, I could apply for a Chase Mary Kay Rewards Visa card, which offers instant approval, 0 percent interest for six months, and two points for every dollar spent on Mary Kay merchandise. “What you need to understand is that this is not a debt,” Antonella said firmly. “If you spend eighteen hundred dollars on a new couch, sure, that is a debt sitting in your living room. But this eighteen hundred dollars is an investment in your business.” This eighteen hundred dollars would also be almost half of Antonella’s December wholesale goal.

The truth is that inventory is not necessary in Mary Kay. Recruits are told they need it to be successful, because no one wants to wait for their cosmetic purchases to arrive. While having inventory on hand may help consultants sell a little more, the bulk of their customers would be willing to wait for a few days to receive their items. (After all, millions of people order products off the internet every day, and wait anywhere from a couple of days to a week to receive them.)

Any additional sales that a consultant will generate because she has inventory on hand will be more than wiped out by the high cost of having the inventory on hand. Those costs include interest on the debt, the cost of expired products, the cost of obsolete products (Mary Kay is constantly rolling out changes to their products), and the cost of any inventory that just can’t be sold because of market conditions.

And if you doubt the truth behind my statement that Mary Kay products are incredibly difficult to sell, run on over to eBay and search for Mary Kay. At any given time you will find 40,000 to 50,000 auctions of products that women could not sell through the face-to-face means that Mary Kay encourages. Many of those products are sold for less than wholesale pricing, which is 1/2 of the suggested retail price.

Virginia gave a nice shout out to Pink Truth:

For the half dozen Mary Kay consultants I interviewed, the “corporate income” Daria talked about, to say nothing of Antonella’s Mary Kay dream house, never seemed to materialize. These anecdotal accounts reflect the findings of Tracy Coenen, a financial-fraud investigator and former Mary Kay lady who founded Pink Truth, an online community that describes its mission as giving “a voice to the millions of women who have had negative experiences with Mary Kay.”

Extrapolating from data published in the company’s Applause magazine, Coenen estimated that fewer than 300 U.S. Mary Kay ladies are earning a six-figure income after business expenses—roughly 0.05 percent of the 600,000 American consultants.

Coenen also estimated that the highest-earning sales consultants generally order only about $50,000 worth of products per year, meaning the most they’re making annually from direct sales is $25,000. But hostess gifts, official Mary Kay skirt suits, travel, and other expenses—not to mention the challenge of moving so much inventory—eat into their profits. “Almost everyone loses money,” said Coenen. “Most of those who do profit are making about minimum wage.”

A business in which only a select few earn real money while everyone else pays to play sounds a lot like a pyramid scheme. The Federal Trade Commission distinguishes between recruiting salespeople to sell a product, which is perfectly legal, and making money through “fees for participation,” which isn’t. What constitutes a fee is, of course, vague, but the FTC has charged some multilevel-marketing companies with employing pyramid schemes. In those cases, the majority of sales occurred between company and salespeople; the retail products were essentially decoys. The FTC has never taken action against Mary Kay, and an agency spokesperson told me that he was “unable to confirm or deny” whether the company had ever been investigated.

When I contacted a public-relations manager at Mary Kay headquarters, she was quick to emphasize the same technicality that Antonella had: buying inventory is “a personal choice.” On top of that, she said, the commissions that sales directors earn on purchases by their team members are paid by Mary Kay corporate itself; they’re never taken out of the pockets of lower-level consultants.

The company’s website is equally emphatic: “Is Mary Kay a pyramid scheme? Absolutely not,” reads one FAQ. “The entire marketing structure is based on and intended to foster retail sales to ultimate consumers.”

Despite this supposed focus on the ultimate consumer, however, Mary Kay has little real idea where its products end up. When I asked the press officer to comment on Coenen’s income estimates, I was told that the company tracks only wholesale figures. After a saleswoman places her order, Mary Kay disassociates itself from its carefully cultivated girlfriends’ club; every consultant is her own business, independent from (and yet completely dependent on) the mother ship.

Mary Kay supporters are coming forth to decry this story and claim it only reflects the experience of a few “disgruntled former consultants.” Sadly, we at Pink Truth know that is not the case. We know that almost everyone loses money in Mary Kay, and that there are millions of women who have had bad experiences at the hands of this pink predator.

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Comments (38)

  • Tigger

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    That’s gonna leave a mark!

    Reply

  • Lazy Gardens

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    Quatloos ROX! And has a big readership among the technically inclined.

    This eighteen hundred dollars would also be almost half of Antonella’s December wholesale goal.

    So two “star recruits” and a few current IBCs ordering the usual $200 to stay active and the director’s title is safe!

    Wow, what a coincidence that they push “Start like the Star that you are” so damned hard.

    Reply

    • Scrib

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      I don’t care how much the NSDs (such as NSD Pam Shaw) try to spin the need for having closet shelves groaning with inventory, the truth of the matter is that pushing those star orders is the most efficient way to get production. You are not going to actually unload $1800 worth of makeup to a customer, but you certainly can if you get a new recruit to do it, especially if you work that recruit’s hot buttons and get her to show just how serious about her business she really is.

      Speaking of the Queen of Frontloading, check out what NSD Shaw says on her CD, “Mastering Leadership” – Volume Two for Directors.”
      Title of message? “So You Wanna Be an NSD?”

      Get out those steno pads and pens, true believers, because you’ll want to get this down on paper (note: birdcage liners will also work, and best of all, you can give it right back to Polly after you’re done scribbling Shaw’s wisdom on it!) So if you wanna be an NSD, here’s what NSD Shaw says you gotta do. (In this context, Shaw is speaking of consultants who are moving up the career ladder and what they’ll need to bring in production-wise):

      “…raise the bar of the people who are now coming up and show them a strategic plan; it’s a couple of Emeralds [$3600], a Ruby [$3,000], a Sapphire [$1800], an active order, her own personal thousand, and a couple thousand of base production; it’s all new recruiting and some sharp people. It’s no big deal, but you’ve got to show her what makes up a 10k team. Keep throwing that out…and raise the bar.”

      If you’ve done the math, NSD Shaw’s method involves pulling in 12k of inventory just from brand-new consultants alone, versus a measly “couple thousand” from base production. Inventory that’s optional and personal choice, of course.

      And that’s how you make NSD, friends. By frontloading. Tell me why NSDs deserve standing ovations and all this silly hero worship, again?

      Reply

  • selina

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    I was glad to see this in a well-known magazine

    Reply

  • raisinberry

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    The denial of reality is always so interesting to me. Mary Kay knows its turnover rate. It KNOWS the 6 to 7 week drop off rate. It KNOWS that among “old timer” consultants, 95% and more are ordering personal use levels of inventory, per year.

    They call Directors 2%-ers. Two percent of the sale force are the high earners. TWO PERCENT. Now, you are sitting down, right? OF THE 2 PER CENT…98% of those are NOT LISTED in Applause Magazine, which stops listing anyone under 5K a month (or at least did so when I was in)

    That means…wait for it….That Your Directors, who you aspire to be, who you are told are EXECUTIVES, who make “executive level income for part time hours”, 98% are making LESS than 5K a month BEFORE EXPENSES.

    Expenses can run from 8K to 12K a year and more, cause you pay for your supplies, your suit, your travel and trips, your meeting room, your prizes,your newsletter, your assistant, and of course your Guest Night giveaways in obsolete product.

    So lets use a Premier Club Director @ 8K production, who sells $500 a week personal sales. She MIGHT make $3,000 a month BEFORE expenses. As long as she had 5 personal recruits ordering she could max the recruiting check. Imagine if your Unit doesn’t even do 8K? She’s paying out of pocket for her car (….and if a Cadillac Unit isn’t doing 16K a month—The Director is paying for her car!)

    THAT’s why Your Director’s name is never in Applause Magazine. She is among the 98% who make less than 5K a month, are up to their eyeballs in debt, take home probably between 1,000 and 2,200 a month and are MASQUERADING as Superstars as they walk across the stage at the Holiday Inn trying to sucker your friends into joining.

    And I can attest that a large number of Directors “peeking in” today, just read that line and just got sick to their stomachs, because the scales just fell off their eyes. Terror. Yep. We’ve been there.

    Reply

    • Embracethis

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      Excellent Raisin! If only all the consultants knew these figures. Everyone is faking it and no one is making it.

      Reply

    • Lazy Gardens

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      They now list the top 100 in each division … so the bottom figure varies. But that does mean that 13,500 or so directors are making less than whatever figure you see as the lowest one there.

      And the directors are working long hours for low pay, with high expenses, and no health care benefits, no 401K plan, no paid vacation.

      Reply

    • Lance McNeill

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      I’m doing some follow up research on this story. Could you please provide a source(s) for all the figures you’ve listed. Thank you.

      Reply

      • TRACY

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        Who is this comment for, and which figures are you interested in?

        Reply

    • Yola

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      I was reading the back issues of Applause Magazine, and noticed that a NSD I remembered, was not listed from the August 2010 thru August 2012. I wonder if her area is not doing well.

      Reply

  • SuzyQ

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    Wow! This is so great on so many levels! I would expect the traffic on the site will rise today as directors read, maybe for the first time, the “negative” site. I also think it is amazing that Pammy felt compelled to respond on the NPR site… looks like we may have hit one of HER hot buttons. This is terrific news! Go Tracy and our sister PT’ers!

    Reply

    • TRACY

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      Harper’s has been promoting this for over a week, as the article came out to subscribers earlier. We have had a huge jump in traffic ever since. :)

      Reply

      • SuzyQ

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        Go you!!!!!! So proud of you and all you do, and especially thankful for providing a forum for us!

        Reply

  • advertisingchick

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    This is awesome!! Pinned to my Pink Truth Pinterest board!!!

    Reply

  • Star J.

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    I wish there was a way we could read the article without a year’s subscription. It looks interesting.

    Reply

    • Freefrompink

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      I purchased the magazine from my supermarket’s magazine rack $6.99.

      Reply

  • gotheart

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    In 1978 I was told that I would make 50% on products I sold.
    I thought it was wonderful because minimum wage was a little over $5. at that time.

    So I signed.

    Then I was told how to explain mk, well it is 100% profit 50% commission. So I was like OK. But I wasn’t gonna tell anyone because I wanted anyone I’d tell for a customer. Right?
    Then I was told that it was really 60% of my sells would go back into inventory. Then 40% would go to pay expenses FIRST, what was left over of the 40% was my paycheck.

    I was an ibc for 13 years.
    As the years went on the company came up with more and more and more expenses for the struggling ibc to survive as a sales person.

    I was between a rock and a hard place.
    Sick husband and two babies.

    I could not be gone from home, at the most 3 hours.

    I was told over and over and over again the money was in recruiting.
    I did not want to recruit.
    I had to earn a paycheck.
    So I started to the DIQ .
    Took me three years.
    The last six months of DIQ.
    I got the job done not the mk way.
    Cause the mk way does not work.
    If you al remember the equation:
    3+3+3 will get an ibc to directorship. NOT

    OK I said all of that to say this.

    The mkcorp and NSD herd women into recruiting by having one expense after another to take away for retail sales income so the ibc will have to recruit for income.
    “You don’t want your customer to be the only one missing out on her PC Mailing. All her friends will receive one and she won’t.”
    “You have to get the GWP or when she finds out…..”
    Your unit will be the only Unit that won’t know about the new product if you don’t purchase the Product Preview Package……”
    Scaminar, retreats, fees, training, suits, jackets, CDs DVDs.Web sites.
    Car payments, GWP, LOOK, PCM……..which the mkc profits from also.
    On and on and on…
    All they care about is recruiting.
    They are masters at manipulation.

    Why don’t they call it Queen of Personal Wholesale? Because they don’t what you to realize what they are doing.
    So they call it Queen of Personal Sales. Director Queen of Personal Sales. Consultant Queen o Personal Sales. No it is not true they haven’t a clue what is sold.
    Why do they call the wholesale product winners. Circle of Achievement?
    Cause they do not want ya to know it is all about production. They avoid those words.

    All of the ibc and sd that are sitting at Scaminar ( whoever thought of that name right on!)actually think it is Queen of Sales! “They are thinking “how did she ever sell that much product!”

    I was in the Sapphire Division for years. At Scaminar,
    the same ibc got Queen of Sales every damn year. She was from Washington state. Probably still is queen.
    I called her and said can I come and see how you do it.
    She said no.
    It took me a long time to figure out why she didn’t wanna show me!
    She was in on the scam too.

    I got out of mk in 2006 when my son, who was in college at that time, educated me on MLM. Mary Kay was on the list. Made me sick. Tremendous heartache to my family.

    Thank you Tracy for this site.
    Thank all of you women that have fought the good fight and held steady.
    The front page of Harper’s magazine is the most beautiful sight for my soul. I am so happy, at this moment.

    Sincerely.
    gotheart

    Reply

  • Dazzling Diva Dana

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    Hi gotheart!

    I was Sapphirre too… Didn’t we have the SAME NSD? She was from the Washington, DC area. Is THAT who you wanted to shadow? Who turned ya down?

    ~ Dazzling Diva Dana

    Reply

  • Jenni D.

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    Hey! They’re talking about this article on Think! here in Dallas and they have a representative from Mary Kay trying to defend the company and one of the first things he said was “Mary Kay does not make any promises…” Are you kidding me? Just thought I’d throw that out there.

    Reply

    • Lazy Gardens

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      Jenni –
      Link please?

      Reply

          • Windy_City_Gal

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            This inteview is unbelievable…the truth is being shouted. Finally!! Things are going to be very different now. MK will ‘circle the wagons’ and clamp down on all those cheesy sheets that directors use to recruit. I am so glad I am out!

            Reply

  • gotheart

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    Dazzling, Dalene White was my NSD.

    The ibc I wanted to shadow, that was ibc personal sales, year after year after year, was from Washington State. Every month in the Clapp she was ibc personal Queen of Sales for the month, month after month. Her totals were 16K give or take a few.

    Reply

  • punkedbypink

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    Gotheart, I remember her well. Saw her on stage and she had to be helped out to sit on the throne. Apparently she had a very traumatic event in her life, and still suffered from it. But she overcame it with MK,right? She had so many bees on she could have had a honey business on the side. Claimed to have over a thousand customers that still ordered from her. I wish I could remember her name…..this is gonna bug me!

    Reply

  • Pink Truth » Pink Truth Hater Hotline

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    [...] Critics, Pink Truth Press This week’s official release of Harper’s Magazine story “The Pink Pyramid Scheme: How Mary Kay Cosmetics Preys on Desperate Housewives,” along with the NPR’s On Point with Tom Ashbrook episode entitled Investigating Mary Kay has [...]

    Reply

  • Nelope

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    If anyone still thinks a snake can’t ride a bike, listen to Ms. Beitler and Mr. Mariano backpedal about all the “different reasons” people get involved in direct sales that have nothing to do, of course, with making a living wage in a tough economy. If you are looking for “opportunities for recognition” through Mary Kay, join up with your local community theater instead. It’s probably more fun and definitely less expensive.

    Reply

    • nani

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      I am a current mi ibc and the articule is so true that bait you, with all these false hopes, once you get your starter kit they do the store of 1800, they al sound a like I wanted to say if its a invest you two give me the 1800 each and i can open me a 3600 store. I wish they could cash me out and give me a full refund.

      Reply

      • Lazy Gardens

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        Nani – How long have you been in? And what country are you in?

        In the USA, you can return the dollar value of the product you have bought in the last year for a 90% refund … so if you made any orders in the past year you can get 90% of it back real fast.

        Reply

  • Lily pad

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    Wow! Mary Kay USA seems so different than Mary Kay Scandinavia. So much pressure and cynicism in the US, at least according to this article. That’s just sad.

    Reply

  • Heather

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    I actually BOUGHT a subscription to HARPER just to read this.

    I was an IBC for 3 months. I was so very unhappy at my job, no time with my kids, bored, and unfufilled. A girl I worked with started MK in Feb. She was doing really, really well. She even QUIT HER FULL TIME JOB!! That was my freaking DREAM! Work from home?!?!?! Sign me up.

    So I did. Right off the bat, I was pressured to buy 1800 to 3000 bucks in inventory from my Sales Director. I told her “NO” and that if ANY inventory was to be purchased it would be purchased AFTER I got started. Frustrated she said we’d “Talk about it later.”

    My recruiter told me not to worry about it, and that she started with 1200 and I really should too, but do what I felt was best.

    So I did just that. Ordered NOTHING. I sold from the catalog and not one person was upset that they couldn’t have the merch that day.

    I went to festivals entering people for a drawing for a “free miracle set” and went to town trying to get bookings off of their information. I got a little bit of business. One embarassing party with four 16 year old girls. THAT was a wake up call.

    So in the end, I actually made up my starter kit investment. That’s it. Broke even. Didn’t order product, never quite bought into to the whole thing I suppose. The extra product in my starter kit I gave to family and friends. Kept some. I very seriously doubt I will even reorder the product once it’s done. It’s not that great.

    The job I hated? I quit. I am going back to school to be a social worker. Start on Tueday. I cashed out an IRA I had and with that and some careful planning, I am going to work PT for a while and just enjoy my kids and being a student. I am really happy. I found my own way!!

    As for Mandy the recruiter? She is a Sales Director now. I told her I quit and she never texted me back. God speed Mandy, God speed.

    Reply

  • Tigger

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    I came across the magazine in question at our local Safeway last week. Couldn’t believe it! I stood in the magazine aisle for a long time scanning the article.

    Wanted to buy the magazine but it was $6.99 and I wasn’t paying that just to satisfy my curiosity. I figured the worst they (Safeway) could do to me was sic the magazine police on me and tell me to buy it or move on. They didn’t so I kept reading. Walked away feeling sad for all those conultants who will come across that mag. cover and nearly faint.

    Then I perused the cosmetics aisle looking for Oil of Olay.

    Reply

  • Pink Truth » Does Mary Kay Know Their Products Aren’t Being Sold?

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    [...] Numbers in Mary Kay With the recent spotlight on Mary Kay thanks to Virginia Sole-Smith’s eye-opening article about Mary Kay Cosmetics in Harper’s magazine, the company has repeatedly said it doesn’t know how much is actually sold by consultants. [...]

    Reply

  • Pink Truth » How Many Marriages Has Mary Kay Ruined?

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    [...] the future, I plan on exposing very publicly about this Pink Cult. However, as I recently read the Harper’s article The Pink Pyramid Scheme, this particular passage stuck out at me: Lynne resigned from her directorship soon after, but she [...]

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