Explaining the Failure of the Mary Kay Business Model

Written by C_Personality

My letter to my team when I decided to quit Mary Kay back in 2008.

Dear Current and Former Mary Kay Team Members,

This is a very different letter than I have ever written.  I have made the difficult decision to phase out of Mary Kay.  Because I recruited you into Mary Kay, it is very important for me to explain why I am leaving.  I feel that I have been misled in Mary Kay, and in turn I have misled all of you.

For the past two years, I have scaled back my Mary Kay business.  I found myself doing less and less Mary Kay because of changes in my personal life (mainly, by becoming a mother (!) 15 months ago!).  After my daughter turned one, I considered jump-starting my Mary Kay business.  I began by taking an objective look at my involvement in Mary Kay, and the things that I discovered about it were very eye-opening to me.  I have learned a lot, and I want to share some of it with you.

First, I analyzed my profitability over my 7 years in Mary Kay.  The first ~4 years I lived in Utah, and worked my Mary Kay business “by the book”.  I did exactly what I was taught to do, I worked VERY hard, and I was quite “successful” at it.  What you don’t know about that time, and what I only recently discovered myself, was that I actually LOST ~$7000 during that phase of my Mary Kay business.  This is probably as surprising to you as it was to me!  Appearances can be very deceiving in Mary Kay, and I deceived myself as well as others (unfortunately, including you).  The expenses were very high, and everything that I made went back into the business (and then some).  The expenses from attending all of the meetings and events (the training isn’t really free), with purchasing more inventory than I should have (to qualify for contests and prizes, and to meet production requirements), and making insurance and co-payments on the Grand Am (no, the Mary Kay cars are not completely “free”) all contributed to this negative cash flow.

The last ~3 years while living in Ohio, I have done Mary Kay a little differently.  The Grand Am had already been returned to Mary Kay, I didn’t attend meetings and events regularly, I didn’t do as many selling appointments or recruiting interviews, and I attempted to scale back my inventory.  During this phase in my business, I MADE ~$5000.  This was very surprising to me – doing it the way I was taught, I LOST money.  Doing it with less Mary Kay “rah-rah” but more business-sense, I MADE money.  Still, over my 7 years in Mary Kay, I have lost ~$2000 in Mary Kay.  I worked many, many hours, and in the end I netted NOTHING for them.  It am forced to conclude that it is not worth my time or effort to continue.

I thought that I was the only one who had worked hard in Mary Kay, doing exactly what I was taught to do, and had not shown a profit.  I felt like a complete failure.  What I didn’t know is that nearly EVERYONE in Mary Kay, especially if they are recruiting and moving up the career path, is re-investing all of their money back into the business.  That nearly EVERYONE was losing money, most of them going in debt for it.

I was told about a website, www.pinktruth.com, and the stories and information I read there resonated with me.  They captured the essence of many of the doubts and concerns I’d had about Mary Kay.  Most importantly, I found out from www.pinktruth.com that I was not the only one losing money – in fact, it was quite common!

I have learned that the only people who are making that “executive income” we talk about in Mary Kay are the very top Directors and National Sales Directors (because their downlines are ordering so much inventory!).  There are only about 500 women in this category that are making over $80,000 per year (gross commissions) – you can easily see this for yourself by counting the women in the Applause magazine who have commissions of $6666 or more for the month.  These 500 women are the only ones making the “executive income” – out of ~10,000 Directors, out of over 700,000 Consultants – so only ~5% of Directors, and less than 0.08% (8/100ths of one percent) of all of the women in the US Mary Kay sales force.

There is another group of people who are making a little bit of money – the sales-only Consultants that don’t make poor inventory and money decisions (i.e. – they don’t do it the way they are taught).  Even if a consultant is a SPECTACULAR seller and does Queen’s Court of Sales ($36,000 in retail product), the absolute maximum they will gross is $14,400 per year.  This is by selling ALL of the $36,000 in product, and by keeping discounts and expenses less than 10%, which is virtually unheard of.  In most states, these women would make the same amount of money working a minimum wage job.  The majority of the consultants and Directors in the middle are losing money, or at best, breaking even.  This is how all multi-level marketing companies (including Mary Kay) work.  But – you probably already know this, by experience, and were just quicker to figure it out than I was!  I believed in the (misleading) Mary Kay dream for far too long.

The other thing that I really had to look at objectively was the announcement that Mary Kay was going to be changing the entire color cosmetics line (again).  All of the compacts, their foundation, powder, eyeshadow & cheek color refills, lipsticks, lip liners, eyeliners, brow pencils, ALL OF IT.  This was very hard for me to stomach, knowing how much color cosmetic inventory I had, and how few color products I had been selling recently.  Mary Kay is constantly changing the product line, and unless you don’t stock any inventory, you’re going to be stuck with discontinued products time and time again.  Mary Kay Corp’s general response to why they’re always changing the product line is “to stay current and fresh in the marketplace”, but from where I am standing as a Consultant with a large inventory (as we’re taught to do!) that is about to become obsolete, it looks much more like Mary Kay Corp. wants to force Consultants to buy more inventory.  And I finally understood that that having a large inventory is not an “investment”, it is a depreciating liability; it is, after all, a PERISHABLE product.  After 3-5 years, most of it is worthless, because of its shelf life!

For these, and many other reasons, I have decided that leaving Mary Kay will be the best thing for my financial and personal life.  I plan to leave gradually, so that I can recoup as much money as possible, and hopefully break even on this 7 year venture.  I won’t quit abruptly, but rather let my customer base (and business) gradually fade away.  I have not had a completely negative experience, and I am not angry with my recruiter or Director.  I realize that they have been deceived and hurt by this company in the same ways that I have, although they probably don’t realize it just yet.

I have definitely learned some positive things from Mary Kay also.  Doing facials and classes were fun, and I definitely enjoyed the sorority aspect of the meetings & events.  I learned how to apply my makeup better, and how to be comfortable speaking in front of groups.  I gained a lot of self-confidence.  Luckily, we were fortunate to have a Director that is a fantastic trainer.  In addition to Mary Kay-specific training, she also taught me a lot about setting priorities, time management, and goal-setting (including life-goals, not just Mary Kay goals). A lot of our training was applicable to LIFE, not just Mary Kay, and those things are useful to me nearly every day. For that, I am very grateful to Karen.

I have done many things wrong over the years that I wish I could take back and do over.  I know that many of you have been hurt, to various degrees, by your involvement in Mary Kay.  I want to sincerely apologize to you for my part in that.  I’m sorry that I pushed you to join Mary Kay if you didn’t really want to.  I’m sorry that I pushed you to purchase a large inventory (or any inventory, if you didn’t want it or couldn’t afford it).  I’m sorry that I gave you terrible advice to take on debt to “fund” your inventory.  I’m sorry that I pushed you to order when I needed it to finish a goal, or make production that month.  I’m sorry that I made you feel bad about not attending meetings.  I’m sorry that I made you feel bad about your level of activity not being high enough.  I’m sorry that I made you feel guilty about sending your product back to Mary Kay for the 90% buyback.  I am now out of the pink bubble, and I have learned so many lessons.  I am truly sorry that I learned some of them at your expense.  Please forgive me.  If I knew then what I now know, I would have done things differently in my own business, and I would have led you, my team, differently.

If there is anything I can do to help you, please let me know.  I have learned by experience many of the “do’s” and “don’ts” of Mary Kay.  If you decide to continue on with Mary Kay, please benefit from my mistakes!

For many of you, it would be very beneficial for you to get to get some money back for any over-stocked or unnecessary inventory.  There are several ways to do this:

  1. Mary Kay Cosmetics.  If you have purchased ANYTHING from Mary Kay within the past 12 months, you are eligible to return it for 90% of your purchase price, plus the sales tax you paid.  At this time, Mary Kay is accepting any new and unused Section 1 products, no matter their age, so long as the dollar amount is not greater than the amount you purchased in the past year.

For example, if you purchased $400 in wholesale product in the past 12 months, you can return $400 in wholesale product (no matter if it’s old or even discontinued), and be reimbursed $360.  If your sales tax rate is 7%, you’d also receive $56 back in sales tax, for a total reimbursement check of $416.

Doing this would terminate your Mary Kay contract, and you would not be able to purchase anything from the company again.  You can find out the specific amount of product that you are eligible to return by calling Mary Kay at (800) 272-9333 and speaking with the product repurchase department.  Also, you can go to www.pinktruth.com and click on “Return Inventory”  for more detailed information.

  1. Inventory Liquidators.  There are a companies that will purchase Mary Kay products, including older products, Section 2 items, prizes, training materials, etc.  They usually pay 25% of the wholesale price.  So if you were to sell $400 in wholesale product to them, they would likely pay you $200 for it.  I don’t think that they reimburse sales tax.  With this option, you would still remain a Mary Kay consultant, but also get some money for your unnecessary or outdated inventory.
  1. Trading Groups.  There are some trading groups online where you can trade products you don’t need for things you do.  It is also a great way to find discontinued products.   Trading product is a “gray area” in terms of your consultant agreement, but if you can’t sell it yourself and if you can’t return it to Mary Kay, I think helping each other out is a good option to have.
  1. Solid Financial Advice.  If you are struggling financially and need some help managing debt, I highly recommend www.crown.org, a Christian financial minstistry, and www.daveramsey.com.

I have also learned that you can buy products on eBay (www.ebay.com) for less than 50% off, from other consultants who have quit.  So staying in Mary Kay to get the 50% discount for your personal use may no longer be necessary.  You can also purchase at steep discounts from some of the inventory liquidators.

For more information specific to the problems with Mary Kay, visit www.pinktruth.com.  For more information about the problems with multilevel marketing (MLM),also known as network marketing, in general, and to avoid future problems, visit:  http://mlm-thetruth.com/ or http://www.vandruff.com/mlm.html.  You may also be interested in finding out why LDS members are more frequently involved in MLMs than others,

http://www.mlm-thetruth.com/LDSwarnings.htm.

I welcome calls, letters or e-mails from you about this, to answer any questions that you have.  And certainly, I would love to stay in-touch after Mary Kay, if you are so inclined!

Best regards,

C_Personality

10 Comments

  1. BestDecision

    Your breakdown of the non-“executive income” claim is spot on. I read that the average is $187,000/year right now, which would mean on those on the extended Top DirectorTrip would be earning enough to gross that. There are only 9 or 10 NSDs on pace to do Inner Circle this year, according to the new May Applause, and there were only 10 units out of the ENTIRE country that added 20 new Consultants in January. 10!

    The business model is outdated and enables corrupt, embezzling behavior. The mantra of “praising to success” causes people to do whatever it takes to get high levels of attention.

    I make well more now than I did driving a Cadillac with Offspring Directors. And don’t get me started on the benefits I now have!

    1. C_Personality

      There was basically no response. Most people avoided me altogether, and I had already moved to a new state from the majority of my recruits, so I didn’t run into them. Interestingly enough, I found a letter from a friend/recuit in my files a few years later. She spelled out why she was quitting Mary Kay – basically because she was losing money, even with high sales. The time investment and lack of real profit wasn’t worth it to her. I recalled reading her letter when I was still in the bubble, and I just didn’t GET IT. But later on, it made perfect sense. You can’t see the truth when you are blinded by pink clouds.

      1. BestDecision

        Mary Kay lost a $40 million lawsuit, so it makes sense they updated their color line around the same time! It just hit me as I read on Beautypedia about them losing a patent infringement:

        “Mary Kay lost a lawsuit filed by TriStrata, the company whose founders hold over 100 patents on the use of AHAs in skin-care products. It was revealed that Mary Kay’s former AHA products infringed on three of these patents, and, after some back-and-forths in court, Mary Kay ended up paying royalties of over $40 million (interest included) to TriStrata. Perhaps because they’re still licking their wounds after this defeat, the company has not launched any new AHA products, and no longer sells the ones that were in question during the legal battle.”

        All that MK Signature product we had to fill our shelves with helped them pay their lawsuit. I also love how even Beautypedia agrees that Mk’s products are outdated.

        And now they want the sales force to be excited about an upcoming charcoal mask? Origins has had one for at least 5 years! Clinique does, too. Once again, MK is late to the party!

      2. raisinberry

        Great piece, “C”. And you are right, when you sit under the indoctrination you just can not see or believe that they are deceiving you. They do not even know it themselves, for the most part. The nationals do, but not the underlings.

        The big terror to them, regarding PinkTruth, and our stories, is that we break the spell. We are the big, loud, snap of the fingers that wakes a reader up into reality.

  2. Kimberly Charlier

    What I learned all the years I was with MK is never bring a guest to your meetings…director will take advantage of you and sign them up with them and also praise you for your work for having your free facial bag or box set up with businesses and literally go there and take your names and call them directly and take future customers…since they’re directors and need the clients it’s allowed..they also will personally call your customers and offer them fantastic deals behind your back…never again…I refuse to even use their products anymore.

    1. BestDecision

      Just because we were Directors didn’t make stealing customers acceptable. I had it happen to me, too, and it was awful. Knowing that another Director was that desperate when all we were taught at New Director Week was about “sisterhood” continued to build my case against staying in any longer.

      I’m with you. I recycled every product I had and haven’t used MK since. Way better options out there!

  3. Shay

    Question please.
    Let’s say I bough $150 worth of Mary Kay off a consultant. (Foundation, blush, mascara, eyeliner.. you get the picture..)

    Then I take it home and don’t like it. I tried it so that means I used some.

    I want to take advantage of the 100% money back guarantee…

    Do I go to the consultant for the money back? If so, will MK reimburse her?

    Or is this another crappy situation where the consultant gets screwed and Mary Kay essentialy doesn’t take a hit and just the consultant?

    Second scenario..

    I buy the satin hands set off a MK lady I met via warm chatter..
    I take the satin hands home and don’t like it..
    I want a refund a week later..
    I find out MK lady quit and isn’t answering emails or calls..

    Would I still get a refund?

    1. PurpleH

      Both of your scenarios should qualify for refund by the original consulant or any other consultant. I returned product for several customers who had bought from someone else- never had a problem. I had to call MK to find out the part number & original price on some pretty old products and always received replacement value. That was honestly one of the only ways that IBCs were truly supported by MK Canada. Of course, some customers totally abused this system – buying from one IBC, using most of it or letting it dry up, then returning it to another IBC knowing that they could get a new product to try.

    2. BestDecision

      In your first example, MK would send a replacement of the product you returned to your Consultant at no charge to her or you. It’s an online form that we submitted to MK, along with product identification codes, and we’d get the equivalent product mailed to us soon after.

      In your second example, this, sadly, is not uncommon. I had numerous customers contact me in an attempt to reach their original Consultant/Director, and they were all finding unreturned phone calls and complete ignoring of their desire to get their money back. Because we were independent of one another, the customer could not get an exchange or refund from me, but could call 1-800-MARY-KAY, explain the situation, and would be serviced by MK. MK would then send a bill to the Consultant for the amount she owed them for taking back that customer’s product. If she was receiving commission checks, the amount owed would be subtracted from her next check.

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