Mary Kay’s Inventory Con Game


Written by Anonymous

Do you really need all that inventory? Do you really “profit” 50% on inventory you sell? No and no. But they sure make it sound good, don’t they? And yet, it’s all a con game.

Profit Margin

Below is a quick table showing. what the true profit margin is from customer sales for a new Mary Kay consultant. We’ll assume that she is selling $300 retail per week. (That’s probably a lot more than the vast majority of consultants sells, but work with me on this.)

Directors and recruiters always parrot the line about making 50% profit on “everything you sell” in Mary Kay. As you can plainly see, there is not a 50% profit to be made.

Below are all the actual costs, including the cost of going to meetings, averaged to $4 per meeting. (Remember all the FREE training you were promised when you signed up, gals? wink, wink) Also added in are Section 2 items, including those roll-up bags we’re supposed to use to entice women to buy 4 sets at $199 or $299 (see below.)

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This table assumes that everything is sold at full price. That’s rare. The roll-up bag results in a profit of about $100 instead of $150 because of the great “special” that is usually offered.  Suddenly our “profit” has dropped and we haven’t even accounted for any other expenses yet. So if you figure there are roll-up bags sold, the profit margin above will be much smaller.

Paying For Inventory

For every sale made by a consultant, she must replace inventory, pay for supplies and gifts, and then the profits remaining can be used to pay off the initial inventory purchase.

Using our wildly optimistic estimate of sales of $300 retail per week, the below chart shows how long it takes to pay for the initial inventory purchase, using the $348 monthly profit from above. Even with a modest initial inventory of $1,200, you see that it will take about 3 1/2 months to pay that off!

Profit From Recruiting

Okay, you say “Well, what about all the money we make from recruiting?” Glad you asked! Let me break it down for you…

The company’s own admitted dismal statistics show that 93% of all consultants never attain Star Recruiter status, which is having 3 recruits simultaneously active. Let’s assume for this example, that a consultant actually recruits 3 new consultants who each come in with a $3600 initial inventory order. That’s unlikely, but let’s assume it for now.

Just how much commission does she stand to make? A recruiter gets anywhere from 4% to 8% commission. These inventory purchases by her recruits would qualify her for 8%, so she would get $864 in commission that month. Sounds good but remember that those consultants likely won’t order much again. If those three consultants each order the minimum the next month, the commission check will be only $27.

The commissions as a recruiter are so inconsistent and so low at 4% to 8%, that they won’t be much help in paying off that initial inventory purchase.

Increasing Sales

So, now what? The only way to do better is by improving her sales. Can the consultant sell $500 a week? Very few are able to do this consistently. But even if the consultant could, here is what the numbers would look like:

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In this scenario, profit margin increases very slightly, to 31.4%. But, you may point out, the profit itself has increased, right? Ummm, yeah, to $628/month. Now, it will only take the consultant 5 months to break even if she did the $3,600 inventory. Woo hoo!

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Keep in mind that in Mary Kay, they say you should keep reinvesting in inventory until you have at least $3,600 wholesale on the shelf. That’s considered “profit level” inventory, and you’re not supposed to take any profits until you get to that point. You’re also supposed to keep replacing products once you get there, so you always have at least $3,600 on your shelf.

Except that keeping little to no product on your shelves is actually the most profitable way for any new consultant to run her business.

It makes no economic sense for each consultant to keep her own inventory. In fact, inventory as a business term is only appropriately applicable to the Mary Kay corporate warehouses. It only takes a few business days to receive an order from Mary Kay, and most customers will have no problem waiting that long to receive their product purchase.

And that, my friends, is the Mary Kay inventory con game. Stock inventory at your own risk.

11 Comments

  1. NotSoPrettyInPink

    How I wish I would have found this information before I sunk a chunk of money into MK. I fully admit that I was bamboozled and sold by a director whose one job was to recruit me. She did just that and took advantage of my foolish hopes. My one huge concern going in was that I have a physical disability that comes and goes. Some days I’m fine and others I can’t leave the house. I was told by my director and hers that if I had ANY issues they would be the first in line to help me make it through. If that meant doing skin care classes them they would do it and give me the profit. Boy – was I wrong. When the time came a couple months in, they could not be bothered. I had two surgeries in less than one year and I was literally laid up on the couch for months. While they couldn’t seem to find time to do the few parties I had booked – they were very quick to send thoughts and prayers over social media. When I tried to figure out how to send my inventory back I was told I could never purchase anything from MK again. Since this line is the only thing that seems to work for my collagen deficient skin, I stepped away from returning my order. Huge mistake. I am now left with large boxes of inventory I cannot sell and a husband who is trying his best to not hound me about it.
    Please, please, PLEASE stay away from MK. They are not what they say they are.

    1. Taxdiva

      Don’t forget sales tax.
      In states with sales tax, Mary Kay is charging sales tax on all that inventory based on retail value, not wholesale value. The consultant is absorbing sales tax on anything sold for less than the 50% wholesale markup or giving away for free.
      The only way to stop this is to apply for a resale certificate (or equivalent in your state), then collect sales tax and remit it to the state directly. This route could add extra costs in accounting fees as it may require the assistance of a tax preparer to prepare sales tax returns or assist with audits.
      How do I have all this information? I have a masters in Accounting (concentration in taxation) and am studying for the CPA exam. My mother-in-law tried to pull me into Mary Kay but I found this page after the numbers didn’t add up. I’m trying to pull her out now.

      1. Lazy Gardens

        “The consultant is absorbing sales tax on anything sold for less than the 50% wholesale markup or giving away for free.”

        Many consultants charge full-price sales tax on discounted products (which is illegal) to try to recover the money. It’s illegal, but they are told to do it by upline.

        There is a way to recover that pre-paid tax from Mary Kay every year, but it requires tracking the full-price sales, discount sales and freebies closely, and filling out a form that is hard to find. Mary Kay discourages careful tracking of sales.

  2. Char

    “Except that keeping little to no product on your shelves is actually the most profitable way for any new consultant to run her business. It makes no economic sense for each consultant to keep her own inventory.” –

    True. So why then does MK encourage it? Oh that’s right, the consultant is the actual customer, and thus not running a real business.

    Now it makes perfect sense, doesn’t it?

  3. MLM Radar

    “Profit Level” inventory on your shelf has NOTHING to do with you making a profit. There are far too many products, and they change far too often, for you to ever have enough on hand.

    “Profit Level” really means that you’ve bought enough inventory for your Director to make a profit on your purchases.

    Your Director had time and expenses involved in recruiting you and persuading you buy inventory. At “Profit Level” of about $3,600 inventory you’ve bought enough for her commissions and bonuses to cover those costs.

    If you’re going to do MK your best move is to (like Amazon) buy only the absolute minimum to either stay active, or fill orders already placed by your customers.

    Even at $10 an order, shipping costs are way less than the cost of getting stuck with $3,600 in products that are the wrong color, wrong formula, or just disappeared from the Look Book forever.

    1. MLM Radar

      Putting it simply, you do NOT work for your Director. She does NOT pay you. You are NOT responsible, ever, for making sure she makes a profit.

      She knowingly used manipulative tactics to get you to join and buy inventory. She told you half truths, she omitted important details, and she gave you made-up facts (lies) about success. She probably recruited you (surprise!) when your friend brought you to a guest night while intending to have you as her customer. You do NOT owe your Director any payback for this.

  4. cindylu

    Of course we were conned into buying unnecessary product. The stupid statement “You can’t sell from an empty Wagon”??? Is this the 1940’s with the snake oil salesman? This company does not care one iota about its sales force. They never ever did. Buy inventory and watch these greedy creeps change much of their product line days later. Worst is the deceit of making this pink fraud seem like such an opportunity. Since we don’t think like greedy, manipulative scam artists, we are trusting. We are victims of their well planned hoax.

    1. MLM Radar

      In 1965 you might have had a hard time selling products that you had to order. So in 1965 keeping a basic inventory made a little sense. But even in 1961 there was an amazing device called a telephone which you could use to place immediate orders for delivery by air mail.

      In 2019 we have amazing devices called smartphones with high speed internet connection. So you can place orders for whatever anyone wants while you’re still at your home party, with them watching you. And there are no less than four competing companies providing next day air and two day ground delivery.

      In 2019 it makes absolutely no sense to buy inventory before you have customer orders.

  5. Juliet

    NotSoPrettyInPink, please don’t call yourself foolish for having hopes, wishes, needs and dreams that you were given reason to believe MaryKay could fulfill. You were exploited but your dreams and wishes should not make you ashamed, those who exploit people like all of us are the ones who need the shame and guilt. I admire your motivation to manage working around such a difficult disability. I am the same, in that I am good, then I am NOT, and it is too unpredictable for me to know what will happen when. I haven’t any information of help but I do want you to know YOU ARE NEVER FOOLISH TO HAVE DREAMS 🙂

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