Mary Kay is Not a Business Opportunity

pyramid-scheme-mlmWe get the same comments from Mary Kay supporters over and over: Mary Kay works when you do, don’t steal someone’s dream, it’s not a get rich quick scheme, it is a business and you have to treat it like one…

The sad fact, however, is that Mary Kay is NOT a business opportunity. Even those who are making money at the very top of the company are not doing so because they are running a business. They are “making money” because a scheme (often called a pyramid scheme) takes money from those at the bottom and transfers it to those at the top.

Those hugely successful women (and a couple of men) are “succeeding” only at duping people into joining Mary Kay Cosmetics and spending hundreds or thousands of dollars on products they have almost no chance of actually selling for a profit. More than 99% of people who participate in multi-level marketing lose money. So all these “successful” women are doing is luring others into an “opportunity” to part with their family’s hard earned money.

Are you hoping that you can join Mary Kay to earn a little extra money in your free time? Or are you praying that you will be one of the lucky ones who will go on to make the big bucks? Either way, your chances are almost zero.

And what do you have to do to earn money?

  1. Try to sell overpriced products (for the level of quality) to friends and family. You’ll have to heavily discount the products in the hope of making some sales. That cuts into any potential profit you may earn.
  2. Build up your inventory, because you’re taught to believe that you “can’t sell from an empty wagon.” You will be told that women won’t buy if you don’t have products on hand, because they want their stuff immediately. Not true! Have you ever heard of shopping on the internet? People order products online by the millions, and *GASP*… they wait for the products to arrive. You don’t have to stock Mary Kay products to get women to buy. And chances are that even when you do have inventory, you’ll constantly need to place additional orders for items you don’t have on hand. While stocking that [largely unsellable] inventory, you’ll incur interest charges on the credit card used to buy it and you’ll tie up your family’s money in products that are regularly discontinued or revamped (so you’ll need to order the new stuff!).
  3. Spend hundreds or thousands of dollars trying to sell the products and recruit people, including paying for: samples, supplies, gas and auto expenses, events,etc.
  4. Try to recruit new marks into the Mary Kay scheme using deception. You will be taught to omit certain important information from the recruiting talk. You will be asked to claim you’re successful and making money, even when that’s not true. Your potential recruits will be shown your director’s “high check,” but not given important information like the amount of that commission that had to be paid back to the company when recruits returned products, or all the business expenses that deplete that check to almost nothing. You will be asked to claim that women in Mary Kay earn a full-time income with part-time hours.

So if Mary Kay is not a business, then what is it?

It’s not a social activity. I know, I know. When those opposed to multi-level marketing point out that 99% of people lose money, a common response is that “women join MK to have fun!” Wrong! There are plenty of free or low-cost social and volunteer opportunities. If women need or want to have fun, they don’t have to join Mary Kay to do it.

So what does that make Mary Kay?

It’s a very cleverly crafted scheme that has been perpetrated for 50 years. It is a company that convinced the general public that it “helps women.” While promoting that fantasy, it actually harms women and their families. It uses a product that appears to be legitimate as the front for the scheme…. Mary Kay can claim they’re not a “pyramid scheme” because they have a legitimate product that can be sold for a profit. They don’t tell you that your chances of profiting from product sales are extremely low.

The executives and owners of Mary Kay Inc. are getting rich, as are a tiny handful at the top of the pyramid. And everyone else is losing money in a sham that they thought was a chance to own their own business.

21 Comments

  1. morningstar

    Great Post. Here’s my opinion, the top is getting squeezed and that will continue until they make a decision. Too much inventory in the downsized, rightsized warehouses, rogue representatives flittering about desperate to make a sale (dressing up as fairies, pseudo porn videos, etc.). They (family) have their pile of money, and do they let it slip lower by each passing day or not? I say not.

    We have had employees speak here in the past few months, one a veteran, making her work during pandemic while others lounge at home due to internet bandwidth issues. Others speak of the warehouse changes as we posted here. And most importantly the closing of NZ and AU to save a buck. Problem is more warehouse stuff from NZ and AU. I honestly think ebay searches would run faster for all of us if MK products for sale would vanquish from the site.

  2. Enorth

    The begging is worse than ever. Using their children – even their unborn children – to beg for parties and orders so they can “earn” the temporary use of a pink car or the “prestige” of purchasing an overpriced blue suit.

  3. MLM Radar

    According to the employer vs contractor guidelines published by the IRS, all MK consultants should be considered employees. MK controls every aspect of how you act, how you sell, what products you can and can’t sell, what you say, how you advertise, and what you wear.

    The only thing that lets MK Corporate off the hook is that MK Consultant agreement which says you agree to be an independent representative. If it weren’t for that, MK would have to comply with all the laws that prevent employers from exploiting this work forces.

    1. TRACY

      I disagree. There are certain rules. But when it comes to where the work is done, how it is done, whose equipment it’s done with, etc, the consultant makes her own choices and that is the feature that distinguishes her as an independent contractor.

      1. NayMKWay

        Tracy, what is your take on California’s AB 5 as it affects MLM companies?

        https://en.wikipedia.org/wiki/California_Assembly_Bill_5_(2019)

        It was originally targeted to go after Uber and Lyft (who have both decided to pointedly ignore it), but was broadened to the point that all MLM consultants would seem to need reclassification. The main sticking point is that the consultants are engaging in activity (sales) that the company also engages in, which under AB5 makes them employees. I know of one former Amway IBO suing for wages:

        https://www.latimes.com/business/story/2020-01-10/amway-lawsuit-pay

        Personally, I think AB5 was flawed from the get-go. The legislators probably meant well, but they just didn’t think it through. The fact that exceptions have been post facto declared for doctors, engineers, insurance brokers, etc. is proof enough of that. I know you don’t live anywhere near California (I wish I didn’t), but I was wondering if you had looked into it.

  4. NayMKWay

    Unlike Tracy and most of the other contributors here, I was never in Mary Kay or any other multi-level marketing (MLM) company. While I do not have a personal axe to grind, what I see happening bothers me a lot.

    Little more than a year ago I thought MLM was just an alternative and legitimate way of doing business. While traditional companies spend big bucks on advertising, MLMs just use word-of-mouth, right? It all seemed reasonable until I looked deeper and realized MLM by its very nature is a fraudulent enterprise.

    Here’s the fraud: MLM is NOT word-of-mouth marketing of a product, it’s word-of-mouth marketing of a fictitious opportunity. They claim you can join up, gradually build your team, and earn a decent living. But if you join up, you’ll find yourself competing with thousands of others wanting to build THEIR teams, and mathematically only a few can succeed. The late Dr. Jon Taylor, a PhD economist, calculated the break-even point between income and expenses in an MLM was to have about 100 under you. That’s where the statistic that 99% lose money comes from: mathematically, only about one in 100 will make money.

    One in 100 a lousy excuse for an opportunity and MLM companies know it, yet they perpetuate the lie because they have to to survive. Why? Because the MLM structure means the products have to be overpriced to pay out all the commissions. While the companies pretend the products are somehow special and worth the money, that is a tougher sell than a pretend opportunity to get people to sign up and BE the customers.

    Most who join will have to be replaced after see the futility and drop out in a few months. This creates constant churn, something Mary Kay Ash herself equated to trying to fill a bathtub with the drain open. (She seemed to care little for those who lost money so long as she could get fresh blood to sign up. Didn’t all those women going “down the drain” bother her? It would me.)

    MLM is a vicious cycle of fail. The products have to be overpriced to pay all the commissions, but the only way to move enough product to keep the company afloat is to continually add commission-consuming members to the “sales” team (quote marks because they are buyers more than sellers). Other than the rarefied few at the top, the only winner is the company (it’s why Mary Kay has been around for over 56 years).

    Months ago I did my own analysis to see if there might be a way to create a “good” MLM company. By the time I finished modifying the model to eliminate the unfairness, what was left was no longer MLM. My conclusion: the only moral way to do MLM is not to do it at all. I later found plenty of others much smarter than I (like Dr. Taylor) who came to the same conclusion. So why do we still have MLM? Because there are evil people out there, that’s why.

    1. Jacirene

      They are obsessed with the number 100. “100 is the magic number in Mary Kay. The Consultant who has 100 loyal customers in her notebook has managed to achieve the desired success.” This dreadful teaching is widely taught in all MK training. NSD’s and SD’s reinforce this idea at each Meeting, Meeting, Conference, etc … They just don’t explain that, after the Consultant has achieved the long-dreamed “magic number of clients” – something that I doubt anyone can do – these clients will be recruited to power the voracious MK machine. It is a system that always needs “new blood”. They are MLM vampires always looking for new victims. This must be the obsession with number 100.🙄

      1. TRACY

        “100 and pink is all we can think.”

        This is a common catch-phrase for getting into a Cadillac. If you can get your unit to 100 members, you’re allegedly able to qualify for (and continue to support) a Cadillac.

  5. Data Junkie

    MLMs were not created to bring a real business opportunity to the sales force, but rather to fool the sales force into thinking it is a business opportunity so the reps can justify (in their own minds) repeatedly buying over-priced product in quantities they can neither sell nor use, and recruit others to do the same.

    The MLM company founders know this is the only way to get high margins for the mediocre products they offer that would never sell at these prices in a competitive landscape. Once they have a sucker hooked on the “dream”, they can also hit them up for seminar fees, training materials, web site fees, qualifying minimum purchases etc. The rep is the primary revenue source for the entire operation, and the starter kit is the most lucrative thing they sell. Outside sales are simply not needed (nor expected) for the MLM to be profitable.

    There is nothing in the MLM business plan that depends on outside customers buying or consuming their products. The compensation plan similarly rewards buying and recruiting, with little if any incentive to actually sell product to outside customers. Meanwhile it is mathematically impossible for any down-line in any end-less chain recruiting MLM to be profitable as a whole. The profits at the top are proportional to the losses below. This simple MLM model shows why (sorry for the repeat):

    https://www.reddit.com/r/antiMLM/comments/d3rpcb/geometric_growth_is_impossible_in_mlm/

      1. NayMKWay

        At least they didn’t threaten legal action. Not that they could; by shutting down they nullified their contracts with their former sales force. But to even have the chutzpah to say, “Stop hurting us by undercutting our prices” is… I have no words.

  6. J

    Before you join:
    “It’s so easy!! I’m literally making money while we’re having coffee. No sales experience is PeRfEcT! People will be drawn to your authenticity. Classes average $300 in sales, giving you an extra $150 per week if you only do one, but why not aim for 3 classes per week? Don’t you want to triple you’re money? Could you find an extra 3 hrs in your week? And that opens up a whole new avenue of income: ShArIng ThE oPpoRtUniTy! Wouldn’t you want all you girlfriends to have the same opportunity as you!? Of course you would because you’re an awesome, God driven woman!”

    After you see the light and leave:

    “You should have tried harder. God only blesses the work you do! You’re bad attitude is making you off putting. No one ever said this was easy. Why would you expect full time income if you’re only working part time hours. You need to be a business minded person to make this more than a hobby. Wrinkles to you; also I’ll pray for you. Also, please don’t return your inventory, I can’t afford gas for my free car bc it wasn’t free this month.”

    Idk, sounds like a manipulative relationship to me.

    1. Data Junkie

      Great work Lazy Gardens! If you do this again some day, I’d love to see that graph with qualifying costs removed from “income”. Even your graph makes it seam that folks are making money at this. In reality, that is not “monthly income”, it is “gross income”. Profit is a whole different matter. Once you pull out qualifying purchases and other MK costs, that graph goes below zero very close to the y axis.

      1. Lazy Gardens

        I would like to do it, but it is extremely hard to get the data now. For some reason, Mary Kay told the directors they had to password protect their websites.

        Maybe it was to keep people like Tracy and me from nabbing data.

      2. BestDecision

        Don’t forget a lot of people don’t keep their receipts or claim all their expenses on taxes. I had that as an argument when I left and questioned how much profit they were really making.

Leave a Reply

Your email address will not be published. Required fields are marked *