Inventory Loading (aka Frontloading)

We’ve talked before about sales directors ordering too much inventory, so let’s go back to ABC’s 20/20 segment about Mary Kay and Pink Truth. Two of the biggest problems in Mary Kay Cosmetics are the lack of retail sales of the product and consultants and directors having large stockpiles of inventory. Watch below and then continue reading.

When asked by 20/20 how Mary Kay knows “… that the product isn’t ending up in people’s basements,” Laura Beitler replied:

“Oh, trust me Rebecca. We know that women love to buy Mary Kay products over and over again.”

See what she did there? She didn’t answer the question. She was asked about products being stockpiled in basements, and the best answer she could come up with is that women buy Mary Kay products.

Sure, women buy the products. But in what amounts? How does Mary Kay know that all of those “star orders” are ending up in the hands of actual consumers? The fact is that most of the product does NOT end up with a customer. Mary Kay knows this, so they choose to track only orders placed by consultants, rather than tracking actual retail sales. Ignorance is bliss! The company gets to pretend that most of the products sold to consultants are retailed to actual customers.

Then there is this little tidbit that Mary Kay used to attempt to prove that there are lots of retail sales:

The company says tens of millions of dollars of consultant orders are shipped directly to consumers every year.

That sounds impressive, doesn’t it? Tens of millions…. or something between $20 million and $99 million… is shipped directly to consumers. Impressive, until you do the math. Mary Kay says they sell $3 billion wholesale annually:

 

That’s $6 billion of products at retail pushed out Mary Kay’s door each year. They brag that “tens of millions of dollars” go directly to customer. This means that something between 0% and 2% of Mary Kay’s yearly sales are shipped directly to customers. What about the other 98% or more of products that are in the hands of consultants?

You can’t have it both ways, Mary Kay. You can’t fail to track actual retail sales, then claim that lots of retail sales are occurring. If you’re not tracking sales, you don’t know. The anecdotal evidence is very clear: If you walk away from your encounter with Mary Kay without unsold/unwanted products on your shelf, you are one of a very select few. (And you certainly won’t get to the levels of top director or national sales director without hoards of product in your basement or garage.)

We’ve heard it all before. When Harper’s magazine ran an article called The Pink Pyramid Scheme in August 2012, Mary Kay had some damage control to do. In an interview on NPR, Mary Kay’s Laura Beitler claimed that “…the majority of the product ends up with end consumers.”

The lie behind that statement was exposed here by The Scribbler:

False. Ms. Sole-Smith was quick to remind Beitler that “Mary Kay doesn’t track their retail sales. She can’t tell us how much they’re actually selling to the retail market.” while Beitler tried to suggest that “…when you look at all the beauty editor mentions we have in magazines regularly, being named as a top beauty brand, you don’t get there without having a significant number of end consultants, consumers in the mix.”

Beitler’s logic is fractured, as she assumes that because Mary Kay gets beauty editor mentions or gets named as a top beauty brand, this must mean that that the majority of the product is being sold to end consumers. Again, without proof of retail sales, Beitler cannot accurately make this claim.

Mary Kay has a vested interest in pretending that the vast majority of products sold to consultants ends up in the hands of third party consumers. If it didn’t, the company would be nothing more than a glorified pyramid scheme which uses mediocre cosmetics as a front to look like a legitimate business. Wait a minute…..

16 Comments

    1. pinkblacksheep

      The tone of that interview and the way it was edited seemed to me that they weren’t fooled. It definitely did not look good for Mary Kay, especially when the Directors had no idea what they made after expenses, and one of them wasn’t in 6 figures even before expenses. The whole thing was a dumpster fire.

      1. NayMKWay

        It wasn’t pro-MK, but it was far from hard-hitting. I would have rather seen a Mike Wallace type questioner who didn’t let the interviewee get away with evasions. I kept yelling at the screen, “That’s not an answer!” Why didn’t the interviewer say the same thing?

        From what I heard, that 20/20 piece started out as a full-show exposé and ended up just being a segment or two of softball. ABC got cold feet and eased off for fear of lawsuits, is my read.

  1. morningstar

    Agree lawyer speak. Now I understand much more. When I first saw the video and her title it doesn’t juve with her look on TV. A MK corporate would have touched up her hair, and looked less subtle. After all she is promoting cosmetics company. That said, it is lovely to go grey naturally and is a personal choice. I don’t know why that ombre stood out so much way back when, but this I remember.

  2. BestDecision

    Listen to this…Directors now get to go to Leadership party for having just 3 unit members ordering $600 for 6 months in a row now through December. In past years, you had to be on-target for at least Circle of Achievement or a Court to get to go.

    Here is the math:
    Director + 3 unit Stars = 8 Stars and about $80,000 unit retail production by 12/31
    (We were taught that 30 Stars is $300,000 Circle of Achievement. 50 Stars for the year was Half Million. 65 was Trip. It almost always worked out exactly that way.)

    Past Leadership parties:
    $150,000 YTD unit retail
    $16,000 YTD personal retail
    12 qualified recruits

    So, people with HALF the requirements from just a few years ago get to go to one of the biggest events of the year. The most coveted invitations for Directors.

    How about those New Zealand and Australian people?? Could never happen here in the U.S., could it?

        1. Char

          She “worked” by endless-chain recruiting and front loading inventory orders from poor women, and encouraged those same women to keep placing orders. There is a saying: No honor among thieves.

    1. Ruby Slippers

      I would like to see PT post an article on aftermath of Australia and NZ shutdown. I’d also like to hear more from corporate moles, lol. MK Corp completely squashed and hid any Australia and NZ shut down from MK news. It doesn’t even come up on search engine on InTouch.

  3. Char

    “Oh, trust me Rebecca. We know that women love to buy Mary Kay products over and over again.” –

    Not a lie. Those women are called consultants!

    Interviewer (me): Mary Kay sells 3 billion worth of product annually. What marketing strategy does MK use to move so much product?

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