Facts, opinions, and the real story behind Mary Kay Cosmetics.
 

The Mary Kay 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.

13 Comments

  1. Frosty Rose

    Excellent points. Thank you for the concrete, conservative examples of realistic MK earnings. I tend more toward melodrama, so I would point out that this extremely conservative estimate excludes the fact that a $3,600 inventory order is going to cost closer to $5,000 by the time you add in sales aids and taxes. Many products will be discontinued quarterly and need to be refreshed with new “seasonal” items. Seminar costs about $1,000 annually. Career Conference costs around $300 annually. There will be hostess events at least quarterly, but often monthly, which will cost around $10-$15 with a national presenting. January Jumpstart, Fall Retreat, Camp Holiday, DIQ training, and more. All with added costs in both time and money. Postage expenses. Ink/paper/printer/general office expenses. Wear and tear on your vehicle. “Don’t spend dollar time on penny jobs,” so you simply must hire a housekeeper and an office assistant. “Keep that image up, ladies!” Time for new shoes and a new dress. “If you haven’t gotten a compliment on your hair in the last two weeks, it’s time to change it!” On and on and on. If you stay in long enough, add a line item in your budget for therapy to deal with the self-esteem issues you’re suffering due to an excess of toxic positivity.

    It’s easy to see why more than 99% of all MLMers lose money playing this game. And why Corporate never does.

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  2. Mountaineer95

    29% profit margin might work for a high-volume environment (like a Dollar General store or similar) but not with the types of numbers that most beauty consultants will be able achieve. They just don’t have the volume of buyers to justify it. Maybe if they have buyers who are spending A LOT per transaction, but again, that’s not reality. The numbers just don’t work for the vast majority of beauty consultants to see any consistent, meaningful profit.

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    1. Mountaineer95

      Ooh I earned a Ridiculous Downvote ™ yay! Thank you, mysterious Kaybot who cannot offer any legit reasons why this deserves a downvote but instead reacts to anything apparently “negative”! We’ll be praying for you!

  3. Cat Ballou

    Another question is how many hours is the consultant working to sell an average of $500/week? 40+? On the other hand, based on my state’s minimum wage, the consultant could earn the same amount of money in less than 16 hours/week.

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  4. Data Junkie

    Excellent work Anonymous! I want to just one tidbit…

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

    Mary Kay gets these ladies too. If you don’t order at least $225 in a quarter, you don’t get the 50% discount. So you must hold your orders until you reach that threshold, or you will either lose money on the sale due to paying full retail for the product, or you will order more than you need…tying up your cash in inventory rotting on the shelf. “Ka-Ching” for Mary Kay either way! But steadily increasing debt for the consultant…just the way Mary Kay wants it.

    Everything in Mary Kay is about ordering and recruiting, and nothing in Mary Kay is about selling.

    Face it ladies…from Mary Kay’s perspective, you are the customer.

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    1. Mountaineer95

      Lol! I have learned, by accident, that if you add ™ after the words, it actually shows up as a true tm. Let’s see if it works here:

      “Spending time posting a Ridiculous Downvote ™ is not an income-producing activity for a Kaybot.”

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