Written by Frosty Rose

Way back in the Dark Ages, when I was still a consultant, Mary Kay rolled out a shiny new convenience for consultants and directors called Customer Delivery Service (CDS). With the click of a button, you could drop ship any current products directly to your customer.

The key was, it was a convenience service and was priced accordingly. With new changes to CDS requiring that all website orders be shipped this way, costs to consultants will skyrocket. In the blink of an eye, we’ve gone from an optional service that is all about “helping consultants”… to a mandatory process for website orders that increases Mary Kay’s profits at the expense of consultants.

Let’s break down the numbers.

Consultants have the option to set thresholds on their websites, under which shipping must be paid by the customer. But, let’s be real. When was the last time you paid for shipping? I know I never do! It’s an expectation in today’s e-commerce culture that shipping is baked into the cost of the product and I’m not paying an extra line item for it.

Say the consultant says she’ll pay shipping for all orders over $25 (the norm when I was a consultant.)

Customer Katie orders $30 to get her free shipping. How much does that cost the consultant?

Katie Pays:  $30 retail cost of products + $1.50 estimated sales tax = $31.50

Consultant’s Cost:

• $15 wholesale cost of product
• $1.50 sales tax
• $5.95 shipping
• $1.15 ProPay fees
• TOTAL = $23.60

So …. Customer Katie paid $31.50 and the consultant had to spend $23.60, leaving $7.90 in the consultant’s pocket.

Well, that’s not 50% profit!

And that’s for active consultants who are only paying 50% of retail as their wholesale cost. For inactive consultants, whom the company is “helping” with the new 30% discount off suggested retail, the charge to the consultant for a $30 CDS order will be $29.60! She’ll keep $1.90 from that sale.

Well, you say, that’s just a $30 order! Surely, the margins are better with larger orders. And who’s ordering just $30 anyway? Fair point. Let’s look at what happens with a $100 order.

Katie Pays:  $100 retail cost of products + $5 estimated sales tax = $105

Consultant’s Cost:

• $50 wholesale cost of product
• $5 sales tax
• $5.95 shipping
• $2.99 ProPay fees
• TOTAL = $63.94

Customer Katie paid $105 and the consultant had to spend $63.94, leaving $41.06 in the consultant’s pocket. (But let’s not forget that the consultant has other costs too, like samples, catalogs, gift with purchase, etc.) W’re around the 40% profit that Mary Kay promises.

But again, only if you’re “active.” If you’re inactive and you get Mary Kay’s 30% discount off the suggested retail pricing, then the consultant’s cost is $83.94 and your profit is only $21.06 before the costs of samples and things.

Yep, that’s some executive level income there, either way you go!

Now, the scuttlebutt is that ProPay is going away. But it will be replaced by some other credit card processing service, and those ALL have fees. That charge is unlikely to change much. If it does, given recent changes Mary Kay has offered to its sales force, it will likely be even more expensive.

This also does not factor in the cost to have a website (last I checked, $60/year), or the cost to have ProPay (an additional annual charge).

The real problem here is that consultants don’t have a choice on which orders go CDS and which are taken out of her inventory. You know, the inventory that’s not mandatory, but that “all smart businesswomen” have. So, if my customer orders a Miracle Set from my website the month after I’ve “maxed out” a corporate discount, I’m still stuck with all that product in my basement, it costs me a whole lot more to ship, and I miss the opportunity to meet up with my customer, strengthen the relationship and, of course, upsell her.

The whole scam sounds like a great way to make money to me! For MK Inc!

Come on, Mary Kay. Just rip the bandaid already and announce the final move to affiliate. It’s obvious that’s where we’re heading, and you’re doing no one any favors with these small, sneaky steps in that direction.