There Is No 50% Profit
Those of us who have been hanging around Pink Truth for a while know that the idea of 50% profit in Mary Kay is a total lie. If a consultant sells all of her product at full retail, with no discounts and no giveaways, she has a 50% gross profit… out of which all other expenses have to be paid.
There’s not 50% profit, no matter how you slice it. And when you do discounts and promotions, you can eat into any potential profits mightily. Let’s face it, with all the MK ladies out there, it’s hard to sell the products at full retail. So the question becomes whether you’d rather sell nothing or whether you’d rather give discounts and incentives. Here’s one such promotion:
When you do a reorder or even meet someone say… “How do you like to get your cosmetics? Full price, Half off or FREE?”
She will say ‘what do you mean??’ You say… “Well – it is your lucky day – you were supposed to meet me – because when you become my customer you can have all of your cosmetics FREE for the rest of your life!!!!!”
For every purchasing girlfriend you get together for a makeover – you will get $10 of FREE MK! 8 girlfriends who purchase from me at a get together – you get $80 FREE!! So anytime you want cosmetics –just have a get together and you can get yours for free anytime- all year long!!!
Or… Half Off – Ask around at work and get 10 orders for me and you get a HALF-OFF shopping spree!!! You can do this as many times as you want to!!!! Or – of course – my favorite – you can just purchase at FULL PRICE!! The choice is yours!!!
I realize that retailers all run sales and special offers that cut into their profits. It’s a gimmick used to get people in the door and get them buying. I’m not opposed to that basic marketing tactic.
Unfortunately, it seems so few sales in Mary Kay can be made without some sort of discount or giveaway. Every time you turn around, your director is telling you to give away a lip gloss, or offer a $10 free certificate, or give away hostess gifts, and do a buy one / get one free, or discount the discontinued products. There are women having going out of business sales and there are eBay and Facebook Marketplace. Any Mary Kay customer who pays full price is a fool. But the consultants pay the price, and they will never see a 50% profit.
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As is the way with MLMers, they misuse or conflate business terms. If you pay $10 for an item and sell it for $20, that’s a 100% margin on that particular sale. But if that $10 item was part of a $1000 order, you are still $980 in the red, before your non-inventory costs are included!
You don’t turn a true business profit until your aggregate revenues (including commissions) exceed your aggregate expenses. That translates to generating well over $1000 in sales to cover inventory costs as well as other business expenses. Research shows that 99.6% of MLMers will never cover their aggregate business costs with sales revenue and/or commissions. And the nature of pay-to-play endless-chain recruiting schemes like MK guarantees this.
This is why an accurate business ledger and proper use of business terms is so important. A new MLMer keeping an accurate ledger will very quickly see the folly of MLM participation. Their little business will perpetually ask for more cash infusion as cumulative costs grow faster than the revenues and commissions to cover them.
Sales margin is necessary, but does not constitute profit until, in the aggregate, total revenues exceed total costs. Good luck selling enough MLM product at sufficient margin to generate a true profit. The odds are not in your favor!
I was not taught how to keep my books by my director/recruiter/NSD Kay Hall beyond basics of tracking items, keeping receipts, etc. for when I had my taxes done. I figured out pretty quickly that if I wanted to truly end in the profit zone, I would have to make severe decisions as to how I ran my business if I didn’t recruit. Let’s jus say that it took 3 years before my schedule C said I was profitable. And when I say profitable, I mean profiting only in the hundreds of dollars for a year’s work…not thousands. It certainly was not worth my time and effort to pay myself way less than minimum wage for all of the anxiety MK caused me. I had a good network of customers and knew that if I couldn’t make a decent part-time income from selling only, no one could.
Quitting was the best thing I ever did. From there, I ended up on a path to where I am today career-wise. Had I stayed in MK, I most likely would have stayed in my then J.O.B., not taken chances, and NOT end up with a fantastic career that provides insurance, sick days, generous time off, a 401K, and on and on. I thank God that he opened my eyes and that I paid attention to the signs to QUIT!!
“retailers all run sales and special offers that cut into their profits” … they have HIGHER markup, often 3-6x their cost. CVS can sell lipstick at 50% off and still make money