Mary Kay is a widely recognized cosmetics brand that operates through direct selling channels that are facilitated by independent beauty consultants. While Mary Kay is known for offering high-quality skincare and makeup products, there have been doubts raised regarding the legitimacy of its direct sales model. To resolve these concerns, let’s delve deeper into Mary Kay’s business structure and compensation plan to determine is mary kay a pyramid scheme.
What is Mary Kay?
Mary Kay Inc. is an American cosmetics company headquartered in Addison, Texas. It was founded in 1963 by Mary Kay Ash with the goal of empowering women and offering an income opportunity through direct sales. The company sells skincare, makeup, bath and body products, fragrances, and more.
Mary Kay relies on a direct sales force of independent beauty consultants to sell its products. Consultants host parties and one-on-one skincare/makeup appointments to demonstrate and sell the products. They can make commission off their personal product sales and the sales of any consultants they recruit.
The Mary Kay pink Cadillac is the famous symbol of the company. Top-performing consultants can qualify to earn the use of a pink Mary Kay Cadillac. The car incentive serves as motivation for consultants to build their teams and drive sales.
How Does the Mary Kay Compensation Plan Work?
Mary Kay uses a multi-level compensation plan to reward consultants based on their own sales and the sales of their recruitment teams. Here are the main ways Mary Kay consultants can earn income:
- Product Sales: Consultants earn a 50% commission on their personal retail product sales.
- Team Building Commissions: Consultants earn a 4-13% commission on the wholesale orders of any consultants they recruit. This includes orders placed by their recruits’ downline teams.
- Leadership Bonuses: As consultants build their teams and advance in status, they become eligible for monthly car allowance payments and other cash bonuses.
- Prizes & Incentives: Mary Kay offers prizes like free product, jewelry, electronics, trips, and the famous pink Cadillacs to top earners.
Consultants must stay active to qualify for commissions and bonuses. This requires a minimum of $200 per month in personal retail orders. Recruits contribute to a consultant’s team production requirements.
Is Mary Kay a Pyramid Scheme?
A pyramid scheme is an illegal business model that compensates people primarily for recruiting new members rather than selling actual products or services. Recruits are required to pay upfront fees and inventory costs to participate. Here are some reasons why Mary Kay does not qualify as a pyramid scheme:
- Mary Kay Sells Legit Products: Mary Kay sells quality skincare, makeup, bath products, and fragrances to real customers. Consultants earn commissions for selling actual products, not just for recruitment.
- No Required Inventory Purchases: Mary Kay consultants are not required to purchase inventory. Their starter kits only cost $100-$200. Purchasing product inventory is optional based on the consultant’s sales goals.
- Buyback Policy: If a consultant decides to leave Mary Kay, the company will buy back any unused inventory up to 90% of wholesale value. This reduces the risk of losing money from required inventory purchases.
- Refunds Available: Customers can return Mary Kay products for a full refund within 30 days if unsatisfied. This shows the company stands behind its products.
- No Required Fees: There are no required monthly fees or renewal costs outside of the optional $25/month website fee. Consultants are not pressured to pay recurring fees to remain active.
- Rewards for Retail Sales: Consultants earn the highest commission (50%) for making retail sales to outside customers. Recruitment is rewarded too but not the primary income source.
- Focuses on Quality Products: The company educates consultants on in-home party sales tactics rather than recruitment-focused tactics like hotel meetings and seminars.
The FTC has additional guidelines on differentiating legitimate MLMs from illegal pyramid schemes. Mary Kay aligns with the FTC’s standards through its focus on real products, buyback policy, lack of required inventory loading, and rewards for retail sales.
So while some employees may still engage in overly aggressive recruiting, Mary Kay’s official company policies are structured in a legal and ethical manner and do not fit the definition of a pyramid scheme.
Pros of Joining Mary Kay
Here are some of the main advantages of becoming a Mary Kay consultant:
Flexible Schedule: You can make your own hours and work as much or as little as you want. Mary Kay is appealing for stay-at-home parents and others seeking flexibility.
Low Startup Cost: With a starter kit costing only $100-$200, the startup costs are reasonable compared to many MLMs that require inventory purchases.
Quality Products: Mary Kay is an established company selling skincare and makeup products customers want to buy. Consultants don’t have to hard sell undesirable items.
Incentives & Prizes: Top performers can earn exciting rewards like free trips, cash bonuses, and the famous pink Cadillacs. This motivates many consultants.
Women Empowerment Mission: The company aims to empower women. Some find this mission-driven culture inspiring.
Helpful Training: Free online education and in-person events teach marketing, sales, leadership, and other skills that can be applied beyond Mary Kay.
Supplemental Income Potential: While very difficult, it is possible to earn supplemental income starting out or eventually work up to a lucrative full-time income with enough hard work and team building.
Low Risk: With no required inventory loading and a buyback policy, there is lower financial risk compared to many other MLMs.
Cons of Joining Mary Kay
However, there are also some potential drawbacks to consider before joining:
Diminishing Market: The in-home party model has declined in popularity. Competition from online makeup and skincare shopping has also intensified.
Over-saturation: Mary Kay has over 2.4 million consultants. Cities often have dozens of consultants competing over the same territories and social networks.
High Turnover: The turnover rate is extremely high. Around 50% drop out the first year. Getting started and maintaining sales can be very difficult.
Commission Caps: Team building commissions max out at 13% on 4 levels. Fast growing teams reach commission caps quickly. Leaders need to continually recruit to increase earnings.
Most Earn Little: The typical consultant earns less than $5,000 per year before expenses from Mary Kay. About 1-2% achieve the flashy Cadillac level. Significant earnings require major recruitment.
Alienation: Aggressive recruiting makes some feel pressured by family/friends in the business. Constant parties and social media pitches annoy others.
Exaggerated Income Claims: Marketing materials emphasize exceptional earnings over typical experiences. This leads to disappointment for most consultants.
Encouraged Inventory Loading: While optional, recruits are still encouraged to load up on inventory exceeding their sales needs. This raises failure rates.
Work/Life Balance: Achieving higher sales levels requires being very active with parties, networking, recruiting, and social media. Maintaining work/life balance becomes difficult.
The odds of making a decent income are low, especially with market saturation. Making money requires constantly growing a large team which most find extremely difficult.
Is Mary Kay Worth It?
With the pros and cons of Mary Kay in mind, is joining worth it?
If you just want to receive a discount on products for yourself, the starter kit makes sense. Selling occasionally to friends and family can earn a little side cash too. However, trying to seriously grow a business and reach the commissions and car levels advertised is unlikely.
You have to consider your financial situation and sales personality too. Are you comfortable constantly networking, promoting on social media, and recruiting colleagues to join your team? The vast majority of consultants find they aren’t able to maintain this kind of hustle or generate enough sales to progress through the rising career levels.
Success stories shared through company marketing represent a tiny fraction of top performers rather than typical experiences. Remember that 15,000+ quit each month while half quit within a year.
Before paying to sign up, think carefully about your income goals and if you want to rely mostly on family and friends for sales. With market saturation and the recruitment focused structure, significant earnings are extremely difficult for most to achieve. But if you have an open schedule and want to give it a try, the relatively low startup cost and buyback policy makes it a lower risk endeavor than many other MLMs. Just go in with realistic expectations.
Here are answers to 5 frequently asked questions about Mary Kay:
Q: Is Mary Kay a pyramid scheme?
A: No, Mary Kay is not a pyramid scheme. Consultants earn commissions for selling real products. Recruitment is encouraged but not the main focus. There are no required inventory loads or fees.
Q: How much does it cost to join Mary Kay?
A: You can become a Mary Kay consultant for $100-$200 which covers a starter kit of samples and business supplies. There are no required monthly purchases or fees outside of an optional website subscription.
Q: How much money can you make with Mary Kay?
A: Most consultants earn less than $5,000 per year before expenses. About 1-2% reach the top levels earning commissions of six figures or more. But significant earnings require constantly recruiting a large team which is extremely difficult.
Q: Is Mary Kay worth it?
A: Mary Kay can be worth it if you want discounts on products or minimal side income from casual sales. Expecting to seriously profit or reach high commissions like the cars is unlikely due to market saturation and the recruitment focused structure.
Q: Is Mary Kay cruelty free?
A: No, Mary Kay is not cruelty free. They do test on animals when required to comply with government safety regulations. Mary Kay is, however, not tested on animals for other purposes though.
Mary Kay has a legal compensation model focusing on direct sales of cosmetics rather than recruitment. But market saturation and declining popularity of in-home parties makes earning significant income a challenge without aggressively growing a team. Lower startup costs and buyback policy make it lower risk than many MLMs, but the odds of achieving flashy commissions like cars are still very low for most consultants.
While not a fraudulent pyramid scheme, assessing whether IM Academy is a good side hustle to make money requires a careful examination of its profit potential, as the realities may differ significantly from the income claims shared in marketing, akin to the experience with Mary Kay, which often works best as a discount on products or a casual side gig unless one possesses the sales drive and time for continuous networking and recruiting efforts.