Life not so rosy for women selling Mary Kay cosmetics

Mary Kay is a storied brand in the beauty products industry. But an investigative story in Harper's Magazine suggests the company's success comes at the expense of the women who sell the products.

Tess Vigeland: What image pops into your head when I mention Mary Kay cosmetics? The pink cadillac, right? Well-attired women holding parties with potions and lipsticks and all manner of beauty aids to sell. It's an almost mythical success story in the annals of American business. But there's more to that story and not all of it is pretty. Virginia Sole-Smith wrote the cover story for the August issue of Harper's. It's titled is "The pink pyramid scheme: How Mary Kay cosmetics preys on desperate housewives." Welcome to the program.

Virginia Sole-Smith: Thank you for having me.

Vigeland: So the first party that you ever went to was really a recruitment meeting as much as a tool to sell makeup. How much were you told you could earn as a Mary Kay consultant?

Sole-Smith: So in the magazine article, the first party that I attend -- the first party that I attended ever for Mary Kay -- was hosted by a senior sales director named Daria Rocco. What Daria painted the picture of was that we could expect to make an executive-level income or a corporate-level income, those were the terms she used. She was driving one of the pink Mary Kay cars out in the parking lot, it was brand new and gorgeous. She was wearing a beautiful Mary Kay suit. She was the very picture of success.

Vigeland: And what kind of income are we talking about?

Sole-Smith: What I was then told when I met with a recruiter, she told me that if I held one skin-care class a week, I would be able to earn $17,040 a year. She also told me, 'A lot of my consultants are making $100 an hour.' In reality, the best that we were able to figure out for actual numbers is that of the U.S. sales force of 600,000 women, maybe 300 of them are making six figures. The rest are, at best, making $25,000-30,000 a year. It's really a minimum wage or a sub-minimum wage job.

Vigeland: And you use the phrase, "the best we were able to figure out." This is not a public company, so it's not easy to get numbers like this.

Sole-Smith: All they tell us is that they do $3 billion in wholesale orders a year. They don't track retail sales. So we don't know, once you buy your inventory from Mary Kay, how much of it ends up in the retail market; we don't know how much the consultants are actually pocketing as their salary.

Vigeland: What's really striking in this story is the women that you interviewed who ended up with thousands of dollars in debt, marriages fallen apart because of this endeavor. How is it that so many of these consultants get in over their heads when it only costs $100 to start up?

Sole-Smith: Right. Mary Kay loves to say that. It's a very low barrier to entry. A hundred dollars, all it gets you is a couple of samples, some sales brochures, some catalogs to pass out to your friends. But it doesn't give you everything you need to really run the business. So as soon as you buy that $100 starter kit, you're at your orientation, step one to launch your business and be successful is place your inventory order -- before you've made a single sale, before you've even met with a customer.

Vigeland: And you mentioned in the article that when you said, 'Well I don't have that kind of money' up front, they suggested that you apply for a Mary Kay Rewards Visa card.

Sole-Smith: They certainly did. Antonella explained to me that she actually discourages her sales recruits from spending cash on their products. She said the better way to go would be to open up this credit card. When I said to her that I'm not looking to go into any credit card debt, she she said, 'Oh no, no, it's not debt. It's an investment in your business.'

Vigeland: You do point out that the Federal Trade Commission has never taken any action against Mary Kay. The federal government has not done anything. But you do bring up the phrase Ponzi scheme. What is the difference between Mary Kay, as you describe it, and a pyramid scheme?

Sole-Smith: The FTC defines a pyramid scheme as a business where the primary way you make money is by recruiting others to join the program and charging them fees for participation -- not by selling products to the retail public. Really, the only way to make money is by recruiting other people to sell products as part of their sales unit, which they then get paid a commission off of every time those women place a wholesale order. And that does look like a pyramid scheme.

Vigeland: What's been the reaction from the company?

Sole-Smith: So they want to have it both ways. They really want to say, 'Oh we offer tons of support for our women. We are there for them every step of the way. But if they're doing badly, it's not our fault. They're just independent business people.' And I don't think that works.

Vigeland: Virginia Sole-Smith is a New York-based journalist. Her article in the August issue of Harper's is "The pink pyramid scheme: How Mary Kay cosmetics preys on desperate housewives." Thank so much for joining us.

Sole-Smith: Thank you for having me.

Vigeland: We called Mary Kay for a response. This is what they said:

Mary Kay has a long and strong history as a premiere skin care and color cosmetics company - we've been in business for almost 50 years. We have more than 2.4 million independent beauty consultants in more than 35 countries worldwide selling our products and for the vast majority of them, it's been an extremely positive experience. That said, of course, like anyone who starts a small business, it may or may not be a fit and no entrepreneur is guaranteed success - it's a lot of hard work. Different people start a Mary Kay business for different reasons - some are looking for just a little extra income; some, especially with the current downturn in the economy, are looking for a new career; some are looking for the social aspects.

What's true for every independent beauty consultant is a simple model - she signs an agreement directly with the company, purchases her products directly from the company at a wholesale price and then sells the product to her customers at a suggested retail price. If she sells a $13 lipstick and bought it for $6.50, the profits are hers to keep. It's each person's choice on how much product she wants to purchase from the company to sell to her customers. What's also true for everyone who starts a Mary Kay business and isn't pleased: if she does decide to buy inventory, she can return any products she purchased and we will refund 90 percent of the purchase price within one year of purchase. The incredible and continued interest in Mary Kay along with the longevity, reputation and success of the Company speaks for itself.

About the author

Tess Vigeland is the host of Marketplace Money, where she takes a deep dive into why we do what we do with our money.
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I think this is just a little ridiculous. They prey on "desperate housewives"?? Seriously?? This makes women who actually do decide to take on this venture for Mary Kay sound like they are just big morons who have so little going on upstairs that they are easily suckered into a "pyramid scheme". And I suppose that the Mary Kay company should try to get people to sell their product by telling them they will fail?? They could never ever earn a car? I live in a small town, do not work for Mary Kay but did recently go to a Mary Kay party. Yes, the women hosting this party where "higher ups" in the company but they had also dedicated 11-15 years with this company. There is something to be said for dedication on their part which did lead to success and their longevity with this company. There were a total of 4 women, 2 were working on their 5th-7th car. One was working on their 1st and the other had just started. The 2 that had earned cars had been with the company 11-15 years. I think of myself as an average woman. I have 3 children, work and also purchase makeup. I dont see why woman who join a company to sell skin products, cosmetics, etc should be deemed "prey". I myself love cosmetics. I have them from many different makers. I love Estée Lauder!! It's one of my faves! But I have never been offered the opportunity to sell this product unless I want to work for the store that has makeup counter in it. There are lots of women like me that love cosmetics. Why not try to make a little extra money or at the very least get ages items discounted. I think it's a huge leap to find the definition of pyramid scheme and apply it to Mary Kay. Fact is there are women that do earn cars from this company. There are women, that while raising a family have managed to make a good living from this company. These women can choose how much time they want to put into this company while still working part or full time job, not to mention the full time job of being a mother. I think calling Mary Kay a scheme would be Acceptable if there was no real way to make money. Fact is, you can make some great money in this company, meet new people and open yourself up to new opportunities. I see positive things from this company, not negative. And it is a "sales" job. If you apply yourself and "sell" you will in fact make money. You can EARN a car. These things are true and very much so tangible.

Obvious story is obvious. Like Amway, anyone with the tinest bit of common sense realizes this is a scam, from start to finish. If it wasn't, they'd be willing to show hard data, buy back their product at 100% rather than 90%, or better yet, not make you buy inventory.

The entire structure is dependent on continually adding new 'sales' people, and the only way they can succeed is to add more 'sales' people under them. The actual products aren't the focus of the business, they're the distraction.

I'd question anyone who says otherwise without hard evidence, especially since simple math shows it's a failure.

If a friend comes over to your house to sell you on selling Amway or Mary Kay, throw them out. They're not your friend.

FYI: Mary Kay will buy back your product at 90% if you have had it for a year!! You could have even used most of the stuff. How many companies offer that kind of guarantee??

If a person buys a membership to a gym and still stays out of shape do we write an article attacking the gym? Of course not, that wouldn't make sense. Just because someone buys a starter kit with Mary Kay (which is an incredible value by the way) and then "trys" it for all of two weeks doesn't mean Mary Kay doesn't work. The company is amazing and I have been with them for over 4 years. It does take work and effort. Most small businesses fail after a short while. It takes work but I have found after earning several company cars and having a lot of success that Mary Kay does work if you work it. I would like to know how long this person "tried" doing one party a week. Did they really use the support of their Director and stick with it long enough to see results (like 6 months or more)? I agree with the person who said that $100 an hour isn't bad....and certainly more than min. wage! If you only work your business 3 hours a week and even make $100 that's more than working at some retail shop. The inventory helps me take better care of my customers and where can you start your own business with a 90% guarantee for a year?! Most small businesses cost thousands and thousands to start with no guarantee.

Amen! And most companies need a year to really get off the ground. You see a return on your (very small) investment a whole lot sooner. And you do have a ton of support. You also do not have any kind of deadlines or quotas to meet. Not a lot of "profitable" sales jobs offer that flexibility or freedom. I say f you are interested in becoming a salesperson then be smart. Have an idea in your mind of what you expect. Make sure that what you expect from the company is parallel to what you expect of yourself. Like any job, work hard and you will be successful. But if you are still hesitant ask questions. Figure out what makes you so hesitant and ask a Mary Kay representative. They are there to answer your questions, ALL of your questions. They are not there to force you to sell, but to offer you the opportunity to be part of a multi-billion dollar company that is in fact a household name. Who doesn't recognize the Mary Kay name? And how can a company that has been in business this long be a bad thing??

Just because Mary Kay has been around for 50 years does not make it any less of a pyramid scheme. Bernie Madoff was engaging in a Ponzi Scheme for well over 20 years, probably a great deal longer and wasn't caught until certain conditions were met. If the historic market crash hadn't happened, I have no doubts that Bernie would still be scamming people. Sometimes the biggest scams are the ones that are held in plain sight. I'm afraid that Mary Kay falls into this category.

I've never been in Mary Kay but I have been approached numerous times about the "opportunity". As a business owner myself, one I might add that I started from scratch when I was 17, I have learned a great deal about how things work. And the things i have heard from the Mary Kay sales flunkies have given me pause to wonder, just how big is this scam anyways? I assumed for years that it was just boisterous overly made up women hawking way too expensive makeup for pin money. But this is not the case.

The business model from what I have seen (and ms. Sole-Smith points this out) is to entice women, many of them complete novices, into purchasing obscene amounts of inventory for their "businesses" before they have sold anything! This is because their "up-line" gets a commission on the big inventory packages. All sorts of tricks, cons and manipulations are put into place in order to cajole women into purchasing inventory. In fact, a new rep who comes in without an inventory package purchase of $600 or more is considered "unqualified". Inventory package levels have alluring names like "emerald stars" or "pearls" - which sounds great - but a pearl order ($4800) that rots in the basement accruing credit card interest each month is no pearl!

The other thing that bothers me is that you can never ever get a Mary Kay rep to actually show you an accounting statement for a year or several years that shows that they actually made MONEY. I'll hear all sorts of income claims like "executive income" and when it comes time to "show me the money" then I hear the stories - how they used to make a lot of money but now they don't because they don't have time, or because their health is poor, or because they really don't work their business anymore. The bottom line, is that there is no way that the overwhelming majority of Mary Kay reps can make money in a sustainable fashion, because they are always on a hampster wheel to find new recruits, talk them into big packages, to account for the old reps that dropped out and sold back their inventory. (Mary Kay doesn't mention this, but when women sell back at the 90% refund, the "up-line" takes a commission hit of upwards of 25%, ouch!)

I am really grateful that Ms. Sole-Smith has written about this great American fraud, the size of which is akin to the scraps of Bernie Madoff's Ponzi Scheme, and I hope this dialogue will prevent more innocent women from being preyed upon.

PS Should any Mary Kay reps decide to slam me, I am 100% open to reviewing your financial documents that demonstrate that you made money, after expenses, for at least 2 years. SHOW ME THE MONEY - it would absolutely be a first.

You sound like a baphoon, which I am sure you are not...right? This is a sales 'business', like selling cars, working at a bank, selling insurance, etc. It is totally dependent on your efforts, abilities, skills, and personality. Similar to your job, if you don't show up, you don't make money. Life happens, and there will be ups and downs. The difference is, your employer will fire you if you don't show up to work, MK will not. It is always there for you when you are ready to resume your business activities. It is NOT guaranteed to make you money as if money grew on trees, or that the black and white bag multiplied cash for you. You say, SHOW me the money... Could we please see YOUR paystubs from your job?

Shame on you NPR and Tess Vigeland for not doing your homework and offering this woman airtime. I'm surprised that as a journalist, you didn't consult an expert, like someone from the Direct Selling Association, for example, or at least bring in a counter experience. You just let one person and HER experience drive this story.

Is she credible because she tried and failed?

I've been a consultant in network marketing for 2.5 years. I rep a different company, not Mary Kay. I earn over $6k/month and growing, and I did build my business part-time, along side my full time public relations firm.

So here's a different perspective. We do not carry inventory. We show our products and then client's orders are shipped directly to their doorstep.

We offer a business with products people can sell and a system to build a thriving 'volunteer' sales force. As consultants, if we and our team do not sell products, like any other business, we do not make money.

We can earn off of our direct sales, thus even without a team and still earn.

Just like any other business, we can earn more than the people above us, even if they've been in the business longer than us. How? Try doing your research.

The way Mary Kay was represented in this story is not the industry standard, how a solid business is built, and certainly NOT how we build our business.

It's a shame Ms. Sole-Smith got a voice on NPR, because it's one story and one-sided. Network marketing can offer a VIABLE and ETHICAL opportunity for people to take control of their financial futures.

Compared to starting any other business, network marketing takes as much work to make successful, but with less risk and overall financial investment. Like any other entrepreneur, we get paid for our vision, commitment, and hard work.

Regarding the comment about the consultants on the plane. When was the last time you heard people that excited about their job?! Isn't that a good thing amidst layoffs, over-worked, and under-paid Americans? Just because they were openly celebrating success, doesn't mean they were trying to "recruit" you.

The positive stories I have from my team alone are countless to how this opportunity has helped to change people's lives, beyond just financially.

There are over 75 million consultants worldwide. “Mad Money” market guru Jim Cramer recently told his CNBC viewers: “Direct selling has never gotten its due from Wall Street. It’s time we recognize that the direct sales model works, and it works well.” There is little question why financial notables like Cramer, Warren Buffett, Ray Chambers and Suze Orman have touted businesses based on direct selling.

Maybe NPR, you should find out why.

Of course it has not been investigated by the Federal Government, pyramid schemes are a STATE issue. Unless the scheme is with the Financial sector, it is up to the STATES to deal with it. This is how a Federal System of Government works.

Mary Kay avoids the scheme by following the laws of the States. Mostly by having a break point in the set up. At some point the people below stop counting towards the commission of the person. Amway manages this at the fourth or fifth level below.

It is a scheme, just not a pyramid scheme. The way it works to get that big pay off best is to get a sucker, I mean, friend to become a distributor below you and buy their inventory from you. If you can get a new person every week to buy inventory from you, sign up for a Visa, buy training programs, web page "business" sites, etc you will get very rich. But you need to keep getting new people as the old ones get stuck with all that "investment cost".

All multilevel marketing programs are schemes. yes, you can make money but you have to con people or be the first to be selling the MLM in your area. Which is why Mary Kay is seeing most of its growth overseas.

I am a big fan of NPR and Marketplace unless you are dealing with a subject where I have some knowlege beyond what is in your story. This writer has no credibility or legal standing to say that Mary Kay is a pyramid scheme. The company has been in business for decades and has shown consistant growth around the world. Just because someone has written a predictable and snide article is no reason to give them air time or to do an interview that does not challenge their false assumptions. Your link to the article requires someone to subscribe to the magazine to actually read what was written. Like any business you can make as much or as little money as you earn through selling your product with Mary Kay or any other type of business. People who use the products tell me they are of high quality. I know the company leases thousands of cars each year for its top sales people in the U.S. and abroad. Instead of attacking Mary Kay Marketplace would do well to see how the business model was established and why it works so well. In addition, Mary Kay's story of overcoming discrimination in the workplace is an inspiring one. Do your homework.


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