Is Mary Kay a Pyramid Scheme? What You Should Know
If you are looking to become a consultant for Mary Kay, there are a few things about this opportunity that you should definitely know. While you can make money, it is not all its cracked up to be. Much of the information you hear is misleading and is intended to get you to sign up.
The commission structure of this business model brings up the question.. is Mary Kay a pyramid scheme? While many people will tell you that it is a pyramid scheme, I do not think that it is. HOWEVER…. this does NOT mean that it is a good business opportunity and I will go over why.
Mary Kay Consultant Review
- Website: marykay.com
- Price: $100 for starter kit
- Recommended?: No, more on this at the end
Just so everyone knows, this is a review of the business opportunity that Mary Kay offers. I will not be reviewing the products themselves.
Mary Kay is a company in the cosmetics industry. They offer a range of products from skin care, to makeup, to fragrances.
The reason you, and many others, are interested in this business is because they use a direct sales business model. This means that individuals like you and I can become consultants and sell their products ourselves.
This business also has what is called a mlm structure. What this means is that you can recruit people into the business beneath you and get paid for their efforts. And this is the pyramid scheme side of it all.
Related MLM’s: Younique
The Cost of Being a Consultant
To start out you are going to have to spend a minimum of $100 on the Starter Kit. This kit includes the following…
In the Starter Kit you can see that it says you get a 50% savings on your Mary Kay personal website. This is an additional charge if you want your own website. It will cost $30 for the first year and $60/year thereafter.
The business cards will also cost you extra if you choose to get them.
In order to stay an active consultant you are going to have to purchase $200 of wholesale products every 3 months. If you do not do this you will become inactive and you will not be eligible to receive commissions from your team.
The 3 Ways to Make Money
As a Mary Kay consultant, you will have 3 ways that you can make money. These include…
When you sign up to become a consultant you will have to purchase wholesale products from Mary Kay. You will then sell these products at a markup price and you will keep the difference.
Commissions From Your Recruits
As mentioned, you can earn money from the efforts of the people you recruit into the business beneath you. To qualify to earn “team” commissions you must have at least one active recruit and have been promoted to the rank of Senior Consultant.
The amount of commissions you will make ranges from 4-13% and depends on your rank.
You can also make money from how well your “team” performs. This ranges from $50 to $3,000 and is based on the amount of product volume you and your team purchase wholesale.
Your “team” by the way is just what they call the group of people that you recruit into the business and train.
A Look Into The MLM Side Of It
As mentioned, Mary Kay is a mlm business. MLM stands for multi-level marketing. And this means that you can recruit people into the business and get paid commissions from what they do.
You can make anywhere from 4-13% on the orders that your team members place.
You see when you are a Mary Kay consultant, you buy products from them at wholesale price, which you then sell directly to consumers at a markup. These wholesale order are what you are going to be earning commissions off of.
The amount of commissions you earn depends on the size of your team. In other words, its depends on how much you recruit new members which determines your rank. The criteria you have to meet to receive high commissions and move up the ranks is as follows…
- Independent Beauty Consultant – 4% Commissions
- 1-4 active team members
- $50 team builder bonus on 4th qualified recruit and others after
- Independent Sales Director – 9% Commissions
- 5 active team members
- Independent National Sales Director – 13% Commissions
- 5 active team members that place a minimum wholesale order of $200 and you place a minimum wholesale order of $600
Isn’t This a Pyramid Scheme?
Before I compare this to a pyramid scheme it is important for me to go over what makes a pyramid scheme a pyramid scheme in the first place.
A pyramid scheme in its purest form does not have any products for sale to the general public. They rely solely on people buying into the scheme and paying a charge to become a member. All of their revenue comes from people paying to get in.
However, just because Mary Kay has products doesn’t necessarily mean that it isn’t a pyramid scheme. In fact, most pyramid schemes do have products for sale in an attempt to disguise themselves as legitimate mlm’s. You call these product based pyramid schemes.
In order for an mlm to be considered legitimate, its revenue must not be too dependent on people buying in as members. It must rely on product sales to the general public. And because Mary Kay does rely on product sales to the general public it is not a pyramid scheme…. well .. probably not.
There is somewhat of a blurry line that is difficult to see if Mary Kay crosses. And it could actually be a pyramid scheme that is very difficult to spot.
Related Reading: MLM vs Pyramid Scheme
How It Could Be a Pyramid Scheme
One thing about Mary Kay’s business opportunity is that you have to buy products to stay active. As I’ve said you must purchase $200 worth every 3 months.
And from what I have seen and read there are a good number of people that have purchased the products because they felt forced to. They purchased just to stay active even though they had no need to actually purchase more.
This leads to people having too much product and not being able to sell it all.
There are plenty of examples of this. I can show you is from eBay. If you search for Mary Kay Starter Kits on eBay you will see a bunch of new and half used starter kits for sale at very low prices. These were more than likely purchased by people, because you have to purchase a starter kit to join in, and then the consultants gave up on it all and are now just trying to get some money out of it.
The starter kits aren’t all that big of a problem in my opinion however. It is how you are forced to buy $200 of products every 3 months that I have a problem with. Why can’t they just let you buy products as you need them?
The fact that you are forced to buy products and that the person that recruited you will make money from your purchase does make me question the legitimacy of this business and brings up the whole pyramid scheme thing.
Sound Like a Good Opportunity? You Might Want To Reconsider
The commissions that you earn from other members is where the real money is at and every one that actually makes good money with Mary Kay knows it. You have to recruit, recruit, and recruit some more if you want to make it.
Sure you can make money from directly selling to customers, but this isn’t going to be that great.
If you want to make good money you are going to have to be a recruitment machine.
To prove to you how difficult it is to actually make good money, take a look at these numbers from consultants in Canada in 2015. I only could find this for Canada, I don’t know why, but it accurately represents how difficult it is.
There were 4,104 independent consultants that year. Only 47.3% made more than $100, the rest probably just gave up I’m guessing.
At the top of the consultant list are the National Sales Directors. There were only 18 total and of them only 61.1% made over $100,000 that year.
So that means only 11 people out of the 4,104 independent consultants total made over $100,000.
Final Thoughts & What I Recommend
I don’t think that working as a Mary Kay consultant is that great of an opportunity. It is just too difficult to make money for the average person. You have to be one heck of a salesperson and good at recruiting to make it happen.
Another problem with Mary Kay is that it has been around for quite a while. This means that the market is pretty saturated and it will make recruiting difficult. With an mlm like this it is best to get into the business early on.
If you are like me and are just not the salesperson type, and you want another option for making money with your own business, you should read my post on how I make a living working online (link below). I work for myself online and its a pretty awesome career. In the post I wrote I explain what it is that I do, how it all works, and how others can do the same.
Comments, questions, concerns??? Leave them below in the comment section and I’ll get back to you soon 🙂