Mary Kay Inc. is an American privately owned multi-level marketing company that sells cosmetics products. According to Direct Selling News, Mary Kay was the sixth largest multi-level marketing company in the world in 2015, with a wholesale volume of US$3.7 billion.
Mary Kay is based in Addison, Texas, outside Dallas. The company was founded by Mary Kay Ash in 1963. Richard Rogers, Mary Kay's son, is the chairman, and David Holl is president and was named CEO in 2006.
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Business model
Mary Kay sells cosmetics through a multi-level marketing model. Mary Kay distributors (called beauty consultants) can potentially make income by directly selling to people in their community, and also receive a commission on wholesale purchases made by people they recruit into the distribution network. Mary Kay distributors must purchase a $100 starter kit in order to qualify.
As a private company, Mary Kay releases few details about the average income of its sellers. In 2005, Mary Kay reported that its wholesale worldwide sales exceeded US$2.2 billion. In 2010, worldwide wholesale figures were reported at US$2.5 billion. In 2015, worldwide wholesale figures were reported at US$3.7 billion. None of these figures take into account product returns.
The table below shows the company's reported sales figures in more detail.
Note: Unless otherwise stated, dollar amounts are in United States Currency, which has not been adjusted for inflation;
Manufacturing plants
The primary manufacturing plant is in Dallas, Texas.
A second plant was opened in Hangzhou, China, to manufacture and package products for that market. A third plant was opened in 1997, in (La Chaux-de-Fonds) Switzerland, for the European market. The Swiss plant closed in 2003.
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Cars
In 1968, Mary Kay Ash purchased the first pink Cadillac from a Dallas dealership, where it was repainted on site to match the "Mountain Laurel Blush" in a compact Ash carried. The Cadillac served as a mobile advertisement for the business. The following year, Ash rewarded the company's top five salespeople with similarly painted 1970 Coupe de Ville cars. GM has painted over 100,000 custom cars for Mary Kay. The specific shade has varied over the years from bubble-gum to near-white pearlescent effects. GM had an exclusive agreement to sell cars of the specific shade only through Mary Kay. The cars are offered to distributors as two-year leases, and distributors who choose to buy the cars are only allowed to resell them to authorized dealers. After the lease expires, the cars are repainted before being resold.
Mary Kay has different incentive levels for its consultants. Independent Beauty Consultants can earn the use of a white Chevy Cruze, in August 2014 introduced the limited edition Lipstick Red color option also for limited time, or cash compensation of $375 a month. Independent Sales Directors can choose a black Ford Fusion, Chevy Equinox, or $500 a month. Top Independent Sales Directors can choose between the pink Cadillac CTS, or cash option of $900 a month.
The specific qualifications for earning the car depend upon the country, and vehicle that is desired. If those qualifications are not met, then the distributor has to pay for a portion of the lease of the car for that month. Meeting the qualifications entitles the distributor to pay no monthly lease and 85% of the car insurance, or a pre-determined cash compensation award.
In 2011, a solid black Ford Mustang was introduced as a possible incentive. In 2014, a black BMW was introduced in its place, although the pink Cadillac remains the top reward for those distributors whose units purchase over $100,000 or more in a year. There is no tracking by the company of actual sales.
Earnings for salespeople
There are two ways for consultants to earn money in Mary Kay:
- Recruiting
- Retail sales
Recruiting commission earnings
"Recruiting commission earnings" reflects the commission and bonuses of 4, 9 or 13% that one earns from the wholesale purchases of their team or unit. These bonuses come straight from Mary Kay corporate and not from said consultants team or units pockets. It does not include income from retail sales nor does it include income from the Mary Kay tools business.
In February 2010 Mary Kay (Canada) claimed the following incomes for its salesforce:
- 29,675 people were consultants during the year;
- 1,878 consultants earned more than CAD 100 in commission;
- 276 of the 553 sales directors earned more than CAD 17,471 in commission;
- 15 of the 23 national directors earned more than CAD 100,000 in commission;
For Mary Kay (USA) National Directors, the 2006 median gross income (prior to business expenses) was $175,443.
Retail sales earnings
Mary Kay consultants earn a 50% gross profit on products sold at full retail price. The quoted figure of US$1,057.14 per year (2015) for the average consultant was derived by dividing the annual wholesale sales by Mary Kay Inc., by the number of Mary Kay consultants. This figure does not take into account product returns, eBay, auctions, sales at a discount, and purchases by "personal use consultants" which would lower this figure.
Consultant turnover rate
A 68.6% per annum turnover figure has been calculated based upon information supplied by Mary Kay (USA) to the Federal Trade Commission.
An 85% per annum turnover figure has been calculated, based upon the data supplied by Mary Kay (Canada). That document excludes individuals who earn a commission and are in the company for less than one year. It also excludes individuals who are in the company for more than one year but do not earn a commission check.
Court cases
Woolf v. Mary Kay Cosmetics
The 2004 court case Woolf v. Mary Kay Cosmetics was originally decided in favor of the plaintiff, Claudine Woolf. In doing so it marked the first time that workplace rights could be applied to independent contractors who worked from their home. This decision was stayed and then reversed after an appeal. The Supreme Court denied certiorari on 31 May 2005.
In this case, Woolf was terminated from her position as director because her unit failed to make production for three consecutive months. Woolf contended that her firing was illegal, because of her medical condition -- she was suffering from cancer.
Liquidator court cases
In May 2008, Mary Kay, Inc., sued Touch of the Pink Cosmetics, a website that sells product from former Mary Kay consultants at heavily reduced prices. The company claims that Touch of Pink interferes with their business by offering to purchase inventory from discontinued consultants, and that their use of the Mary Kay trademark in reference to Mary Kay products they sell is deceiving.
On 20 July 2009, Mary Kay, Inc., sued Pink Face Cosmetics for trademark infringement. The specific issue appears to be the use of the Mary Kay name, in selling Mary Kay products on eBay and other Internet venues for less than the wholesale cost of the products.
Animal testing
In 1989 the company announced a moratorium on animal testing of its products, after pressure from animal rights groups. They were among the first in their industry to do so and to sign the PETA pledge.
In 2012, when the company expanded into China, the Chinese government required Mary Kay to comply with Chinese law that requires animal testing on all health and beauty products. The Chinese government carries out this testing, not Mary Kay. Thus Mary Kay has been removed from PETA's "Don't Test on Animals" list to the "Do Test" list.
References
Source of the article : Wikipedia
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