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The answer is no, not all direct sales companies are MLM or pyramids although confusingly similar terminology is being used by some Companies in an attempt to recruit. I frequently get questions from my customers or coaching clients on this issue because they have been approached by someone outside of my company and given inaccurate information. To clarify, I consulted Mary Kay Cosmetics Legal department and here is what they said:
“Mary Kay is not a multi-level or “pyramid” company. The following points concerning the Mary Kay marketing plan are of particular importance in distinguishing it from these other organizations:
- There is one wholesale sale (Company to Independent Beauty Consultant) and one retail sale (from Beauty Consultant to customer) of Mary Kay® products. There are no levels of wholesalers between the Company and the consumer through which products pass at varying discounts before sales. Thus everyone, whether Independent Beauty Consultant or Independent Sales Director (unit Director of Beauty Consultants), purchases all cosmetic products directly from the Company at the same published wholesale prices for resale to consumers of their choice. Everyone has the opportunity to buy at the same discount irrespective of their level within the independent sales force career path.
- Everyone recruited as an Independent Beauty Consultant is recruited to sell products at retail. Independent Beauty Consultants do not recruit others to buy products from them. All Independent Beauty Consultants are thus aware that all products purchased by them are for sale at retail to ultimate consumers (or may be returned to the Company for repurchase).
- Everyone begins as an Independent Beauty Consultant with the purchase of a starter kit. No compensation is earned by anyone on this starter kit purchase, i.e., “for introducing” a new Independent Beauty Consultant. No “investment” is required and no level within the independent sales force career path may be purchased by the payment of fees or by the purchase of a given quantity of products from the Company or anyone else. There are thus no “sales” of “levels,” “positions,” “distributorships,” or “franchises” by the Company or any of its’ Independent Beauty Consultants.
- Elevation from Independent Beauty Consultant to Independent Sales Director does not involve the payment of any fee, rebate, premium or hidden discount of any kind to either the Company or anyone else. Elevation, at the election of any Independent Beauty Consultant, is based strictly upon proven recruiting and sales ability.
- Any Independent Mary Kay Beauty Consultant who terminates her contractual relationship with the Company may return unsold products in resalable condition, and these will be repurchased by the Company per the terms of the Independent Beauty Consultant Agreement at 90 percent of her original net cost.
- The Company pays all commissions directly to Independent Beauty Consultants and Independent Sales Directors. The commissions are paid based upon monthly purchases and recorded on computer reports furnished with the commission payments. The entire marketing structure is based on and intended to foster retail sales to ultimate consumers. Commissions paid on any products returned by a terminating Independent Beauty Consultant for repurchase by the Company, pursuant to Item E above (i.e., products not sold at retail), are charged back to the commission recipient.”
In my early years in business, I frequently found myself in a position where I had to explain this to a prospective new independent beauty consultant’s husband because there were so many illegal pyramid and ponzi schemes at the time. In an effort to protect his wife, the husband had to understand that Mary Kay was not one of them. I admit, that as the economy is in a downturn, there are more and more of these dubious new companies attempting to recruit people on the “ground floor”. (before they are shut down and many unsuspecting victims lose money)
I hope that this post helps you to understand the differences and maybe avoid choosing the wrong company to start your home business with. As always, if you have further questions or wish to speak to me, fill out the contact form above. In addition, don’t forget to subscribe to my FREE weekly e-zine that is sent out each Wednesday and includes many extra FREE BONUSES!
