Is Mary Kay a Pyramid Scheme? The Dark Underbelly of the Pink Cadillac

If you’re an enterprising self-starter considering joining Mary Kay, you may be asking — is Mary Kay a pyramid scheme? The well-known beauty product company has been selling its items from the trunk of a pink Cadillac for sixty years and is familiar with lawsuits and complaints from unhappy former employees.

Our team at Business2Community has reviewed the facts to create this guide, helping you understand whether Mary Kay is a pyramid scheme, MLM, or a real business opportunity. We will explore the company’s history and how its business model works. We’ll also examine genuine testimonials from customers and employees to see if it’s a wise investment for those looking to become Mary Kay consultants.

The Mary Kay Business Model

Let’s have a look at how the Mary Kay business model works to help you understand why Mary Kay is not a pyramid scheme, but also why it could be a multi-level marketing company.

Background of Mary Kay

Mary Kay is a cosmetics company that employs the direct selling business model. This means that the people who sell for Mary Kay, known as consultants, buy products from Mary Kay and then sell them directly to consumers. The Mary Kay mission according to the company is to empower women, enrich their lives as well as their families, and they also emphasize conservation efforts.

Mary Kay was founded in 1963 by Mary Kay Ash. Mary Kay calls its sellers “consultants”, likely to avoid paying for Social Security and benefits. In its first year, it started out with just 318 consultants, and a revenue of $198,154 coming from sales.

By 1995 the company reached $950 million in sales and was also making significant revenue around the world. The company has continued to grow. In 2019 it became the 6th-largest network marketing company in the world with $3.25 billion in sales.

One of the reward for highly successful beauty consultants was a pink Cadillac – an icon that has become synonymous with the brand. The company claims that over 24,000 salesforce members have qualified for a pink Cadillac or other car option.

Mary Kay Business Structure

Mary Kay relies on its independent beauty consultants who make up its sales force. The consultants purchase their inventory from the Mary Kay wholesale division. They typically sell the products through their own websites, social media, or through parties they host in their homes.

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Consultants get to keep the profit they make from selling the products, and they earn a commission when they recruit others below them.

In short, consultants make their money with Mary Kay in two ways:

• Commission income from recruiting
• Retail sales income

Commission earnings based on recruiting include commission and bonuses ranging from 4 to 13% from people purchasing Mary Kay products. The bonus percentage doesn’t include income from retail sales.

The Mary Kay USP

The unique selling proposition of Mary Kay cosmetics may not be so unique after all. They reach out to women with the prospect of empowering them through entrepreneurship and selling high-quality products. However, this is the same USP of most MLMs, of which, according to the Direct Selling Association, 75% are aimed at women.

Being One of the Mary Kay Ladies

One of the most impactful articles published bringing to light what it was like to be a seller for Mary Kay was written by journalist Virginia Sole-Smith for Harper’s Magazine in 2023. In her report, she talks about how despite the company’s claims that you can make up to a 50% profit through direct sales, and promising a 90% buyback of inventory that doesn’t get sold, it does not provide an easy way to get rich.

In an interview with CBS, she reveals that only 300 out of the 600,000 women Mary Kay consultants make six figures.

Smith, in an interview with Marketplace, says that the only way to make money is by recruiting others beneath you to sell products, so you can get a commission off every sale your recruits make.

Blogger Kalyn Brooke has also talked about her experience as a Mary Kay Consultant. She joined after trying the products, which she says really worked for her. When she was offered the starter kit at a reduced price, she finally bought into the idea of being an independent business owner and selling products to her family and friends.

She notes some of the realizations she had as she was getting started:

• She had to spend more money than what the starter kit costs, as there are extraneous costs bound up in promoting your own business, including business cards, website maintenance and promotion, and a credit card processing program.
• She also noted that she was encouraged to buy a lot of inventory (which is common in sketchy MLMs and pyramid schemes), which she ultimately declined to do.
• Before she managed to sell any products, she had already paid out $500. At this point, she bowed out because she wasn’t willing to invest the time and money needed to recruit more sellers and buy even more inventory.

Another woman – and one of the many former Mary Kay consultants – gave her two cents on the subreddit r/antiMLM. She got into Mary Kay because she received an offer for a free facial for her and her girlfriends. At the time, she didn’t know it was going to be conducted by Mary Kay.

She and her husband were struggling to pay for their wedding, and she felt that a couple hundred dollars more per month could be helpful. She notes how MLMs like this one prey on women like her, or single mothers who want a way to work from home.

Once she received her starter box, she was encouraged to get inventory, paying the lowest amount possible of $700 and putting it on her credit card. She put in the time and worked hard to sell her inventory, but ultimately wasn’t able to. She ended up losing money, but she recognizes that it’s not her fault that she wasn’t able to be successful in an MLM, although she is upset that she fell for the sales pitch.

YouTuber Dee Harker shares her experience as a Mary Kay consultant. She guides potential consultants on how they should go about conducting their business with Mary Kay.

The key points of her experience are:

• One of her biggest regrets is that she gave in to the pressure to purchase so much inventory. She recommends selling through a website and not buying too much inventory.
• She stresses that you don’t have to buy inventory, but they will push it on you. She does say that if you put the work in, you can have a successful business.
• She ultimately quit Mary Kay because she didn’t have the time to put into it to make a profit, and she also didn’t like the pushy salesy aspect of it.

The Experience of Mary Kay Customers

There are mixed reviews from customers about the quality of Mary Kay products. The company has a 2.9-star rating on Consumer Affairs and a 2.6-star rating on Trustpilot. Notably, on Trustpilot, 47% of reviewers gave the company only 1 star. Customers cite bad customer service and poor value for the money.

Even more concerning are claims that they charge more for products for women of color.

For another point of view, Mindful Midlife YouTube reviewer takes you through some of the products she bought, including a foundation brush, foundation, and concealer. She has mixed reviews for the products but overall says that she thinks Mary Kay is a good brand and would be more popular among the masses if it were sold in actual stores instead of by consultants.

Is Mary Kay an MLM?

Yes, Mary Kay is an MLM. The business model — that of a direct sales company — has all of the characteristics of an MLM, from having to purchase a starter kit and inventory to being strongly encouraged to recruit people to sell under you.

How MLMs Work

MLMs follow a business model wherein individuals, often known as independent business owners, or in the case of Mary Kay cosmetics, beauty consultants, sell products directly to consumers. The sellers earn a commission on the sale of those products.

These sellers are strongly encouraged to recruit other sellers to join their sales force, working beneath them as a “down-line”. When they do this, they receive a percentage of the commission on their recruits’ sales. The result is a hierarchical structure in which a seller’s earnings don’t only depend on what they sell, but also on the sales made by the people they recruit. This, then, becomes an incentive to recruit more and more people.

In the following video, John Oliver, from Last Week Tonight warns viewers of the dangers of MLMs. Oliver notes that MLMs are a nearly 40 billion dollar industry and he outlines the MLM business model, explaining that to get into the business, independent business owners must either sell the product from the company themselves and make their earnings from those sales, or recruit people and make money on their recruits’ sales.

He also points out that products sold by MLMs are not available on typical store shelves. You can only purchase them directly through the company’s distributors. These distributors might do more than just sell you the product; they could also try to recruit you to join the team. After all, they will benefit from the sales of any people they sign on.

Oliver reflects on how the MLM business model is actually shaped like a pyramid (as it is very similar to a pyramid scheme). However, to get around being technically labeled a pyramid scheme, they find loopholes to avoid legal problems. The Federal Trade Commission (FTC) has had a difficult time investigating MLMs for many years. That’s because they have enormous lobbying strength, and to muddy the waters even more, some members of the FTC are members of MLMs. For example, Herbalife, a giant nutritional supplement MLM has FTC executives working with it.

How Mary Kay Works

Mary Kay is a direct-selling company with many of the same traits as the typical MLM. As soon as you join the Mary Kay sales force, you must purchase a $100 starter kit. According to pinktruth.com, in order to continue as a consultant, you have to order at least $225 of wholesale products every three months.

The sellers higher up in the hierarchy tend to push the sellers beneath them to purchase more inventory than they need so the ones at the top can receive larger commissions. this technique is known as front loading. The results of this are often loads of unsold inventory and even debt.

Mary Kay does not track how much of the inventory purchased by consultants is actually sold to retail customers, leading to speculation that a significant portion remains with the consultants.

Pressure to Meet Volume Requirements

Those who sell Mary Kay cosmetics are under a lot of pressure to meet monthly production numbers, and as we mentioned before, they must make a minimum order of $225 every three months to be considered active.

To receive their commission checks, they must also meet monthly volume requirements. These requirements are eased the higher up you are in the sales force, while for new recruits they present an even greater challenge to succeed.

Compensation Plan

Mary Kay consultants are paid through a complex compensation plan with various titles and levels, such as Consultants, Star Consultants, Red Jackets, Team Leaders, Directors-in-Qualification (DIQ), and National Sales Directors. With each level achieved, the seller receives higher commission percentages and rewards based on the amount of sales they make and their team-building success.

While there is a potential for profit, especially higher up in the inverted triangle, many consultants find it too difficult to maintain the inventory levels required.

According to the Mary Kay website, the business model allows their beauty consultants to earn up to 50% profit on the products they sell to customers. Consultants can choose how much inventory they purchase from the company. They can also return that inventory if they can’t sell it. Mary Kay will also repurchase unused products at 90% of the original net cost, as long as they were purchased within the last year.

But, in the video below, one former Mary Kay consultant explains how the buy-back guarantee isn’t necessarily the best option. She also mentions that people often feel pressured to purchase too much inventory. Additionally, the person who recruited you might also pressure you to not send back your inventory. That’s because they’ll have to pay back what they earned on the inventory purchase you made.

Is Mary Kay Safe and Legit?

The answer is nuanced and requires one to understand the business model and experiences of its consultants. Mary Kay operates as an MLM, which means that its consultants sell products directly to consumers and can also recruit others to join the sales team, earning commissions from their recruits’ sales.

The Nature of MLMs

While MLMs are not inherently unsafe, and in fact there are people who have success selling with these types of businesses, it’s important to be aware of the potential risks involved.

MLMs, including Mary Kay, often require consultants to purchase a starter kit and maintain a certain level of inventory to remain active. For Mary Kay, the initial investment ranges from $100 to $200, and consultants must order at least $225 of wholesale products every three months to stay active.

Potential Risks

One of the main risks with Mary Kay and most MLMs is the practice of “front loading”. Front loading is when the sellers that are higher up in the hierarchy encourage their recruits to buy too much inventory upfront. For the recruits to make their money back, they have to sell all of the inventory, which takes a lot of time and dedication and even then, it may not be possible. Many consultants report ending up with unsold products, leading to financial stress and even debt.​

Additionally, reports suggest that average monthly earnings for Mary Kay consultants are very low – around $115, with many making even less.

Evidence of Success and Concerns

Some consultants do succeed in the Mary Kay business model, but the reality is that many others struggle. In the end, Mary Kay is a legitimate company, and it is also an MLM. Legally, it is not a pyramid scheme, because sellers actually sell products, not just a subscription or membership.

However, if you are thinking about joining Mary Kay as a beauty consultant, you should approach it with caution. Make sure to understand the financial and time commitments and the amount of effort required to earn a profit.

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