Mary Kay

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Mary Kay Inc.
Type	Private
Founded	Dallas, Texas (1963)
Headquarters	Addison, Texas
Key people	Mary Kay Ash, Founder Richard R. Rogers, CEO David Holl, COO
Industry	Personal care products
Products	Skin care, cosmetics, nail care, sun protection, perfume
Revenue	$2 Billion
Employees	Independent sales force of 1.6 million worldwide (2005)
Website	Mary Kay Inc.

Mary Kay is a brand of skin care cosmetics and color cosmetics sold by Mary Kay Inc. Mary Kay World Headquarters is located in the Dallas suburb of Addison, Texas. Mary Kay Ash founded Mary Kay Inc. on Friday, September 13, 1963. Richard Rogers, Mary Kay's son, is chairman and CEO, and David Holl is president and COO.^[1].

In 1968, the company went public, being traded on the over the counter market. By 1976 it was large enough to be traded on the New York Stock exchange. In 1985, Ash took the company private through a leveraged buyout. As a private company, Mary Kay Inc. does not make all of its financial information available to the public.^[2]

Contents 1 Markets Mary Kay is in 2 The Products 2.1 Sales Volume 3 The Car 4 Earnings 4.1 Recruiting commission earnings 4.2 Retail sales earnings 4.3 Consultant turnover rate 4.4 Retirement income 5 Controversial Aspects 5.1 Woolf v Mary Kay Cosmetics 5.2 The 90 Day Clause 5.3 Inventory 5.4 Mary Kay Qua Pyramid Scheme 6 Mary Kay Ash Charitable Foundation 7 In popular culture 8 External links 9 References

[edit] Markets Mary Kay is in

Mary Kay Entered the market

Year	Market		Year	Market		Year Not Known	Market
1963	USA		1993	Singapore		?	Switzerland
1971	Australia		1993	Russia		?	Moldovia
1978	Canada		1993	UK		?	Netherlands
1980	Argentina		1994	Brazil		?	Lithuania
1984	Uruguay		1994	Japan		?	Latvia
1986	Germany		1995	China		?	Estonia
1988	Malaysia		1995	Portugal		?	Dominican Republic
1988	Mexico		1996	Finland
1988	Thailand		1997	Czech Republic
1991	New Zealand		1997	Ukraine
1991	Guatemala		1999	El Salvidor
1991	Taiwan		1999	Hong Kong
1992	Spain		2000	Kazakhstan
1992	Sweden		2000	Philippines
1993	Bermuda		2000	Slovakia
1993	Brunei		2001	Korea
1993	Chile		2002	Uzbekistan
1993	Guatemala		2005	Moldovia
1993	Malaysia		2006	India
1993	New Zealand		2006	Poland
1993	Norway		2008	India

A grey market serves vendors of Mary Kay Cosmetics in other countries.

[edit] The Products

The original nine skin care products were based upon a recipe from a tanner, allegedly whose skin was much smoother, and clearer than his age would indicate. In the United States, roughly 200 products are currently available. In other countries, fewer products are available, because they are reformulated to meet local laws or, more commonly, consumer preferences. For example, Asian makeup is sometimes much whiter than European makeup. African (the continent) makeup has traditionally been more ochre than European makeup.

Some products, such as Mary Kay Whitener, are created for a specific country, or geographic region. Other products, such as the Mary Kay Limited Edition, are created to reflect seasonal changes.

In the early nineteen nineties, recognizing that the majority of both its customers, and consultants were women of color, Mary Kay introduced colors that were more suitable for that market.

PETA celebrated a semi-victory in the cosmetics industry in 1989, when Mary Kay Cosmetics announced a moratorium on animal testing.^[3] The sought-for victory --- fur coats are not prizes --- came in 1996, when Mary Kay stopped offering fur coats as incentive awards for its sales force ^[4]. The final push may have been a series of embarrassing cartoons that appeared in newspapers across the country in the years immediately preceding the ban. In 1989 they were published in The Night of the Mary Kay Commandos^[5] by Berke Breathed. A famous line from the book reads Even their Uzis are pink.

In 1995, to adhere to the laws of The People's Republic of China, Mary Kay opened a plant in Hangzhou to manufacture and package products. A European plant was opened in 1997, in La Chaux-de-Fonds, Switzerland, to serve the European market but was closed in 2003.

In 2005, wholesale sales of Mary Kay products to the consultants exceeded $2.2 billion.^[6] This $2.2 billion figure does not account for products returned by consultants to the company.^[7]

[edit] Sales Volume

Mary Kay Sales Figures

Year	Wholesale Volume	Consultants	Directors	National Directors	Wholesale volume / Consultants
1963	$198,154[8]	318[8]	0	0	$623.13
1973	unknown	21,069[9]	450(?)	2(?)	unknown
1983	$300,000,000[9]	195,000[9]	unknown	unknown	$1,538.46
1989	$400,000,000[10]	200,000[10]	unknown	unknown	$2,000.00
1991	$511,000,000[11]	220,000[11]	unknown	unknown	$2,322.73
1992	$500,000,000[12]	250,000[12]	unknown	unknown	$2,000.00
1993	$735,000,000[9]	325,000[9]	unknown	unknown	$2,261.00
1994	$850,000,000[13]	unknown	unknown	unknown	unknown
1995	$950,000,000[13]	unknown	unknown	unknown	unknown
1995 Russia	$25,000,000[14]	unknown	unknown	unknown	unknown
1996	$1,000,000,000[13]	unknown	unknown	unknown	unknown
1997 China	$12,000,000[15]	15,000	unknown	unknown	$800.00
1998 China	$7,200,000[15]	unknown	unknown	unknown	unknown
2001	$1,400,000,000	800,000	unknown	unknown	$1,750.00
2001 USA	Unknown	500,000[16]	unknown	unknown	unknown
2001 Mexico	$20,000,000[17]	unknown	unknown	unknown	unknown
2002	$1,600,000,000	850,000	19,000[18]	more than 300[18]	$1,882.35
2002 USA	unknown	unknown	13,000[18]	unknown	unknown
2002 China	$120,000,000[15]	120,000[19]	unknown	unknown	$100.00
2003	Just under $1,800,000,000	1,100,000	18,500[20]	More than 100[20]	$1,636.36
2004	$1,960,000,000[21]	1,300,000[22]	27,000[6]	410[22]	$1,507.69
2004 USA	unknown	unknown	unknown	210[22]	unknown
2004 Canada	$125,000,000[23]	29,357[24]	661[24]	16[24]	$4,257.93
2004 United Kingdom	$7,700,000[25]	3,500[20]	More than 70[20]	0[20]	$2,200.00
2005	$2,200,000,000[6]	1,600,000[6]	31,000[6]	just under 500[6]	$1,375.00
2005 China	$300,000,000[26]	400,000[26]	unknown	unknown	$750.00
2005 USA	$1,300,000,000[26]	715,000[26]	unknown	unknown	$1,818.18
2005 Canada	unknown	32,820[27]	673[27]	17[27]	unknown
2005 Argentina	unknown	20,000[28]	500[28]	8[28]	unknown
2005 Mexico	unknown	175,000[29]	unknown	unknown	unknown
2005 United Kingdom	unknown	5,000[30]	140[30]	2[30]	unknown
2006 Worldwide	US$2,250,000,000[31]	1,700,000 +[31]	unknown	about 500[32]	$1,323.53
2006 Canada	unknown	34,272[33]	724[33]	18[33]	unknown
2006 USA	unknown	unknown	14,000+[32]	unknown	unknown
2006 UK	unknown	5000 [34]	140[34]	2[34]	unknown
2007 Canada	unknown	31891[33]	659[33]	25[33]	unknown
2007 USA	unknown	unknown	unknown	215 [35]	unknown
2007 Worldwide	US$2,400,000,000 [35]	1,700,000 [35]	unknown	unknown	$1,411.76

Notes:

• Dollar amounts are in United States Currency;
• Dollar amounts have not been adjusted for inflation;
• Official Mary Kay, Inc. policy is to round up their gross Wholesale volume.;
• Official Mary Kay, Inc. policy is to round down the number of consultants;

[edit] The Car

In 1968, Mary Kay Ash purchased the first Pink Cadillac, where it was repainted on site, by the dealership owner, to match the Mountain Laurel Blush in the compact.^[36] It was such a good rolling advertisement that Mary Kay Ash decided to reward her top five producers, by providing them with a Pink Cadillac paid for by the company in 1969. Pink was an obvious color choice --- matching the company's eye and lip color palettes. Since 1980, the shade used by the Mary Kay fleet has been exclusive to Mary Kay. Every two years, a Director or National can requalify for a new Cadillac. When the two year lease has expired, the cars are repainted, prior to being auctioned off. The shade of pink has changed over the years. In 1998, the color was changed to "pearlized pink". In honor of its 35th anniversary, the Mary Kay edition, white GMC Jimmy sport utility vehicle was offered in the United States. In 2007, the color changed to either black, or smoky platinum, depending upon which model the consultant chose to lease.

In the United States, the 2006 vehicle choice consisted of a Pontiac Vibe, Pontiac Grand Prix or a Cadillac. A Mary Kay director that qualifies for a car may choose from a Cadillac DTS, a Cadillac CTS, or a Cadillac SRX. In 2007 the offered cars were Saturn Vue, Pontiac G6, Pontiac Vibe, Cadillac CTS, and Saturn Aura.^[37]

The current (2005)GM (USA) fleet size is 9,870.^[38]

In the United Kingdom, Germany, The Netherlands, and Spain, the car is a pink Mercedes-Benz. In Argentina, one receives a pink Ford, while in Taiwan, it is a pink Toyota.^[39]. In Australia, one gets to choose between a Ford Falcon, or Volkswagen Beetle.^[40] In China, the vehicle is a pink Volkswagen Santana. In the Nordic countries you receive a pink Volvo V50.^[41]

The specific qualifications for earning the car depend upon the country, and vehicle that is desired. If those qualifications are not met, then the Car Driver has to pay for a portion of the lease of the car for that month. Meeting the qualifications entitles the Car Driver to pay no monthly lease and 85% of the car insurance, or a pre-determined cash compensation award.^[42]

Since the program's inception, more than 100,000 Independent sales force members have qualified for the use of a Career Car or elected the cash compensation option.^[7] It is not known how many Directors select the cash option in lieu of the car, but GM estimates that it has built 100,000 pink Cadillacs for Mary Kay.^[36]

[edit] Earnings

Mary Kay reveals as little about the financial side of the company as it can. As a consequence, there is very little reliable information about actual earnings by consultants.

There are two ways to earn money in Mary Kay:

1. Retail sales;
2. Recruiting;

In both instances, the potential income is affected by the consultant turnover rate.

[edit] Recruiting commission earnings

"Recruiting commission earnings" reflects the commission and bonuses that one earns from the wholesale purchases of their downline. It does not include income from retail sales. It does not include income from the Mary Kay tools business.

A press release ^[43] claimed the following for Canada in 1999:

Of the 16,000+ consultants:

• The majority earned less than $199 Canadian;
• 173 Sales Directors earned more than $19,000 Canadian;
• 3 national directors earned more than $100,000 Canadian;

In an April 2005 press release, Mary Kay (Canada)^[44] claimed the following for Canada in 2004:

Of the 29,357 independent Mary Kay Consultants:

• 2,267 earned more than $150 Canadian;
• 331 Sales Directors earned more than $15,500 Canadian;
• 8 National Directors earned more than $100,000 Canadian;

In an April 2006 press release, Mary Kay (Canada)^[44] claimed the following for Canada in 2005:

Out of 32,821 independent Mary Kay Beauty Consultants:

• 2,356 earned more than $100 Canadian;
• 336 Sales Directors earned more than $17,000 Canadian;
• 15 National Directors earned more than $100,000 Canadian;

In a February 2007 press release, Mary Kay (Canada)^[44] claimed the following for Canada in 2006:

Out of 34,272 independent Mary Kay Beauty Consultants:

• 2,422 earned more than $100 Canadian;
• 362 Directors earned more $16,500 Canadian;
• 16 National Directors earned more than $100,000 Canadian;

For Mary Kay (USA) Nationals, the 2006 median gross income (prior to business expenses) is $75,443.^[45]

[edit] Retail sales earnings

There is no reliable data for earnings from retail sales. The quoted figure of US$1,375 per year for the average consultant was derived by dividing the annual wholesale sales by Mary Kay Corporate, by the number of consultants in Mary Kay. This figure is obviously incorrect, as it does not take into account product returns, eBay, auctions, sales at a discount, and purchases by "personal use consultants" --- all of which would lower this figure

[edit] Consultant turnover rate

A 68.6% turnover figure has been calculated based upon information supplied by Mary Kay (USA) to the FTC.^[46]

An 85% turnover figures has been calculated, based upon the data supplied by Mary Kay (Canada).^[44] 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.

[edit] Retirement income

Individuals who qualified as National Director, prior to the age of sixty, are given the status of National Director Emeritus at age sixty five. This status entitles them to a retirement income that is equal to 60% of the average of the best three of the last five years prior to retirement^{[citation needed]}. That monthly is paid to the retiree or their surviving family for 15 years.^{[citation needed]} There is no retirement plan for other consultants.

[edit] Controversial Aspects

A number of criticisms have been leveled at the company by current and former Mary Kay Consultants. The following is a list of some of the more controversial aspects of the company:

[edit] Woolf v Mary Kay Cosmetics

Woolf v. Mary Kay Cosmetics, No. 00-5612-J (Dallas Co., Texas, Dist. Ct.) was originally decided in favor of the plaintiff, Claudine Woolf. In doing so it marked the first time^[47] that workplace rights could be applied to independent contractors who worked from their home. This decision was stayed and then reversed after an appeal.^[48][49] The Supreme Court USA ruled Certiorari Denied 31 May 2005.^[50]

In this case, Ms. Woolf was terminated from her position as director because her unit failed to make production for three consecutive months. Ms Woolf contended that her firing was illegal, because of her medical condition --- she was suffering from cancer.

[edit] The 90 Day Clause

Section 10:2:ix of the Director's Agreement^[51] reads as follows: ix) If, for any reason, SD shall leave and remain outside the US for a total of 90 days or more during any period of (12) consecutive calendar months. Termination under this section 10.2 shall be effective at Company's option upon mailing to Sales Director written notice of termination or at such other subsequent date as may be specified in such notice, except in the case of termination for failure to maintain Minimum Sales Unit Production, in which case termination maybe made effective by Company as of the last day of the last full calendar month that Sales Director's Sales Unit failed to meet Minimum Sales Unit Production.

One of the effects of that clause, is that several Mary Kay Consultants who are in the United States National Guard, and were called to serve in Iraq, have had their directorship terminated. Because Mary Kay Beauty Consultants are Independent Contractors, the Uniformed Services Employment and Reemployment Rights Act does not appear to be applicable.

[edit] Inventory

One of the criticism of Mary kay Cosmetics is that it is a product based pyramid scheme. This criticism is based upon the pressure to purchase more inventory than one can expect to sell at the MSRP within a reasonable period of time.

Several levels of inventory packages have been established for the new US based Beauty Consultant:

• Pearl Star : US$4,800 Wholesale; over $700 free retail product bonus available
• Emerald Star : US$3,600 Wholesale; over $700 free retail product bonus available
• Diamond star : US$3,000 Wholesale; over $600 free retail product bonus available
• Ruby Star : US$2,400 Wholesale; over $500 free retail product bonus available
• Sapphire Star : US$1,800 Wholesale; over $400 free retail product bonus available
• US $1,200 Wholesale; over $300 free retail product bonus available
• US $600 Wholesale; over $200 free retail product bonus available

From the data in the Mary Kay Sales Figure Table above, it appears that the typical US Consultant purchased $1818 (wholesale) of product in 2005. This implies that an initial inventory purchase of $1,800 will turn over once per year. This also implies that there is no economic justification for purchasing an initial inventory of more than $1,800, and that for maximum profitability, a lower initial inventory purchase should be made.

The commission income of Sales Directors is directly linked to the wholesale inventory purchases of their downline. Retail sales are irrelevant to the amount of commission that is earned.

When placing a product order, Mary Kay makes no attempt to ascertain whether or not prior purchases have been sold to bona fide third party retail customers. This means that the company can not comply with either the Amway Safe Harbor Defense,^[52] nor the more lenient 50% rule, in any FTC action against them.

In accordance with FTC regulations, and State Laws^[53] Mary Kay offers a 90% refund for products purchased within the previous 12 rolling month period. The value of the products are calculated on the basis of the lowest wholesale price at which they were offered.

One effect of a product return is that everybody who earned a commission on the initial wholesale inventory order has to repay that commission.

[edit] Mary Kay Qua Pyramid Scheme

California Penal Code 327: Every person who contrives, prepares, sets up, proposes, operates any endless chain is guilty of a misdemeanor. As used in this section, an 'endless chain' means any scheme for the disposal or distribution of property whereby a participant pays a valuable consideration for the chance to receive compensation for introducing one or more additional persons into participation in the scheme or for the chance to receive compensation when a person introduced by the participant introduces a new participant. Compensation, as used in this section, does not mean or include payment based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme.

In a 2005 article,^[54] SmartMoney.com online magazine outlines one of the criticisms of Mary Kay: There's another way to earn income from Mary Kay: by recruiting new consultants. Recruiters earn a percentage of each inventory purchase made by the consultants they have recruited. And when recruits start assembling teams of their own, the first recruiter makes a commission on the inventories purchased by the recruits' recruits, and so on.

According to the Federal Trade Commission, a pyramid scheme is a multilevel marketing plan in which the main way of earning money is by recruiting new distributors of a product. The best way to tell if a multilevel marketing company is a pyramid scheme is to find out how most of its sales reps make money — by selling the product to end customers or by bringing in fresh recruits, says Robert FitzPatrick, president of Pyramid Scheme Alert, a consumer organization, and author of False Profits^[55] The FTC has a similar anti-MLM article^[56].

'After years of silence, Mary Kay distributors are now coming forward to report abuses of inventory loading, pressure to recruit other MK salespeople, large financial losses and a company culture that blames its own victims. ^[57]

[edit] Mary Kay Ash Charitable Foundation

Established in 1996, the mission of the Mary Kay Ash Charitable Foundation is two-fold: • Committed to eliminating cancers affecting women by supporting top medical scientists who are searching for a cure for breast, uterine, cervical and ovarian cancers. • Committed to ending the epidemic of violence against women by providing grants to women’s shelters and supporting community outreach programs.

In May, 2006 The Foundation awarded 13 cancer research grants of $100,000 each to esteemed doctors and medical scientists in the United States. In October 2006, the Foundation awarded $20,000 grants to 150 women’s shelters across the United States for a total of $3 million.

Additional information about the MKACF and annual fundraising/donations can be found on their website.

[edit] In popular culture

• Mary Kay was parodied as "Lila Lee" in the Murder, She Wrote episode "Murder by Appointment Only".
• The made-for-TV movie "Hell on Heels: The Battle of Mary Kay" shows Mary Kay Ash (played by Shirley MacLaine) and her competition with Jinger Heath (Parker Posey), founder of BeautiControl Cosmetics.

[edit] External links

This article does not contain any external links due to continual External Link edit wars. Pursue the references for more information about Mary Kay Cosmetics.

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