• Mary Kay, Amway And Other Scams
Posted by Kate Lister on January 10th, 2008
We hate to be cynics, but we’ve found an awful lot of work-at-home deals that turn out be scams—legal perhaps, but scams none the less. If you went to make money—if you need to earn a living—Mary Kay, Amway and others like them are not the answer.
Multi-level-marketing (MLM) for example, sounds like a great way to make money and meet new people. But over and over they’ve been shown to only make money for a few people at the top of the pyramid. Their ads sound great, but when you read the fine print, there’s a fee to join, inventory to buy, or lots of other out-of-pocket expenses—which, of course, is how the company or person promoting the “opportunity” really makes money.
Unfortunately, the people who run these scams often target people who desperately want a better income, but can least afford to gamble. The most common scams we’ve seen include telephone services, envelope stuffing, home and beauty products, jewelry, business and consumer loans, and toys. They sound great on the surface, but you’ll be hard-pressed to find anyone who can show you proof that it’s worked for them. Oh, sure, there’ll be a few people that did okay (and they’ll no doubt be filling the comments section with screams of protest), but most people don’t.
Unlike franchises, which are required to jump through all kinds of legal hoops, business opportunities, as they’re called, are largely unregulated. Their ads claim you can add $3,000 to your monthly income while you sleep, for example. Yeah, right.
Unfortunately, the Better Business Bureau won’t be much help because the worst ones frequently change their name and address. So no one’s really watching out for your interests. And the fact is some of the Better Business Bureau practices should be reported to the Even Better Business Bureau (but that’s a topic we’ll have to remember for another post).
Actually, things got so bad that the Federal Trade Commission (FTC) put up it’s own web page warning about MLM scams.
Our advice to anyone thinking about any work-at-home program, or any other business opportunity that claims you can make an easy buck, check your state business opportunity laws and seek advice from an attorney or accountant before you sign anything. After all, if was all that easy and lucrative everyone would be doing it, now wouldn’t they?
If you can’t afford to hire an adviser, check with a local college and university. They often have free clinics and other resources for small businesses. At the very least do a good online search, and stop by your local library and ask the reference desk to find you what they can on the industry and company that will help you make a decision.
Sorry if we sound unusually cynical on these subjects, but Kate used to run an award-winning non-profit program aimed at helping low income single mothers start their own businesses, and she saw too many women disappointed by the false claims of business, loan, and grant promoters.
Once again, if it sounds too good to be true, it probably is!
February 5th, 2008 at 11:05 pm
Pardon me, I apologise if you assume that Mary Kay, Inc. is a scam. Maybe you need to do a little more research. No business worth working for is going to be a walk in the park, and if you want to succeed at anything in life, you have to work hard at it! I can assure you, you will not ‘earn money while you sleep’ with Mary Kay! Aside from Mary Kay cosmetics being the #1 selling cosmetics brand in the United States (thats right #1) for 12 years in a row so far, this company has helped numerous people out of poverty situations! This is definitely not a business for lazy people. It’s all about motivation, meeting new people, studying up on the newest products, and having a positive attitude about life! On a regular basis I hear touching stories of people who are in horrible situations, and were able to finally afford food for their families with the money they worked so hard for selling Mary Kay. The great thing about working with this company is that you do only have to work between 2 to 20 hours in a week, depending on how much money you want to make. It all depends on how successful you are willing to be! And the ‘pyramid’ thing you were referring to usually means you have to dish out money to your superiors before you get what’s left over. Well, Mary Kay absolutely does not work that way! You get to keep every penny you make all to yourself!!! Any ‘extra’ comission you earn from your rank is given directly from the company. They’re in it for the little guy! They want you to make money and succeed! Now, please, in the future, do a little more research before bashing a company you know nothing about. Thank you.
February 11th, 2008 at 11:41 am
Thanks for sharing your opinion Shiloh, but we didn’t assume anything, nor did we suggest that any successful home based business can succeed without a lot of effort.
We stick by what we wrote.
Your claim that Mary Kay was the #1 selling brand for the last 12 years is an example of the kind of misinformation that leads us to identify Mary Kay as a business to stay away from. According to industry data Mary Kay sales were flat in 2006 at $2.2B, and it’s #13 behind the likes of Estée Lauder ($6.4B), Avon $6.1B), and even Limited Brands ($3.1B).
Mary Kay may not be a pyramid scheme per se, but the issue is how much of that $2.2B in sales was to the general public, and how much to the 1.7 million “consultants” of the company? And why won’t the company report such figures?
Motivation and happy stories are great, but a healthy business (and life) is about reality. For a serious dose of reality visit the Pink Truth website.
Slightly off topic, but since were talking numbers here—anyone contemplating a home based business would profit, literally and figuratively, from visiting a library and looking at Robert Morris Associates (RMA) Annual Statement Studies. From skating rinks, to ophthalmic goods, to cosmetics, the publication can give you a look at industry averages for receivables, inventory, fixed assets, payables, long-term debt, net worth, net sales, gross profit, profit before taxes, current ratios, debt/worth ratios, and the like. With that information you can assess how much you should be spending on advertising, for example, or what your profit margins should be. They’re a great source of reality you can use to plan budgets and track your performance.
September 13th, 2008 at 11:48 am
I am an active duty Air Force nurse. I would say that my pay is equitable and that I have a very secure job. My cousin who sells Mary kay has a degree in physical therapy. She worked and made a good living as well. She stopped working (in physical therapy) and started her mary Kay business. She is by far not at the top of the “pyramid”, but sells over $35K in product only working about 10 hours a week. She makes her schedule around her family life. So I guess Mary kay actually offers more than just an income. It’s a very supportive business as well. They recognize your accomlishments and reward you, where with a lot of companies, you would be lucky to get a pat ont he back. I have started selling Mary Kay and with my crazy schedule and two gorgeous children (going for #3), my life is crazy and I am actually making a profit! You are encouraged to keep an inventory because it truly does make it easier to sell things when you have them on hand, but you are by no means required to nor do you have to. If you decide Mary Kay isn’t for you (and it’s not for everyone), the company will buy all of your stuff back at 90%. I think that helps comfort people when they decide to give it a shot. It’s retail sales with a more personal touch. People like the attention they get from their own PERSONAL consultant and the relationships they build with them. That helps build your business. So to be successful, you have to want it and work at it. That may mean learning new traits such as communication skills for those that are maybe not so gifted in that area, but it can be done. Communication is not just being able to speak, but to listen effectively as well. I have nothing bad to say about Mary Kay. I think the individuals that bash, complain or blog negatively are maybe those who went into it thinking you could be rich overnight or soon after. The business doesn’t present in that way (unlike some true pyramid businesses). It says you can be successful and that is simply the truth. Just like any consultant business (cosmetics, computers, medical, nursing, etc), it takes work, vision and skill, but anyone is capable of doing it. The resources are there. I wouldn’t tell people that it’s a scam because in all honesty, it’s not. I wouldn’t lead them to think that they can o nly work 4-10 hours a week and be driving a cadillac either. Some people have been able to do that, but not everyone. They can, however, make a decent living. The company supports you all the way through and if you find it’s not for you, they thank you for your time and buy back the products at 90% and wish you well. That’s it. I think it’s a good deal…if you go into it for the right reasons and without ridiculous expectations.
September 13th, 2008 at 11:51 am
Oh, and excuse the type-o’s. I’m rushing to get out of the house and get things done. :) Hugs!
September 25th, 2008 at 6:04 am
I’d be interested in what you have to say, Tonya, if it was first hand information and not about your ‘cousin’. Multi-level marketing is rife with such feel good stories, yet those stories always seem to evaporate when those involved are pressed for details. $35K a year working 10 hours a week, eh? Prove it.
In any event, if everything you say is true how do you explain the fact that the company is unwilling to divulge figures on how much product is sold ‘down line’ and how much is sold to the public? Yes, I understand companies have a right to maintain certain information as proprietary. But an honest company would be happy to provide such data since it has been a persistent black mark.
People can’t make informed business decisions on fuzzy rhetoric that suggests that “some people” can work 4-10 hours a week and drive a Cadillac. Nor can people “make a decent living” working a few hours a day either. It just doesn’t happen.
November 1st, 2008 at 7:22 pm
I agree with your assessment of the Better Business Bureau. I am writing a book about avoiding work-at-home scams. The BBB is a next to worthless source of information. Some businesses where I have found very serious and legitimate complaints are given satisfactory to excellent ratings by the BBB. In fact, in my book I plan to write about the shortcomings of the BBB.
November 4th, 2008 at 6:36 pm
Just because you may not know someone who is successful in Mary Kay does not mean that just a few can make it. I am a Mary Kay Senior Independent Sales Consultant. I make at the least $300/week, and I only work about 3-6 hours a week. A couple hours calling and a couple 2 hour parties if I have time. This is the same amount of money that I make in my 40 hour a week job. Tell me people can’t do it. I am. I go to a success event once a week with a bunch of wonderful women who also sell Mary Kay and they are even more successful than I. Mary Kay is a wonderful option for those who want to work for it. You can’t expect to just tell people you sell Mary Kay and instantly make money and get your career car. You have to work. I have only been doing this for 4 months and I’m on target to get my car in January. I work for it. Any other woman who wants to work for it with Mary Kay can.
November 7th, 2008 at 6:47 pm
I find it humorous that after all these women have wrote in to tell you that you are wrong about Mary Kay you still refuse change your mind? Has someone you know been burned by the company? I can again testify that you are wrong about Mary Kay. I know three people that currently sell Mary Kay and I’ll tell you about them.
One is my mothers best friend: She started selling Mary Kay when she was a stay at mom. She did really well for a while and helped out a lot with her families income while she didn’t work. Years later however, her husband makes enough to well support their family and she’s slowed down her selling to only close friends and her clients that she kept through the past 7 years, and yet she still makes a decent profit.
The second lady is my best friends mother. She started selling Mary Kay because she liked the products and they sell them to you half price. Really her only clients are herself and very few of her friends, and yet she still makes about $50 every two weeks. Not much but it’s enough to have some fun with.
The third individual is my cousin. She’s young, energetic, and she has a sweet personality. She decided to start selling Mary Kay three months ago and as already become her district’s number one sales person, and is already making enough money to quit her job and support her husband in his ministry by only working 6-12 hours a week! If that isn’t a success story I don’t know what is.
You and other people really should actually do research on a company before you write negatively about it. They teach you that in high school.
Oh, and by the way, I’m signing up Monday to become a Mary Kay Consultant.
November 11th, 2008 at 12:11 pm
So far, Kirby, no has offered any evidence that Mary Kay can actually provide an adequate income for most people, including you. If you want to consider it something like golf, an expensive hobby, fine. I have no gripe with that.
Writing that your best friend’s mother’s, “…only clients are herself and very few of her friends…” is a perfect example of the adled thinking that’s typical of the Mary Kay true believers. How the heck can she be her own client?
So your cousin can support herself and her husband working 6-12 hours a week, eh? You might ask yourself why are there so many people working 12 hour DAYS trying to make ends meet.
Do you know that according to a 2006 Mary Kay Canada press release,there own numbersonly about 2500 out of 34,000 Canadian “beauty consultants’ make more than $100 Canadian, and only 362 make more than $16,500 Canadianthat’s less than $13,500 US?
Mary Kay doesn’t release such numbers for the US , but the poverty level for a US household of 2 people is $14,000.
November 11th, 2008 at 12:23 pm
What’s your NET income, Kris? How much of that is from the sale of products to people who are not downline? Not including stuff you buy for yourself, family, etc.
November 12th, 2008 at 8:45 pm
I don’t know how all of that pyramid stuff works and I must say I am not concerned. I do know, however, that I have been a consultant for 6 weeks and I have no complaints. Yes there was an investment upfront, but I have more than doubled what I started with. I pay no one for anything. All of my clients are just that- clients. Not people under me that I sell to. I am a full time Nursing student/single mom with a mortgage and two children. Spending about 20 hours a week I am comfortable with how my business is growing. Not to mention the pride of not having to depend on a man or the government.
So say what you want. Brainwashed or not my bills are all paid ON TIME!! And I am having a blast meeting wonderful CHRISTIAN women and MEN.
Maybe YOU ought to try an item or two…..
November 13th, 2008 at 7:03 am
Good for you, New Girl. I like your independent attitude. I just wish you had six months of experience and could say the same thing. By then all your friends who are buying from you to be nice will have dried up, and the reality of such schemes will start to become evident.
November 13th, 2008 at 5:38 pm
Well, I do have over 6 months experience and can say that it is profitable. Like I said before, I am an Air Force Nurse and just love my career, but Mary Kay is FUN and profitable and I just love making my own hours around military obligations and family. I’m sure there are many individuals that do not put enough effort into it so they make what they put into it. Tom, you sound like you have done a lot of research and are very interested in Mary Kay. I’ll get you signed up immediately if you would like. What better way to find out than to try it. What do you have to lose. Come on, you’ll look great in pink (you would drive a Pink Caddy if you earned it, right?) If you start trying the lipsticks, well…whatever works. What would you have to lose? If you decide it’s BS, too much, not fun, too difficult, etc, the company will buy everything back at 90%. The starter kit with tax will cost you about $114.00 and the website for the year is $25 and they maintain it. You do not do anything except decide what you would like to show or not show on it. It’s that easy. Also, did you know that the Harvard school of business teaches the Mary Kay business plan? Don’t believe me, research it. It’s true. Did you watch the Country Music Awards last night? Didn’t Mary Kay have great commercials as the official beauty sponsor? And didn’t everyone look gorgeous in their Mary Kay?!?!?! Tom, just sign up and you won’t have to depend on all of us consultants to convince you of how easy and profitable this business can be. You’ll be the next person on her professing your believe to the next person with doubts. I do love your spirit and even if you decide not to try it out (LOL!) stay in touch!
Tonya
November 13th, 2008 at 6:18 pm
You’re barking up the wrong tree here Tonya. I have done a lot of research, and I have 40 years of business experience that tells me the only people making money at Mary Kay are a a few top-level people and the company.
And no, Harvard does not teach the Mary Kay business plan. Harvard Business School uses case studies on a lot of businesses, success and failures, honest and dishonest. The fact that Mary Kay is among them doesn’t mean that Mary Kay is “taught” or “studied” at Harvard. The case study that’s behind this lie merely addresses whether incentives are effective to encourage Mary Kay consultants to buy more product. (They are.)
I recently wrote a piece here about how you can scam yourself by telling (and believing) lies. I love your spunk too, Tonya, so I hate to see you falling for such bunk.
December 22nd, 2008 at 3:55 am
Okay, I did my homework. Harvard does teach the business plan to include the incentive system and other ways to motivate, etc. Here is an excerpt from an article and the web address to get to it. This was on CNNmoney.com.
Excerpt: John Kotter, Konosuke Matsushita professor of leadership at the Harvard business school, calls Mary Kay ”an opportunity-generating machine” and Mrs. Ash one of the best business leaders in the U.S.
Web address:
http://money.cnn.com/magazines/fortune/fortune_archive/1993/09/20/78341/index.htm
Great article with interviews from individuals that went to Harvard Business School. They really are smart. I still love ya, Tom!! :)
By the way, I now have a personal testimony!!!! Between 16 Sept-15 Dec, I was the top sales person for my area. Queen of sales! Like I’ve said before, I am a full time active duty air force nurse with two children (ages 3 and 2) and I only worked my business about 4 hours each week. I did incorporate it into my daily life (grocery store, etc) so if you add that, I worked it about 5-6 hours a week. I made over $4500 PROFIT. Can you imagine if I were able to devote a little more time to it. Yay!!
Tom, you still need to sign up to become a consultant. I think you would be great at it. Who better to sell than a total skeptic who relizes by personal experience that he was wrong all along.
Still love ya!!!
December 22nd, 2008 at 8:55 am
Hang on now, Tonya. Don’t let your enthusiasm cloud your view of reality. Just because you found a single 15 year old article that mentions a Harvard professor who thinks Mary Kay is “an opportunity-generating machine” (it is, but that’s not the same as income for the vast majority) and that “Mrs. Ash is one of the best business leaders in the U.S. (she’s worth over $300 million, but at the expense of how many disappointed women?) doesn’t in any way mean Harvard teaches the company’s business methods. That’s precisely the kind of half-truth that Mary Kay is famous for.
As I wrote before, Harvard simply mentions the company’s motivational approach in a case study. Big deal, that’s hardly an endorsement, and that certainly doesn’t mean they teach students to run a company the way Mary Kay does. Harvard case studies also cover crooks, failures, and bad approaches to employee motivation, too, and that doesn’t mean they approve.
As for your claim that you made a $4500 profit in the last quarter—that’s amazing! You must be one in a million. In fact, if that’s true, and you can do it for a year, you’ll be in the same league as the 362 people in Canada that made over $13,500. (Only 2500, made over $100, remember.)
But are you sure you’re not confusing income with profit? Remember, you have to deduct the cost of your supplies at the very least, and some portion of your gas, phone, taxes and other expenses. To produce $4500 in profit you would have had to sell something like $9000 to $15,000 worth of product. That’s a lot of lipstick in 90 days!
January 4th, 2009 at 8:10 pm
That is definitely profit. I know it isn’t as much as my regular job, but it is pay and I didn’t do it full time so it could be more. We’ll see, I’ll keep you posted. Just remind me.
How were your holidays? Mine we great! Got to be around family for most of it.(worked Christmas eve night and Christmas night…YUCK!)
Hope you are doing well.
Tonya