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Global multi-level beauty company Mary Kay has closed its operations in Australia and New Zealand citing market conditions.
In an announcement on its website, the company said operations in the region were unsustainable, and that the brand would be focusing on their “core growth markets across the globe”.
The make-up company, founded in Dallas in 1963 by Mary Kay Ash, first came to Australia in 1971.
Australia was the first international subsidiary of Mary Kay Inc.
The brand sells cosmetics via a multi-level marketing scheme (MLM), with ‘beauty consultants’ of Mary Kay recruited to sell the company’s products directly to those within their local communities.
Beauty consultants are not employees of Mary Kay and do not receive a salary or wage.
The MLM model has been criticised in recent years, with several media outlets investigating MLMs due to claims that the ‘get rich quick’ scheme is problematic and similar to the structure of a pyramid scheme.
They have also been thrust into the international spotlight by the popular television series, On Becoming A God in Central Florida, starring Kirsten Dunst as a participant in an MLM scheme.
Pyramid schemes are illegal in Australia.
What went wrong?
Despite the recent focus on MLMs, experts said it was unlikely the interest had contributed to Mary Kay’s Australian demise.
Marketing and consumer behaviour expert Gary Mortimer, from the Queensland University of Technology, said he believed it was a sign of the times.
“I think it’s more a case that the Australian community and society has evolved from the 1960s and 70s,” Professor Mortimer said.
“People aren’t at home waiting for a knock on the door, we don’t wait for that catalogue to arrive — those days are long gone.”
In 2018 cosmetics brand Avon, which also uses an MLM business model, announced it was pulling out of Australia after 55 years.
“I remember my mum in the 1970s was an Avon lady … and in order to stay socially connected these types of business models worked really well,” Professor Mortimer said.
“Those Avon and Tupperware parties are great examples of that.
“The younger market are now looking at emerging, exciting brands like Mecca or Sephora, or those types of brands where there is an experience involved in the purchase of makeup — like make-up classes or blogs.
“There is a lot more of a digital element in the purchase of make-up and cosmetics.”
Low profits and hard sales
Professor Mortimer said another issue that impacted MLM companies was the low profits made by most salespeople.
“If you were dependent on deriving an income it was more difficult to do so unless you were very high in the pyramid,” he said.
Anna Jenkins, a senior lecturer in entrepreneurship at The University of Queensland’s School of Business, said people who were considering signing up for MLMs should research the products and have an understanding of how much profit they could make before they did so.
“There’s the rosy picture of how you can work for yourself and make your own money, but the challenging part is once you have all the product and you have to start selling,” Dr Jenkins said.
“How do you monetise your social network? Is it a product you’re able to sell beyond that?
“Often when there’s a strong reliance on your social network, it becomes a difficult sale.”
She agreed market trends, particularly a challenging global retail environment, were bigger contributors to Mary Kay’s withdrawal from Australia than any interest generated in MLMs.
“Lots of retail stores are struggling,” she said.
“Even international brands are pulling out as well as local brands having to shut down.”
Like a ‘job loss’ for consultants
Dr Jenkins said Mary Kay consultants would be feeling a loss.
“It’s a similar type of experience to when you lose your job, you’ve now lost your role,” she said.
“It’s really important to them that it’s a loss that needs to be acknowledged and managed.”
In a statement, a Mary Kay spokesman said a “combination in rising costs of doing business and slowing consumer spend” had been “compounded by the smaller size” of the Australian and NZ markets.
The spokesman said its withdrawal was “not due to a slump in the popularity of products or our channels” and that “Mary Kay’s direct selling business model continues to operate profitably in nearly 40 markets around the world.
“The consultants have shared Mary Kay’s disappointment in its withdrawal from these markets … and is providing support to help them transition out of the business,” the statement said.
The spokesman said the company did not disclose country-specific details about the size of its salesforce.
On its website, Mary Kay said it would accept returned products from its independent sales staff up until April 6, 2020.
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