Todays post about #1, best selling brand has always made me question what TC uses to repute what is announced by Mary Kay.
Here is my question... They always say that MK reports their sales on what is sold to the consultant not the "customer" but then they say compared to the other companies that base sales to the ultimate customer. I have always wondered. In my thought process, it only makes sense that other companies (Estee, L'Oreal, etc) ship to retailers, and then retailers, ultimately sell to the customer. I would think that the figures other companies report would be what they sell to the retailers. They have no way to know what the individual retailer has in their store versus what the consumer has purchased. If my thought process is correct, then we are still comparing apples to apples and not apples to oranges. The Company can only track what they ship, not what is done with it once it is shipped. I have seen very old product sitting on shelves in stores, or in stores such as Big Lots, Dollar Tree. etc... Hope I am making sense because I have always felt this truly needs to be pointed out. And I have never seen this pointed out.
Thank you for this question. I have desired to discuss this subject at length here. However, with the limited time I have for research, I have not yet had time to gather an adequate amount of information to authoritatively speak to this subject.
However, since PT is rather relentless in their bashing of Mary Kay on this subject and because the point of this site is open discussion, I have decided to post the question here with an open request for any information or opinions people would like to share.
Here are some things that I do know:
Mary Kay sells their products directly to their consultants (distributors) for 50% of their recommended retail value.
For reasons unknown to me, they do not report the retail sales of those consultants. While I don't KNOW the reasons, I can guess at the reasons based on why I would do the same if it were my decision.
A. Many consultants only buy for personal use (or friends and family) only and therefore are difficult to classify. (Are they retail consumers at 50% discount or distributors that can't sell any product?)
B. While Mary Kay lists a recommended retail value for the products offered, they also offer their consultants freedom to charge whatever they see fit. Many consultants offer their own specials and create their own incentives to their customers. Unlike a typical franchise (McDonalds, etc.) that sets very strict standards and collects detailed information from their individual franchise locations, Mary Kay gives its consultants independent status allowing them to charge whatever they want and not requiring detailed information to be collected.
C. The cost of collecting and analyzing information from 700,000 consultants that may or may not want to participate may be prohibitive. It is (relatively) easy to measure how much wholesale product is moving and since consultants (theoretically) are only buying what they project they will sell, it does not seem unreasonable to me to use this information to calculate their retail numbers.
*I can accept that there is inventory that has not yet been sold in the possession of consultants. I have a hard time believing that enough consultants are stockpiling $30k+ to negate this method of estimating. I suspect the amount of unsold and unreturned product is negligible. Buying $2k or $6k worth of product in the beginning on sheer faith in an enthusiastic director seems feasible (unfortunate but feasible). Buying even more product to gain recognition or "earn" prizes (while the original product has not even been sold) is incredibly unethical. How someone would do this (defraud the company by claiming sales that have not happened, consultants that do not exist, etc) and then claim the company is the guilty party is beyond my ability to understand.
To adequately discuss the subject of numbers, you have to base the discussion on the same criteria. (Apples to Apples, Bananas to Bananas, Oranges to Oranges) This is always difficult to do and is the reason that companies offering statistics are in high demand. A manufacturer's numbers will vary considerably from a distributor's numbers. A distributor's numbers will be very different than a retail outlet's numbers. One retailer will measure differently than another.
To illustrate lets talk about water. There are some companies that bottle water. There are some that distribute bottled water. There are some stores that sell bottled water in bulk. There are some stores that sell individual bottles of water. There are some companies (maybe) that do all of that. (Arrowhead water comes to mind.)
A water bottling company will most likely only bottle as much water as their distributor orders. End of story. That is all they are interested in. They most likely will require a minimum order (5,000 flats for instance). They may even require a contract for a year. (5,000 flats every month for a year). They don't care if you only sell half of that. They don't care if you don't sell any of it. If you ask for it and pay for it, they are going to keep the water bottles coming. They may throw in tickets to the Lakers or some other 'incentives' to keep the decision maker happy so they don't lose that account. When they are talking to their stockholders or a new company that is considering placing an order, they are not going to roll out the life history of every bottle they have filled with water and sealed. They are going to say, we sold x bottles to company y and x bottles to company z. If they have sold more 10oz bottles of water than anyone else, they are going to showcase that number (even if NO ONE else sells 10oz bottles!). It is their niche, their specialty. It is what makes them different and hopefully it will appeal to the person they are selling to.
A water distributor will have an entirely different set of numbers. They buy in bulk at a predetermined rate and hope to make a set amount of money reselling what they bought. They may represent the company they bought the water from or they may have their own label and have nothing to do with the company that bottled it. Either way, their numbers have nothing to do with the bottling plant. Maybe they sell to the consumer. Maybe they sell to retail outlets. Maybe they sell to bars and vending machine owners. All of these people will have different numbers as well. When someone puts together a presentation one of the most important considerations is who the audience is. If you are presenting your business strategy to a potential investor, you want to highlight the reasons this is a good investment. If you are pitching your product to a potential vendor, you want to point out its popularity with consumers. If you (as a Mary Kay rep) were to sit down with someone that was thinking about buying Mary Kay, you would highlight the things that you like about Mary Kay and anything that you feel makes it outstanding. You would not highlight the fact that some people are allergic to it. Imagine how excited someone would be if you were selling them water (I know there are not water salesmen but work with me anyway) and you said, "now some people get sick from drinking water". And then you went on to say, "some people don't like the taste of water". If you are representing a product, you represent it (hopefully) for a reason. YOU LIKE IT! You want to tell everyone about how great it is and how it is going to change their life. I digress a little... the point is, if you are selling a product, you emphasize the good.
Each one of the other levels is a step between the producer and the end consumer. I really don't know much about how cosmetics and skin care products are distributed. I highly suspect that the journalistic nightmare the site in question calls TRUTH offers little (if any) more comprehension of the subject.
All that being said, if anyone has any insight into this subject or opinions about this, please let your voice be heard here.
Specifically, I am looking for anyone that may own a shop of some sort. How do you handle inventory?
Also, if you have any dealings with distributors or manufacturers, how do they usually rank their successfulness in comparison with competing and non-competing brands?
Finally, if you have any thoughts about the Pink Truth post in question, but are not cynical enough for them, I would love to hear from you.
While I always love and encourage comments here on this site, if you would like to email me like Anon did, you can send a note to firstname.lastname@example.org
Thanks MK4ME for a great conversation starter and everyone else, in advance, for you perceptive thoughts.