The cosmetics and skincare firm Beautycounter abruptly terminated all of its distributors this month. Nonetheless, the corporate’s controversies go deeper than its sudden terminations.
Beautycounter was based by Gregg Renfrew over a decade in the past. The entrepreneur sought to create an organization specializing in “clear” magnificence merchandise. The corporate’s merchandise reportedly use far fewer chemical substances than another manufacturers, with Renfrew forming a 1,800+ merchandise record, often known as the By no means Listing, of components that her merchandise won’t ever use. Beautycounter’s merchandise shortly garnered curiosity as there’s a rising demand for magnificence merchandise labeled “clear” and “pure.”
Whereas the shop opened its first brick-and-mortar retailer in 2018, it largely depends on a Multi-Degree Advertising (MLM) enterprise mannequin. In an MLM, the corporate hires impartial distributors or consultants who promote merchandise for the corporate and attempt to recruit additional distributors. Distributors handle gross sales, advertising and marketing, and recruiting for the enterprise and, in trade, earn commissions on the merchandise they promote in addition to commissions generated from the workforce they’ve created via recruitment. In 2021, Beautycounter boasted nearly 75,000 distributors. Nonetheless, in April of 2024, each distributor was terminated from the corporate.
What’s happening with Beautycounter?
In April, Beautycounter’s complete distributor drive acquired an electronic mail notifying them of their termination. The e-mail notified them that their termination date was efficient April 17, 2024. They’d obtain any closing funds for unpaid commissions by April 26, 2024. Nonetheless, they have been to instantly stop gross sales and would don’t have any additional rights to any “bonuses, commissions, or different compensation following the Termination Date.” The rationale given for the abrupt layoffs was that Beautycounter was “shutting down its operations.”
On April 18, The Carlyle Group, which had acquired a serious stake in Beautycounter in 2021, confirmed it was promoting the corporate again to Renfrew. After experiencing “vital market and channel headwinds,â the group decided its most suitable choice was to shortly exit the enterprise after its sale. If one tries to go to the Beautycounter web site, they are going to be met with the message that the enterprise has “wound down,” though Renfrew claims she’s engaged on a brand new firm. She calls the corporate a “new Beautycounter,” which can arrive in early Could.
The state of affairs is a bit obscure, given that each one distributors have been terminated and the enterprise claimed it was ceasing operations, but additionally claims to be coming again in only a few weeks. On Reddit, customers have claimed it wasn’t simply distributors but additionally full-time workers who have been terminated with no discover, severance, or well being advantages. It’s believed Renfrew is restarting her enterprise and will probably be rehiring many of the workers and distributors whom she was compelled to put off because of the buyback. Nonetheless, many are nonetheless criticizing her resolution to offer no discover to her workers and distributors regardless of clearly foreseeing the result and gathering traders to purchase again the enterprise. Sadly, the abrupt terminations are solely a part of Beautycounter’s controversies.
Why Beautycounter has lengthy been controversial
Beautycounter’s shutdown renewed curiosity within the firm’s controversial previous. Even earlier than the abrupt terminations, the corporate was accused of deceptive and exploiting its distributors. It’s not stunning, as most MLMs are seen with a lot skepticism. MLMs can morph into unlawful pyramid schemes if the main focus shifts extra to recruiting than to promoting precise merchandise. Even when they’re not pyramid schemes, many MLMs are nonetheless seen as predatory scams, luring susceptible people in with guarantees of earnings. These “companies” normally embrace some type of entry price within the type of a starter equipment or class and require fixed recruitment of family and friends to make any cash in any respect. Most “distributors” spend cash on the starter equipment or to pattern the merchandise, then go on to by no means earn a dime from the enterprise.
Criticism of Beautycounter arose when a number of bloggers and journalists determined to dig into the earnings of the corporate’s distributors. The web site Travelling Jezebel regarded into the corporate’s Revenue Disclosure Assertion (IDS) and printed the grim numbers. In 2021, the assertion included earnings from 74,472 distributors. Of these 74,472 distributors, simply 1% or 679 earned over $30,000 yearly. The overwhelming majority of consultants earned $0â$1,000 yearly, whereas 22% made between $1,000 and $30,000 yearly.
It goes with out saying that these are fairly minimal quantities of cash. Just one% of individuals earn something even remotely near a livable wage. Most are incomes nothing, not even an satisfactory quantity of supplemental earnings. And contemplating distributors pay for starter kits to affix Beautycounter, many have been truly dropping cash from becoming a member of the enterprise.
Some might insist it’s probably not Beautycounter’s accountability if its distributors fail to make gross sales or recruit folks. The issue isn’t essentially that individuals aren’t earning profits from being Beautycounter distributors; it’s that the corporate was deceptive folks into pondering they’d earn a living. The corporate was cautious by no means to offer precise figures about how a lot distributors would earn. Even the FAQ on its web site danced round questions on earnings ranges, merely reiterating that distributors who carry out nicely will receives a commission nicely.
Nonetheless, media shops like Reality in Promoting have been capable of pull quite a few examples of deceptive promoting from the corporate. For instance, some commercials claimed that distributors would be capable to use their earnings to repay debt, go on a household trip, or pay for a summer time camp for his or her children. Throughout the pandemic, when quite a few people have been laid off, the enterprise claimed its earnings may change the earnings loss from unemployment. Nowhere in its commercials or on its web site does it warn distributors that almost all of them will make no earnings in any respect.
MLMs like Beautycounter additionally typically particularly goal probably the most susceptible. For instance, the corporate has launched advertising and marketing campaigns focused at these laid off through the pandemic and school college students. They search these most in want of steady earnings after which inundate them with glowing commercials and false guarantees about with the ability to make money working from home at their very own tempo and with no restrict to how a lot they will earn. The typical particular person isn’t prone to assume to seek for an IDSâthey’re going to go off the web site and commercials.
Beautycounter has been deceptive distributors for years with its false guarantees and exploitative enterprise construction. On prime of scamming those that are most susceptible, the enterprise callously lower all of them off with out warning. With a brand new Beautycounter enterprise allegedly on the best way, hopefully data of its terminations and scams will assist one make an knowledgeable resolution earlier than becoming a member of as a distributor.
(featured picture: Beautycounter)