Scentsy is an Idaho based producer of fragrances which was founded in 2004. The company sells their products through multi-level marketing. Scentsy products are sold by over 100,000 consultants in their international network marketing system. In 2016 Scentsy generated revenue of $456 Million, which ranked them at 42 on the 2017 DSN Global 100 list.
Scentsy say that they 'give aspiring entrepreneurs the opportunity to launch a business without making a huge financial investment'. Here at the Finance Guy, we believe that you can't make money with network marketing, but we are happy to be proven wrong in our streetonomic review of Scentsy
What is the Scentsy Opportunity
The Scentsy website explains that this is an opportunity to do business your way. You can start your Scentsy business with either a 'basic starter kit' for $99, or an 'enhanced starter kit' for $149. Both kits come with 'everything you need' to get your Scentsy business up an running.
When you sign up with either kit, you'll get a range of product samples, (you get more products with the enhanced kit), a collection of business tools, and your first 3 months access to your very own Scentsy website. If you want to continue selling Scentsy through your website after 3 months, it will cost you $10 per month.
Unlike other MLMs we have looked at, Scentsy does not offer wholesale prices to their consultants. When you order products from them, you will pay the full retail price. Scentsy then pays you a commission each month on your Personal Retail Volume (PRV).
Commission paid on your PRV starts at 20%, but will increase to 25% once you've made 1,000 PRV points worth of sales. If you manage to make more than 2,000 PRV points worth of sales in any month, then you will get a bonus 5%. This means that you can earn up to 30% commission selling Scentsy products.
Retail sales aren't the only way to make money with Scentsy. The most successful consultants recruit others to join Scentsy as part of their downline. The benefit to you, is that when people you have sponsored buy products, their orders will will help you qualify additional income as explained in the Scentsy Compensation Plan
Scentsy has only provided a one page compensation plan, but we've done our best to interpret the information. This minimal information has meant that we have had to make a lot of assumptions, so we apologize if our explanation has any inaccuracies.
If you are personally ordering at least 500 PRV worth of Scentsy per month, and you have sponsored consultants who are also ordering product, then you might qualify for a rank with Scentsy which pays you a commission based on the wholesale value of all products ordered by you and your downline. The wholesale commission paid at each rank is shown below:
If you someone in your 'frontline' is also qualified to earn wholesale commission, then you will earn a differential commission on their wholesale volume. For example, if you are a star consultant, you are entitled to a maximum of 4% wholesale commission from each 'leg' in your downline.
If someone you have directly sponsored in your 'frontline' reaches the the rank of 'Lead Consultant', then they will qualify for 2% wholesale commission. On this leg you will only earn the 2% difference between their rank and yours.
Once you have reached the rank of Director (or above), you will qualify for the maximum 9% wholesale commission. If others you have sponsored reach these ranks, then they will also qualify for 9%. This means you will not get any wholesale commission from legs in your downline with a frontline consultant who is ranked director or above.
If you are at the rank of Director or above, you will now qualify for a directors bonus. This is a commission paid on the wholesale volume of other directors in your downline. This is not limited to directors in your frontline. You can also earn directors bonuses on up to three generations of directors in your downline.
The bonuses paid at each rank and for each level in your downline are shown in the table below:
Based on our understanding of the 1 page Scentsy compensation plan, is is possible to make money with Scentsy. If you can sell product, and recruit others who also make sales, then you can earn:
- Up to 30% commission on retail sales
- Up to 9% Wholesale commission from consultants you sponsor in your downline
- Up to 5% Directors Bonus if you obtain the highest rank of 'Superstar Director'
Are Scentsy Consultants Making Money
We looked at the U.S version of the 2015 Scentsy Income Disclosure Statement, which suggests that most Scentsy consultants in the U.S did not earn much money. The information is shown in the table below:
As we can see from this table, only 0.55% of Scentsy consultants in the U.S earned an average income of more than $42,000 in 2015. Unlike most mlms, Scentsy includes retail commission in their income disclosure. This means that in 2015 99.45% of Scentsy consultants were not able to earn a full time income
These figures do not include expenses. Running your Scentsy business will cost you time and money. If we were to include these costs, we'd find that the majority of Scentsy consultants lost money in 2015.
Why is it Difficult to Make Money with Scentsy
If you attend a presentation promoting Scentsy, or any MLM, you'll hear all about what is possible. All you have to do is use the products and convince others to do the same. It's a simple enough theory which rarely works in practice.
To qualify as a 'lead consultant' with Scentsy, you need to personally order $500 worth of product per month, and have one 'active frontline consultant', who also orders $500 product per month. We believe this will qualify you as a 'lead consultant' with 500 PRV and 1,000 Group Wholesale Volume (GWV).
To be a lead consultant you need to remain active and recruit one friend who also remains active. This sounds pretty easy, until we look at the results. The 2015 income disclosure shows that in 2015, less than 24% of Scentsy consultants achieved the rank of 'lead consultant' or higher'.
It is possible to earn up to 9% in wholesale commission if you reach the rank of Director. In 2015, only 1.81% of Scentsy consultants were ranked at the level of 'director' or higher. This means that less than 1 in 55 Scentsy consultants qualified for 9% wholesale commission
We evaluated the Scentsy opportunity using Dr Jon Tayolors 5 Step MLM evaluation. This test is designed to find out if new recruits are likely to make any money from joining a network marketing opportunity. We found that Scentsy raised all five red flags in this assessment. We will look at each of the red flags and why we believe they are a concern in more detail below
Red Flag 1 - Constant Recruitment of New Members
We read through a copy of the Scentsy consultant guide, this document is like an instruction manual for new consultants. There is advice about everything you need to do to achieve financial freedom with Scentsy. In the business building section, they state 'There's no better way to grow your income than through building a team'.
The compensation plan is designed for constant recruitment. The only way for you to reach higher commissions is to grow a larger team. The only way for your recruits to earn more, is to also recruit and build their own teams.
Red Flag 2 - Promotion Through Recruitment
You will never need to personally purchase more than $500 per month worth of product to remain active with Scentsy. To qualify for promotions, you will need to grow your wholesale volume and your active downline. Recruiting is how you qualify for promotions with Scentsy
Red Flag 3 - Pay to Play
To remain active, and maintain your rank with Scentsy, you need to buy $500 worth of product per month. We believe that some consultants are ordering more product than they are selling, just so they can remain active.
Dr Taylor warns that pay to play can lead to hyper-consumption resulting in members buying more product than they can consume or sell. Eventually products start to get stockpiled as members fill their storage areas with unopened boxes of hopes and dreams.
Red Flag 4 - Most of the Rewards go to your upline
We found wholesale bonuses of 9% and directors bonuses of 15%. These incentives are included in the price charged by Scentsy As a new consultant your upline will get 24% of every dollar you spend with Scentsy
The price you have to charge your customers will include these generous MLM mark up. This means that the retail price will be expensive, making it more difficult for you to compete with all the alternate aromatherapy products in the market.
Red Flag 5 - More than 5 levels in the payout plan
According to Dr. Taylor, once there are more than 5 levels in a compensation plan, then it becomes very difficult for new recruits to turn a profit. He believes that at this point the system becomes 'an exploitative money transfer scheme, or product-based pyramid scheme'.
How Good are Scentsy Products
Any salesperson will tell you that the best way to make money, is with quality products. It doesn't matter how skilled the salesperson is, making money is easier with good products that are well priced. As we have not purchased or used any Scentsy products, we have relied on the internet to see what others are saying about Scentsy products.
Scented Wax Reviews, sampled several Scentsy bars. We trust this review because they are a customer, not a consultant. Unlike most reviews, they are not trying to sell us Scentsy or any other aromatherapy products.
This review found that when compared to other scented waxes, Scentsy is of very high quality. They ranked well for scent and 'throw'. Even though the products were of excellent quality, the review notes that she would not buy Scentsy again because they are too expensive.
P'd consumer currently gives Scentsy 2.4/5 stars, nobody appears to have a problem with the products, but the customer service and business opportunity have several complaints. Most Former consultants say they were mislead about the income potential, while customers complain about products which have not been delivered (even though they paid months ago).
Based on your online findings, we believe that they are making good products, but Scentsy is overpriced and their customer service needs improvement.
Is Scentsy an Illegal Pyramid Scheme
Even though they closely resemble pyramid schemes, network marketing companies are legal as long as they are attached to a product or service. Having said that, there is a difference between legal and ethical. Network marketing companies don't just promote their produts, they also sell hopes and dreams of financial freedom. This dangling carrot is why MLM companies sell to their members at above normal retail prices
Should You Join Scentsy
If you join the Scentsy opportunity to make money then we suggest that you include this with other income making options. In 2015, only 0.55% of Scentsy consultants in the U.S earned a full time income from their business. Your chances of replacing full time income are less than 1 in 180
You should only join Scentsy if you have already tried their products, and know enough about aromatherapy to make money selling these products at their inflated retail prices. In our opinion you'd have a hard time making money with Scentsy. That's just our opinion, we'd love to hear from you. What do you think about Scentsy? let us know in the comments section below, especially if you can share your Scentsy experiences
For more posts like this, look at our list of mlm reviews.