The Mary Kay direct-sales business relies on a well-defined model that precludes conventional and digital retail sale of its products. And, the filing openly states that “[independent beauty consultants] are not permitted to sell products through retail channels or establishments.”
Not business as usual
The Mary Kay lawsuit stresses that RetailMeNot coupon codes dilutes the beauty brand’s direct-sales business model, explains Sean Lester writing for the Biz Beat Blog of The Dallas Morning News. (Mary Kay headquarters are in Addison, a suburb of Dallas, Texas.)
That’s the central premise of the litigation: “Mary Kay is not a retailer and does not sell products directly to consumers, including in stores or through its MaryKay.com website. Instead, consumers can only purchase Mary Kay products directly from [independent beauty consultants],” reads the filing.
“In addition, Mary Kay does not publish or distribute Mary Kay coupons or discount offers to the general public or permit others to do so. Mary Kay has communicated all of this information to [RetailMeNot].”
The company’s suit spells out how RetailMeNot’s activities harm the Mary Kay brand: misleading consumers to believe there is a business relationship between Mary Kay and the coupon site, confusing consumers with false discounts and unauthorized points of sale for Mary Kay products, as well as exploiting the beauty brand’s name and logo to draw traffic to the site and charge clients high rates for services based on those traffic numbers.
RetailMeNot is indeed seeing a fair amount of revenue tied to its site traffic. The company reported $264.7m in net revenue for 2014, with 20% of Q4 revenue from international markets and 25% from mobile. That same quarter saw monthly mobile unique visitors totalling 21.2 million.
Those numbers are likely to climb in the year ahead, as mobile is a big focus for the site. "In 2015, we are investing in our highest growth areas, such as mobile and in-store, which we believe are the future drivers of our business," said Cotter Cunningham, CEO and founder of RetailMeNot.
In a forward-looking statement included in the company’s year-end financial results, RetailMeNot anticipated net revenues for 2015 to be between $275m and $285m.
Mary Kay at home and abroad
This litigation clearly aims to protect the Mary Kay brand here in the US. The company continues to make strides internationally, nonetheless.
On the same day this suit was filed, the company launched its latest operations in Colombia. This move expanded the Mary Kay presence in Latin America to 8 countries—Uruguay, Portugal, Mexico, Guatemala, El Salvador, Brazil, and Argentina (besides Colombia).