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Jamberry, the nail wrap seller, shuts down, leaves thousands of sales reps in a jam

Jamberry, a multilevel marketer of nail wraps and other beauty products, faces accusations of stiffing thousands of nonemployee salespeople after the company informed employees in a late-night email Wednesday that it was their "last official day" of work. 

"Please come to the ... office at Noon on Thursday for a discussion on what this means regarding health insurance, 401K, and other benefits," Mark Brown, Jamberry's vice president of human resources, wrote in an email provided to CBS MoneyWatch. 

The fate of Jamberry's more than 50,000 nonemployee sales consultants isn't clear. A memo sent to consultants Thursday afternoon confirmed that the Utah-based company is in "foreclosure" and that "any product, gift cards, swag, marketing or event purchases made prior to 11:59 p.m. MT on June 28, 2018, are ineligible for (a) refund from Jamberry." The company scrapped plans for an "International Conference" planned for the Gaylord Resort in Nashville, Tennessee, for later this year. It also scrapped "incentive trips" to Costa Rica and Thailand for top performers.

A group of "elite" Jamberry representatives complained in a video posted on YouTube on June 19 that they were having "serious shipping issues" and that the Utah-based company was "later than expected on our last two commissions." The video said Jamberry had quit communicating with the reps and questioned whether anyone was managing the company's day-to-day operations. 

"We hope and pray that Jamberry will continue shipping and continue to pay us," according to the video, which was posted by Rachel Huse, a North Carolina sales rep, but doesn't identify the speaker. Huse declined to comment for this story.

Some sales reps on Thursday indicated in posts in a members-only Facebook page that they expect to continue selling Jamberry products under the management of M Network, a seller of nutritional supplements that has said it recently acquired "certain assets" of Jamberry. A person with access to the Facebook group provided information on it to CBS MoneyWatch.

According to an FAQ M Network released Thursday, it said Jamberry consultants were welcome to join its company. M Network plans to offer Jamberry products "soon."

As of Thursday, Jamberry's website appeared to be running and taking orders. Efforts to reach Jamberry, which is based in Fork, Utah, were unsuccessful. 

M Network CEO Ryan Anderson said in an interview before the company's deal with Jamberry was disclosed: "I honestly don't know what the bank plans on doing with their agreements with the [sales] consultants. Many have chosen to move on to other companies, and others are holding on to hope that something will still exist of Jamberry."

Jamberry started out less than a decade ago as an idea of three cost-conscious Utah sisters -- Lyndsey Ekstrom, Christy Hepworth, and Keri Evans -- who did not want to pay salon prices for manicures and pedicures. It became an international beauty brand with consultants in the U.S., Canada, Australia and New Zealand.

Like other multilevel marketers (MLMs), such as fashion seller LuLaRoe, Jamberry's success is due to its savvy use of social media such as Facebook and Instagram, along with encouraging sales reps to hold parties in their homes.

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The original owners sold a majority stake in Jamberry to outside investors a few years ago, according to Anderson of M Network. His company acquired "certain assets" of Jamberry and wasn't interested in a merger, he said, declining to be more specific.  

"M Network plans on launching a personalized beauty brand and line of products this year," Anderson wrote in a message to CBS MoneyWatch.

Jamberry's nail wraps, which retail for $15, are thin vinyl sheets with designs on them and can last for up to two weeks on fingers and four weeks on toes. Its products received positive coverage from Self, Glamour and BuzzFeed, among other sites. Jamberry also sells a line of other beauty and hair care products.

"From the beginning, the company's great challenge has been every company's dream: overwhelming demand," according to trade publication Direct Selling News. "To keep up with demand," it said, "the company explored new manufacturing options, leading to initial bottlenecks and quality issues. The company has worked out those kinks."

MLMs like Jamberry sell their products via nonemployee distributors who can earn money both by selling products and by recruiting other members to their sales teams. Other businesses that use the model include LuLaRoe, which has been accused in a lawsuit of being a pyramid scheme, along with Amway, Mary Kay Cosmetics and Pampered Chef, which is owned by Warren Buffett's Berkshire Hathaway (BRK.A).

"The writing has clearly been on the wall for Jamberry for a while -- they have been offering special deals non-stop this year," said The Anti-MLM Coalition, an industry critic, citing "cut-price offers for consultant startup packages, 'flash sales' one after the other [and] cheap sign-up for their 'Style VIP package.'"

When M Network announced its "alliance" with Jamberry, executives at M Network heaped praise on its new partner. They bragged in a May 22 YouTube video that the cultural fit among the MLMs was so strong that it was like "looking in a mirror," said Dave Webb, M Network's senior vice president, who described himself as "giddy" about the deal.

The good feelings, however, proved to be fleeting after the agreement failed to close as expected this month.