It’s a wrap: Nail wrap seller Jamberry shuts down

Jamberry, the multilevel marketer of nail wraps and other beauty products, faces accusations of stiffing thousands of non-employee 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 non-employee sales consultants isn’t clear. 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.

Another multi-level marketing operation called M Network, a seller of nutritional supplements, had planned to expand into the beauty market by acquiring parts of Jamberry, but those efforts apparently collapsed this week amid financial and operational struggles at Jamberry.

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

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.

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’s became an international beauty brand with consultants in the U.S., Canada, Australia and New Zealand.

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

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.