This document will be updated periodically to reflect new questions and additional information. Any changes will be clearly highlighted Questions about the Decision to Discontinue Grace Adele* Q: Why has Scentsy decided to discontinue Grace Adele? A: The decision to discontinue Grace Adele as a direct selling brand was made after we carefully considered the brand s tough business realities, combined with its relatively poor fit within Scentsy s culture. Contrary to our initial hopes, Grace Adele s differences ultimately distract from rather than complement Scentsy s unique strengths. This reality, compounded by the challenges of sustaining a fashion brand in the direct-selling model, brought about our decision to discontinue the brand. Q: Why did Scentsy launch Grace Adele in the first place? Couldn t we have foreseen this? A: Like all successful companies, Scentsy rallies around its strengths while remaining open to new possibilities. When Scentsy launched Grace Adele in 2012, we did so knowing that it was significantly different from Scentsy Fragrance and Velata. We launched a fashion brand as part of a deliberate strategy to diversify, knowing only time would tell whether this particular brand would complement our strengths. Part of being an industry leader is being willing to take chances and push the envelope. Another part of being an industry leader is being able to recognize missteps early and make course corrections. Q: Why is Scentsy choosing to focus only on Fragrance and Velata? A: Scentsy Fragrance and Velata revolve around creating memories and shared experiences. As a company, we are skilled in harnessing the power of the senses like taste and smell which are intricately tied to memory and emotions in unique products that bring people together. These are critical elements of our unique brand ethos. Scentsy Fragrance uses the sense of smell to evoke memories, inspire reminiscing, and create a mood. Likewise, Velata uses the senses of taste and smell to bring families together around the dinner table, spark conversation, and participate in traditions. Our experience with these two brands reinforces that our strength lies in products that warm the heart, enliven the senses, and inspire the soul. Q: Why doesn t Grace Adele fit in with the other Scentsy brands? A: As a fashion brand, Grace Adele caters to individuals rather than families. And instead of focusing on a sensory experience (e.g., smell, taste), Grace Adele 1
emphasizes an aesthetic. Grace Adele is about creating a unique look that no one else has, while Velata and Scentsy Fragrance are about creating a shared experience. We ve learned as a company we offer customers a much stronger value proposition with products that create experiences. Q: What are the business realities behind the decision to discontinue Grace Adele? A: It is difficult for fashion brands to thrive in the direct-sales space, in part because the nature of fashion demands a wide variety of products. Maintaining this product variety carries with it a high level of risk in unsold inventory and extremely narrow profit margins. When combined with increased product development timelines, the value proposition of a fashion brand becomes shaky at best. Q: Why doesn t Scentsy just simplify the Grace Adele brand by offering fewer products? A: If you scale back the number of products, soon every customer has a fashion piece every other customer has, which lowers the appeal. Additionally, for Grace Adele to decrease its product offering, prices would have to be raised about 20 percent across the board, which would put a faux leather bag in the $100 (USD) range. This would obviously have a negative impact on the value proposition. Q: Is Scentsy still committed to the multi-brand concept? A: Yes. We want to give our Consultants focus with options. We remain committed to this strategy, while honing our brand offering to focus on our strengths. Returning our focus to Velata and Scentsy Fragrance will allow Consultants to double down and become even more motivated and successful. One of our key learnings from our experience with both Grace Adele and Velata is that focus and passion are required for success. Scentsy Consultants casually selling Velata on the side will not create the energy or momentum required for viral growth. Because Scentsy Fragrance and Velata share a cohesive brand ethos, they have a greater opportunity to deliver more authentic, emotionally connected stories and experiences for Consultants and customers. Q: What support can I expect from the home office? A: We are committed to supporting our Consultants who wish to continue actively selling Grace Adele through the end of the Spring/Summer catalog season. We ll continue to post great content on the blog, social media, and the newsletter. Likewise, Consultant Support will continue to offer assistance. We also have plans to announce some great sales. Q: Is the decision to discontinue Grace Adele a sign that the company is in jeopardy? A: No. Scentsy recently earned the prestigious ranking of being named the 25 th largest direct selling company in the world (Direct Selling News). We are continually expanding into untapped markets for our brands in the U.S. and abroad, and the company is in excellent shape financially. The decision to discontinue Grace 2
Adele was made with the end goal of strengthening the company and helping our Consultants focus and succeed. This decision is a sign that Scentsy is self-aware and making sound business decisions in a responsible way. Q: What is next for Scentsy Family? A: Scentsy Family is dedicated to fortifying our strengths, while remaining open to new opportunities in the future. As we reaffirm our roots in brands that speak to our strengths, we move forward with a renewed sense of focus and dedication. We have exciting plans in store for supporting our Velata and Scentsy Fragrance Consultants, as well as exciting new products that will be revealed at Reunion. Questions about New Business Rules Q: What does this mean for my Grace Adele Consultant account? A: Grace Adele-only Consultants will have the opportunity to enroll in either Scentsy Fragrance or Velata and will receive a free Starter Kit in their brand of choice. As of July 31, 2014, all Grace Adele accounts will be deactivated. Q: Can I still enroll people to sell Grace Adele through July 31? A: No. Effective May 22, 2014, Scentsy Family will not be accepting new enrollments under Grace Adele. Q: Will Scentsy Family buy back any of my existing products? A: Scentsy Family will buy back any resalable product from the Spring/Summer 2014 Catalog or the Fall/Winter 2013 Catalog. All product in resalable condition will be bought back at 100 percent of purchase price (less commissions) as long as the products were purchased prior to May 22, 2014. Q: What is the process for returning resalable Grace Adele products? A: If you choose to send your product back, your Grace Adele account will be deactivated at that time. The first step is to call Consultant Support between June 2 and June 10, 2014, to request that your account be canceled. After your request is made, you will have 30 days to return any resalable products. As soon as your product is received by Scentsy Family, you will be issued a refund check. To learn more, please call Consultant Support. Q: Will Scentsy Family buy back any of my existing Scentsy Family Store products? A: Scentsy Family will buy back any resalable product purchased after January 1, 2014, at 100 percent of purchase price. All product must have been purchased prior to May 22, 2014. Q: How are Scentsy Fragrance and Velata going to be affected? 3
A: Moving forward, Scentsy Family Consultants will be required to earn 150 PRV in each brand in which they are enrolled in one calendar month over a rolling threemonth period to stay active in each brand. Q: Why are we changing the 150 PRV requirement? A: The requirement of 150 PRV per brand encourages our Consultants to successfully launch and focus on one brand before dividing their time and energy on multiple brands. We want to encourage our Consultants to be passionate about the brands they sell, rather than dabble in them. For this reason, we ask that our Consultants who participate in a brand do so with dedicated focus and energy, in selling 150 PRV in at least one month per quarter. Q: If I am a new Consultant, can I enroll in both brands? A: All Consultants new to Scentsy Family will choose their primary brand during enrollment. Consultants will have the option of adding an additional brand, if they so desire, after a six-month waiting period. Q: What if I am an existing Consultant who sells both Scentsy Fragrance and Velata? A: Consultants who currently sell both Scentsy Fragrance and Velata will be able to continue selling both brands but must meet each brand s PRV requirements. If a Consultant becomes inactive in a given brand for not meeting the 150 PRV requirement, the Consultant will be eligible to re-enroll in that brand three months later. Q: Will I still be paid on my downline team members who are enrolled with a different brand than me? A: Yes, if you are a Scentsy Fragrance Consultant only and have downline that is Velata, you will still be paid commissions on their sales. Q: How do I know if my product is resalable? A: Products and sales aids are considered resalable if each of the following qualifications are met: 1. They are unopened and unused; 2. Packaging and labeling (including stickers/labels) has not been altered or damaged; 3. The product and packaging are in a condition such that it is a commercially reasonable practice within the trade to sell the merchandise at full price; and 4. Products must be included in the current version of a Scentsy Family catalog or are currently being sold through the Scentsy Family Store website (Warmer-of-the- Month warmers, personalized items ordered from Scentsy Family Store, and products sold in packs containing multiple pieces with the package opened are not considered resalable). 4
Q: Will a full selection of Grace Adele products be available for purchase until July 31? A: Starting May 23 all current catalog and closeout products will be offered while supplies last. Q: Will you be refunding me for my PWS subscription? A: No. We encourage Consultants to maintain a PWS since there will be sales/promotions from now until July 31. At that time, or at any moment prior if you so choose, you may cancel your PWS subscription through the Workstation. Q: What about all my Grace Adele materials that are branded Scentsy Family? Are they now out of compliance to use? A: Scentsy Family business tools that have a Grace Adele logo will still be considered compliant, but we highly encourage making revisions to business tools as soon as you can to avoid customer confusion. Q: I just enrolled; are you going to refund me for my Starter Kit? A: If you enrolled after January 1, 2014, and are not interested in selling either Scentsy Fragrance or Velata products, you may cancel your Consultant Agreement and return your Starter Kit for a full refund. Q: What support will the home office continue to offer Consultants selling Grace Adele? What specials will be available? Is it in my best interest to stick with it until the end of July? A: Scentsy will continue to provide full support for Consultants selling Grace Adele through July 31. There will be sales and special promotions through July 31 that will be communicated and we highly encourage Consultants to stay engaged to benefit from these sales. Q: Do we still stand by the lifetime warranty? A: Yes. Grace Adele products will still come with a Lifetime Replacement Warranty for manufacturer s defects. For replacements, Consultants must call Consultant Support, and a refund will be issued upon receiving the defective product. Products will be exchanged exact for exact while the product is in stock. If a returned product does not have an exact match to exchange, Scentsy Family will issue product credit or refund at the discretion of the Consultant. Q: Will there still be a 30-day Satisfaction Guarantee? A: No. Effective May 23, 2014, any products purchased will no longer qualify for a 30-day Satisfaction Guarantee. ALL SALES ARE FINAL. Q: Will Scentsy Family reimburse me for upcoming Grace Adele fairs and shows prior to July 31? A: All Grace Adele Consultants will have the opportunity to continue selling Grace Adele through the end of the current catalog season (July 31, 2014), including participating in fairs and shows. For Consultants who do not wish to continue 5
selling Grace Adele through the current catalog season, Scentsy Family will either refund the cost of the fair or show, or locate another representative who wants to take advantage of the opportunity. Q: What about fairs and shows booked and contracted prior to the May 22 announcement that take place after August 1? A: For events booked and contracted after August 1, Consultants will have the opportunity to purchase any remaining Grace Adele stock at wholesale prices, and sell these products at fairs and shows as distributors rather than Consultants. All shows booked after August 1, 2014, will be considered separate from Scentsy Family and will not be awarded PRV for sales. For Consultants who do not wish to sell Grace Adele under this model, Scentsy Family will either refund the cost of the fair or show, or locate another representative to take advantage of the opportunity. Q: What does it mean that Grace Adele products will be offered at wholesale after August 1? A: Interested Grace Adele Consultants who have booked shows after August 1 would be able to purchase any remaining Grace Adele products at wholesale prices and be allowed to distribute that product through shows, events or other channels outside of the Scentsy Family direct selling compensation model. Q: Why is Scentsy Family offering a wholesale model? Will this model continue indefinitely? A: Scentsy has decided to offer the wholesale model to support Consultants who have fairs and shows booked after August 1 and to liquidate remaining inventory. Our intentions are not to continue indefinitely or to act as a profit center, but only to recoup the inventory costs and reallocate that money back to Scentsy Fragrance and Velata. Those who decide to sell through the wholesale model will purchase the product at significant discounts (without PRV) and sell it through fairs, shows, boutiques, etc. *Additional information regarding the wholesale model will be addressed in July Q: Would selling Scentsy Family Brands and Grace Adele Wholesale be considered cross promotion? A: No. Because you are not building a downline in the wholesale distributor model, there is no inherent conflict of interest. Likewise, the wholesale model is a temporary solution to support Consultants who have booked shows after August 1, as well as liquidate excess inventory. Q: How is the Family Reunion affected? Questions about Reunion 6
A: Scentsy Family Reunion will be focused around Scentsy Fragrance and Velata. We are excited to rally around our flagship brand and our rising star, Velata. Q: If I no longer plan to attend Reunion, how long do I have to cancel my registration? A: May 31, 2014 Q: What if I selected the Grace Adele Product Kit for Reunion? A: Everyone who selected the Grace Adele product kit will have the ability to select either the Scentsy Fragrance or Velata kit until May 31, 2014. If you haven t selected one of those brands by May 31 you will automatically receive the Scentsy Fragrance Kit. Q: If I am a GA Consultant only and paid for Reunion or other events, are you going to reimburse my expenses? A: Yes, if you don t want to go to Reunion, we will refund your Registration Fee. Contact Consultant Support for more information about resolving this issue. 7