How can you make money with MLM LuLaRoe? Why the sums don’t add up
How much money can you make with MLM LuLaRoe? We look at what it takes to become a LuLaRoe consultant, and why the sums just don’t add up.
One MLM that has been hitting the headlines often over the past year for the wrong reasons is LuLaRoe. For those of you who have never heard of LuLaRoe, it’s an American MLM that sells clothing, but is mainly known for its ‘buttery soft’ leggings.
Given the bad press about LuLaRoe, we decided to look at whether it’s possible to earn money as a LuLaRoe consultant, so we looked for evidence of their numbers. And, as we discover in this article, when you dig down into the ‘income opportunity’ LuLaRoe offers their consultants, the sums just don’t add up.
Please note, this article has been updated with important developments in October 2018. Please ensure you read the update section below.
How much does it cost to become a LuLaRoe consultant?
So if you did want to join LuLaRoe and become a ‘consultant’ (as they call their reps), what kind of investment are you looking at? To begin with, you have your initial set up costs. These are unavoidable if you want to become a LuLaRoe consultant.
To join, you’re required to invest a minimum of US$5,500 in inventory, according to Business Insider. You also have other expenses, including (but not limited to) hangers, business cards, a website, space/facilities to store and display your products, and a budget for flyers and local markets and shows. According to this site, you need to put aside at least another US$500 to cover these extra startup costs.
So you’re looking at around US$6,000 to set up as a LuLaRoe consultant. And it doesn’t stop there. According to this recruitment website you need to spend “hundreds of dollars” a month to build a business:
How quickly can you make back your investment in LuLaRoe?
That’s a lot of money to invest. But if you make it back quickly, it’s a worthwhile investment. And, according to this website, that’s reasonably achievable:
This site also makes paying back your investment within four months look easy:
However, as we’ll discover, these recruitment marketing messages are very far from the truth.
You have no control over the LuLaRoe stock you buy
So how easy is it to sell the LuLaRoe stock you’ve invested in? One of the big gripes about LuLaRoe is that you have no control over the designs or even sizes you’re sent. Unlike a genuine clothing retail business, you don’t choose your stock; instead you’re sent a random selection of styles and fits. Apparently they just “provide you with whatever inventory they have in stock.”
Here’s a visual of one their ‘onbarding packages’ (these apparently “change frequently”):
This is bad luck if, like Christina Hinks, you’re sent stock you can’t sell:
“I live just outside of Chicago. My first shipment included 270 pieces of Southwest-inspired prints. There is no market for that style where I live.”
People are also divided whether LuLaRoe clothes are even in good taste. (There are a number of Facebook groups devoted to digging out the ugliest prints and styling combinations of LuLaRoe outfits.)
If stock arrives damaged you’re out of pocket
And if you have the bad luck to receive any products from LuLaRoe that are flawed or damaged you’ll be further out of pocket, as you have to pay the shipping costs to return them (yes, even though it’s LuLaRoe’s fault!):
And the quality of their clothing doesn’t have a great reputation, with customers describing their leggings as tearing “like wet toilet paper”. The company also are not apparently very swift in refunding:
You’re competing in a VERY crowded market
Let’s say you are sent items you like, and they’re not damaged. The next hurdle you need to overcome in making back your investment (let alone earning a profit) is saturation.
This is LuLaRoe’s previous retailer map (interestingly they’ve now changed the formatting of their map so you can’t get a national overview like this one we screen grabbed last year):
As you can see, there are a LOT of LuLaRoe consultants. And with no geographical ownership (unlike franchise businesses), you’re competing for business with any number of consultants in your hometown – and tens of thousands online. As Business Insider learned:
“Some representatives say it’s been getting harder to make money selling LuLaRoe because they are competing with so many more sellers now, and they have to run promotions to attract customers — which is a drain on profits.”
And that’s just the active consultants. You’re also competing (as we’re about to see) with a LOT of consultants who are going out of business (GOOB) and are trying to offload their stock at any price to minimise their losses.
LuLaRoe changed their refund policy overnight
So what if you have decide LuLaRoe isn’t working for you after all and want out? LuLaRoe’s policy used to be that you’d receive a 100% refund, including shipping and handling:
“In April, a policy was implemented stating that LuLaRoe consultants who were going out of business (or leaving the program) could return unsold merchandise to the company and receive a 100 percent refund at any time. Consultants were even covered for the cost of shipping and handling.”
The company specifically clarified that their ‘100% Buy Back on Inventory Policy’ had no expiration date, and included products bought in any timeframe:
But in September 2017, LuLaRoe’s policy changed overnight to refund just 90% of the net costs of purchases made in the last 12 months only (subject to them meeting LuLaRoe’s strict policy requirements), less shipping:
If your returned products are deemed unsaleable by LuLaRoe when they receive them, they’re donated to charity and you get nothing in return for your costs in sending them back. To be deemed ‘resalable’ all the following must be satisfied:
- They are unworn, unwashed, folded with hang tags and in original packaging.
- Packaging and labeling has not been altered or damaged.
- They are in a condition such that it is a commercially reasonable practice within the trade to sell the merchandise at full price.
- They are returned to LuLaRoe within one year from the date of purchase.
The shipping costs of returning your stock in the hope it meets these strict conditions are also high:
Natasha Roberts, of Knoxville, Tennessee, sold LuLaRoe for a year before deciding to pull up stakes in August. She’s worried about the cost of returning her purchased merchandise. “I have nine boxes that are over 300 lbs! Then I would only get 90% of wholesale and nothing on the limited edition items,” she told BuzzFeed. “I have dozens of Valentine’s Day leggings and some items from last Christmas.”
Their policy makes returning products to LuLaRoe a gamble if you have decided to quit. You’ll need to pay upfront for your shipping in the hope that they will deem your returns saleable and refund you 90%. If they decide your returns aren’t saleable you’ll have spent more money on shipping for nothing.
As a result, consultants are selling off their stock CHEAP
The result in the change of policy has been two-fold. Firstly a number of angry consultants are suing LuLaRoe. (They’re also being sued for the poor quality of their leggings and for ‘being a pyramid scheme‘.)
And secondly, former consultants are offloading their stock to try to recoup their losses. These going out of business sales (GOOB sales) are all over Facebook and eBay.
For LuLaRoe consultants this is a nightmare; you’re competing not just with other consultants but with desperate former consultants who are selling their stock at far lower prices in GOOB sales.
So if a LuLaRoe fan really wants a ‘Sarah’ or an ‘Irma’ they can pick one up for a few dollars from an ex-consultant. They don’t need to pay full price for leggings that tear in the wash and fall down repeatedly, or US$50 (including exchange and shipping) for a t-shirt that pills after four hand washes and you can’t wear outside “because it looks like something your average person would sleep in”.
UPDATE on Lularoe’s refund policy
In the months since we last updated this article, so much has changed so fast with LuLaRoe that we have been unable to keep up – we’d have to update this article weekly!
But, in order to ensure that this article is as accurate as possible, here are some of the most important developments you need to be aware of.
LuLaRoe owes over $1.6 million in refunds to former retailers
Despite LuLaRoe’s claims that they are honouring their refund policy, hundreds of former retailers are waiting unacceptable periods of time for their cheques.
Some have been waiting in excess of 10 months, and the sum owed is currently estimated to be in excess of $1,601,273. When ex-retailers attempt to get an update on their refund they are frustratingly given the run around, with no date given to expect a cheque.
Many people waiting are now understandably fearful that the cheques will never come out because the company doesn’t have the funds to cover them, and that LuLaRoe are possibly even headed for bankruptcy (see below).
Retailers are sent defective clothes to sell
From spelling mistakes (villian, not villain) to missing seams, see through leggings and mismatching sleeves, there appear to be an increasing number of faults in LuLaRoe’s clothes. There seems to be such little confidence in the company’s damages policy that retailers are encouraged to actually sell these faulty clothes as usual, and hope customers don’t notice.
As with most MLMs, rather than accept responsibility for any faults themselves, co-founder of the company DeAnne Stidham appears to blame Disney for not spotting their villain/villian mistake:
Top retailers are leaving in their droves
Things don’t look good for your MLM business when your top retailers leave. After all, at the height of a company’s success, these people are making hundreds of thousands of dollars a month from their downlines. And who walks away from that kind of easy money?
So clearly, if top retailers are leaving a company, it means that the money must probably have stopped rolling in. And that’s just what is happening virtually daily at LuLaRoe at the time of updating. Some are moving onto new MLMs, others are starting their own online boutiques.
Individually one top seller or someone at the top of the pyramid leaving would be big news. Collectively, to us, they’re a huge warning sign that the company looks like it’s in trouble.
LuLaRoe is being sold in discount stores
For a number of months now we’ve seen posts showing new LuLaRoe products for sale in discount stores across the US. Now it appears that it’s also being sold in bulk in a number of stores in Australia too, as this image of a pile of leggings for sale at just $2 a pair shows:
Bankruptcy rumours are circling
Their apparent reluctance to pay their debts to retailers, and the alarming number of top retailers leaving LuLaRoe don’t help dampen the increasingly loud rumours the company is heading for bankruptcy.
Some observers are even commenting that the company appears to be making preparations for a bankruptcy announcement in due course, and are warning current retailers to remove any funds off their Bless account (the company’s internal invoice payment system).
If you are concerned about any of the latest developments or rumours about LuLaRoe, we recommend joining the Facebook group LuLaRoe Defective/Ripped /Torn Leggings And Clothes. We also recommend checking out LuLaRoe Fail.
So how much money CAN you make as a LuLaRoe consultant?
So, given all the above, exactly how much money CAN you make as a LuLaRoe consultant? Like all MLMs, it’s very difficult to answer that question. Maybe because they earn so little (according to robust research, 99.6% of reps in MLMs lose money) MLMs go to great lengths to make their earnings structures very complicated and disguise or hide how much their reps genuinely earn.
We did manage to find this 2016 income disclosure statement from LuLaRoe showing monthly bonus payments made to all reps that year. Here’s a screenshot:
As you can see, the vast majority of consultants (73.63%) earned absolutely zero in bonus payments. 0.33% earned less than US$50 a month and 2.9% earned under US$250. Only the top 6.1% of consultants earned over US$1,000 a month in bonus payments.
Bonus payments are based on “bonus payments made by LuLaRoe to Independent Retailers based on the sales generated by their teams.” They don’t include retail profits earned by the consultant themselves.
LuLaRoe don’t publish independent retailers’ profit, but data obtained by Business Insider in March 2017 showed that “more than 80% of LuLaRoe’s representatives generated less than $5,000 in sales last month, including 10,834 who sold nothing.”
And remember, this is apparently sales income, not profit. Out of this sum, consultants need to deduct their expenses, including the cost of purchasing the stock from LuLaRoe.
UPDATE: Please see our updated section above. With so many top retailers leaving the company, and ex-retailers unable to sell off their clothes, even at below wholesale prices, plus the large number of new LuLaRoe items seen at Goodwill and other stores across the US now, we estimate your earning potential with the company has dropped even lower. And would caution anyone against joining a business that is apparently so flawed.
(As you can read in this story of an ex-Mary Kay rep, you can qualify for the trophy MLM car, make it to the top 2% of your organisation and take home huge commission cheques, and STILL be in huge debt with an MLM.)
How much are LuLaRoe consultants earning in sales commission?
So, in absence of any official figure from LuLaRoe, is there any way we can estimate how much LuLaRoe consultants are earning in sales commission? Or just how much they’re selling?
To get an idea, we need to cross reference information from their income disclosure statement with their compensation plan. Here’s what their income disclosure statement says about bonus payments made:
Bonus payments are commission on the purchases of the people you have recruited into you in LuLaRoe – and they people they recruit under them. As you can see, in 2016 72.63% of US LuLaRoe consultants were ineligible for any bonus payments.
So almost three quarters of LuLaRoe consultants didn’t qualify in that year.
What do you need to do to be eligible for LuLaRoe bonus payments?
LuLaRoe don’t appear to publicly share their compensation plan, but according to this video, at the very minimum, as a sponsor (the bottom level of their compensation plan), in order to qualify for bonuses, the people you sponsor into LuLaRoe must order 175 pieces from the company in that calendar month:
So if you’re a sponsor and you want to get commission on the purchases of any consultant you recruit into LuLaRoe you need to order 175 pieces every month. If, in any given month, you fail to order 175 pieces you receive no bonus payment.
As you rise up the ranks the pressure naturally rises, with the qualifying order amount increasing.
At trainer rank, you need 250 pieces to qualify for LuLaRoe bonus payments (100 of which need to be from your own personal order). You also need to have at least three personally sponsored fashion consultants under you, with a total of 10 fashion consultants in their team. And those 10 consultants need to order 1,750 pieces every month between them for you to receive your bonus:
72% of LuLaRoe consultants didn’t qualify for bonus payments in 2016
So, aside from the fact that LuLaRoe’s bonus system appears to place a great deal of pressure on their consultants to keep ordering from them every month (and encouraging the people under them to keep ordering), what does this potentially tell us about how many retail sales LuLaRoe consultants are making?
LuLaRoe may argue that most consultants don’t want to build a team under them, and just want to sell themselves. But given how many LuLaRoe consultants sell the opportunity around the message of building a team under you, we personally don’t believe that 72% of consultants don’t want to participate in their bonus system.
And even if that were the case, if the people being recruited as just consultants were ordering (and therefore selling) enough each month, their sponsors would qualify for the bonus payments. Which means we’d still see more than 27% of consultants receiving any bonus payments in the space of a year we believe.
What appears more likely to us is that up to 72% of LuLaRoe consultants just aren’t selling and recruiting enough to qualify for bonus payments – or to enable their sponsors to qualify.
“I really feel like I failed my family”
We take great care to ensure our articles are as factually accurate as possible, so have used the fairest, lowest figures when looking at the investment consultants are making in LuLaRoe. But our research showed that these numbers are the tip of the iceberg.
This site estimates that consultants need to invest at least US$15,000 in inventory and sell it at a markup of more than 40% to turn a profit from LuLaRoe. And this consultant claims that, “many of the most successful consultants have 600-800 pieces in their inventory.”
Indeed, once you’re in, LuLaRoe apparently encourages you to bulk up your inventory to ‘achieve greater success’ (and was we can see from above, if you want to participate in their bonus system you need to buy a certain amount of stock from LuLaRoe every month to qualify). As a result, many consultants have ended up in debt:
“I was urged to stop paying my bills to invest in more inventory… I was urged to get rid of television. I was urged to pawn my vehicle. I just had to get on anxiety meds over all of it because I’ve started having panic attacks.”
“There was a point in time where I had $8,000 worth of inventory sitting in my home while I was running up to food banks to feed my family. I really feel like I failed my family.”
This article even reveals that consultants are encouraged to continue buying stock, even if they’re not selling:
“Reece says she felt pressured by LuLaRoe leadership to continue buying inventory. She explains at the time, the company paid out bonuses based on what consultants bought, not what they sold.
“Even though we weren’t selling, we were ordering like every week,” she adds.
Jeannette Mortimer is another former fashion retailer who says she felt pressure from LuLaRoe to invest more money on merchandise even though she was swimming in clothing no one wanted to buy.”
How one LuLaRoe stylist got a shock when she did her taxes
So what happens to the stylists who are seemingly making money? How can it be possible that as much as an average of 99.6% of MLM reps lose money, as research published by the FTC discovered?
The problem with many MLM reps is that they count sales as profit. But in order to calculate actual profit, you need to deduct your expenses from your sales. This is what one LuLaRoe stylist discovered when she did her taxes:
This stylist is lucky – she made enough sales to take home some profit, even if it was paltry compared to the effort put in. Many MLM reps, when (if!) they do calculate their expenses discover, like Elle Beau with Younique, that they’ve actually made a loss.
Are LuLaRoe cheques bouncing?
With an organisation as large as LuLaRoe, you wouldn’t expect their cheques to bounce. Especially for an amount as low as under $200. Yet, worryingly, according to the Facebook page LuLaRoe Fail, that’s exactly what is happening.
Here’s an photo of an alleged cheque for a tax refund from LuLaRoe to one of their consultants. As you can see, the cheque was returned as there were insufficient funds in the account.
Their own LuLaRoe Corporate Offices Facebook page also has dozens of reviews from angry LuLaRoe consultants who have apparently been waiting for months for their refund cheques, or just ignored by customer service. Here’s a taste of the treatment they seem to be receiving:
“It took me FIVE months to get my refund check!!!!”
“Each correspondence was weeks before I finally received responses. Hours of hold time with customer service to only be hung up on or finally get through to a live person, only to be given “Michael’s” email address as my only option. Then he can’t bother to respond to an email.”
“I have been trying to cancel my account since January! I can’t even get a response. I have canceled in build and emailed several times. I have all my inventory just sitting here bagged up! I’m tired of looking at it and so t know what to do!! Can someone advise?? I’m so disgusted with this company!!! I don’t want to spend one more minute of my time trying to sell these clothes.”
“This company is nothing but a bunch of thieves!”
“I cancelled This Feb, Feb 13th to be exact and was suppose to recieve $161.00 back in credit. I called and they advised my remaining credit would be sent via check after I opted out of the business. Its going on 2 months.. I have sent numerous emails and even contacted the person Im under for help and NO ONE has replied or helped . Im done. I will never recommend this business to anyone.”
“I started my cancellation process back in July, and I just got my refund [in April 2018]. My husband actually finally got involved and called everyday!”
“I was told I would receive my check in the matter of two weeks for a refund amount of $4223.17. This was four months ago. After many hours on hold, I finally spoke to a customer service representative who told me that the email that was sent out was an automated email, and that it was a mistake. She could not give me a specific time frame of when my check would be issued to me.”
If you’re considering joining LuLaRoe, read these experiences (and plenty more reviews on the LuLaRoe Corporate Offices Facebook page) and ask yourself whether this is a company you’d want to join. A company you’d trust your money, hopes and time with.
LuLaRoe is rated F by the Better Business Bureau
Given all the above, it’s no surprise that the US’ Better Business Bureau (BBB) has now rated LuLaRoe an F (it’s lowest rating) and states that the business is not accredited:
Here’s why it’s rated LuLaRoe so low:
We don’t know about you, but we’d never consider joining (or buying from) a company that appeared to care so little for its consultants and customers.
Joining an MLM is like entering an abusive relationship
We wanted to keep this article focused on the business side of LuLaRoe, so haven’t broached the apparent manipulation and abuse that appears to go on at all levels of the company.
But as a general comment, we have observed that women (and men) who join MLMs are in many ways entering an abusive relationship. The cult-like ways that MLMs operate, and the tactics they use to keep women hooked to buying (and believing in) them are identical to the strategies that abusers use.
And the emotional damage they do as a result just adds to the financial price these women pay to be part of these organisations.
We highly recommend you read this open letter to LuLaRoe from a former consultant.
A quick recap – how much money CAN you make from LuLaRoe?
This is a long article. So, to recap on the key points, here’s what you can expect to earn from joining LuLaRoe, and why:
- It costs around US$6,000 to set up as a LuLaRoe consultant.
- You have no choice over the designs you are sent.
- If you are sent faulty or damaged items you need to pay to return them.
- The clothes are expensive and apparently poor quality.
- You are apparently encouraged to invest regularly in your ‘business’.
- You are competing with tens of thousands of other consultants for sales.
- You’re also competing with cheap GOOB sales.
- If you decide to quit you risk getting very little back from LuLaRoe.
And for all that investment of time, money and hope, you have no way of accurately knowing how much you’ll realistically be able to earn, if anything. Is that really a ‘business’ you want to invest in?
Read more about MLMs
We’ve been covering the MLM industry for a few months now, and the more we learn, the more horrified we become. Here are just a few articles from our site we recommend reading:
- The 10 ugly truths MLMs don’t want you to know
- Thinking of joining an MLM? Read the truth behind the ‘income opportunity’
- How much money can you really make working for MLM Arbonne?
- How much money can you really make working for MLM Stella&Dot?
We have taken every care to ensure this article is as factual as possible. If you spot any factual inaccuracies, please contact us and we will correct them.
Photo by María Victoria Heredia Reye