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.

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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 you’re sent. Unlike a genuine clothing retail business, you don’t choose your stock. Instead you’re sent a random selection of styles. 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”.

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.

(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.)

“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’. 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.” 

Joining an MLM is like entering an abusive relationship

We wanted to keep this article focused on the business side of LuLaRoe, so have steered clear of covering 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:

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