The subtle but important changes MLM LuLaRoe made to their 2021 income disclosure statement

Business

Find out why LuLaRoe’s 2021 income disclosure statement has some subtle but important changes – and reveals why it’s not an attractive business opportunity for most people.

We’ve been investigating MLMs since 2016, and where we can, we always examine their income disclosure statements. So we’ve been interested to see how they have evolved over the years.

As awareness about how predatory and damaging MLMs are has increased, and more people are looking critically at their income disclosure statements, we’ve noticed that MLMs have made them harder to read.

Year-on-year we are seeing less information on income disclosure statements, and numbers presented in ways that attempt to obscure the true losses. (You have to ask why they do this if they genuinely believe they offer viable income opportunities?)

So it was interesting to see the subtle but, to us, significant changes clothing MLM LuLaRoe made to their court-enforced 2021 income disclosure statement. (Click here to read LuLaRoe’s 2020 income disclosure statement, and find out why they are legally obliged to produce them.)

Why have LuLaRoe omitted this figure from their 2021 income disclosure statement?

One of the first things we noticed, was that LuLaRoe have removed what was probably the most honest (in our opinion) figure from their 2021 income disclosure statement.

In 2020, they included this sentence when talking about their Leadership Compensation plan:

And yes, it does say that the median average Leadership Compensation Earnings of all Retailers was ZERO: “In 2020, the average Leadership Compensation Earnings of all Retailers was $1,235.97 while the median earnings were $0.00.”

However, this calculation does not appear on their 2021 income disclosure statement. And it’s probably not because the situation has improved, because as you can see the rest of the numbers are fairly similar:

  • In 2020, 14.62% of LuLaRoe Retailers received earnings through the Leadership Compensation Plan. However in 2021, that number had reduced to 13.72% of Retailers.
  • In 2020, people who qualified for the Leadership Compensation Plan earned $520.99 in median earnings. In 2021, this had increased slightly to $534.19.

So why omit the fact that the median average Leadership Compensation Earnings of all Retailers was zero in 2021? Unless they were trying to avoid publishing the negative figure and exposing themselves to criticism like this?

LuLaRoe made a small but potentially misleading change to their charts in 2021

There’s one other tiny but potentially misleading change LuLaRoe made to their 2021 income disclosure statement. This time it’s in the charts where they show the retail and Leadership Plan profits for all Retailers.

Here’s the chart from LuLaRoe’s 2020 income disclosure statement. As you can see, only 2.9% of people achieved the top level of profits (before expenses).

In their 2021 income disclosure statement this number appears to have increased to 6.14%:

However on closer examination you can see that LuLaRoe have just lowered the ‘top level’ of earnings on their chart. In 2020 they included anyone who earned over $75,000, but in 2021 they lowered it to include everyone who earned over $50,000.

If you include everyone in 2020 who earned over $50,000, the figure is 5.6%. (Which given this is the total number of people who earned over $50,000 BEFORE expenses for a year, is still pretty dismal in our opinion.)

It’s a tiny change but, in our opinion, is a misleading one as it makes it appear, from the 2021 chart, that more people are succeeding.

Of course there may be innocent reasons for these changes, however we suspect they were made in an attempt to make LuLaRoe look better.

At least 17% of LuLaRoe Retailers LOST money in 2021

The small changes LuLaRoe have made to their 2021 income disclosure statement can’t hide the glaring fact that, for the majority of Retailers, it’s not a profitable business opportunity.

Their income disclosure statement shows that in 2021, at least 17.12% of their Retailers lost money. Why ‘at least’? Because the numbers recorded are gross profit, and don’t include business expenses, such as unavoidable shipping and packaging costs.

We believe that once Retailers take into account their business expenses, which LuLaRoe themselves admit “can be several hundred dollars or thousands of dollars annually”, many more will make a loss.

Which ties in with what we see in other MLM income disclosure statements, and this research published on the FTC website that concludes that, on average, 99.6% of people who join an MLM will lose money once business expenses are taken into account.

And the losses in LuLaRoe are substantial. According to their income disclosure statement, 14.13% of Retailers lost between $0 and $4,999 in 2021, 1.01% lost up to $9,999 and .71% lost over $10,000. Again, these figures don’t include business expenses, which will push their losses much higher.

The median average earnings for 2021 have reduced

The media average earnings before expenses for LuLaRoe Retailers in 2021 has also decreased. In 2020, the median gross profit was $1,444.65 (just $120 a month). In 2021, that had reduced to $1,326.04 ($110.50 a month).

To put this into context, the federal minimum wage in the US is $7.25 an hour. Which means that, with a monthly gross profit of $110.50, they are earning less than minimum wage as soon as they work over 15.24 hours. Take out unavoidable business expenses, such as shipping and packaging, and this number reduces even further.

There’s one other BIG thing LuLaRoe’s national income disclosures miss out

As part of their legal agreement, LuLaRoe appear to be required to produce an income disclosure statement for their Washington Retailers. And this clearly has very specific requirements, which LuLaRoe don’t follow on their national income disclosure statement. And you can see why!

Here’s what their Washington Leadership Compensation Plan earnings chart looks like:

As you can see there is one BIG difference between this chart and LuLaRoe’s national one: LuLaRoe conveniently only include Retailers who qualified for the plan on their national statement.

However, when you include, as they must have have been ordered to do for Washington, ALL Retailers the picture looks very different – and very depressing, with 88.91% of all Washington Retailers shown as earning zero from the Leadership Plan.

Washington also clearly requires them to highlight the people who make a loss – again something they fail to do on their national income disclosure statement:

MLMs like LuLaRoe are NOT a viable business opportunity

In our opinion, LuLaRoe’s income disclosure statement, like those we have seen from other MLMs, demonstrates that, despite their recruitment promises they are not a viable business opportunity.

If you join LuLaRoe, the chances are that you will lose money, according to their own figures. To join now, you will need to pay $499:

Given that the average Retailer last year earned just $1,326.04, that means you realistically only have the potential to earn $827.04 for the next 12 months, according to LuLaRoe’s own figures.

But of course that’s not profit. Because as a new Retailer you’ll need have these startup costs to cover, according to LuLaRoe:

  • Racks
  • Hangers
  • Storage bins
  • Mannequins
  • Online sales equipment (camera, internet, computer/mobile phone)
  • Printer for shipping labels
  • Home office/warehouse
  • Vehicle/trailer to transport merchandise
  • Business cards

LuLaRoe also notes these ongoing business expenses:

  • Shipping
  • Packaging
  • Advertising (both traditional and online)
  • Promotional giveaways
  • Travel expenses (vehicle, mileage, gas)
  • To attend corporate events
  • To attend training
  • To host pop-ups
  • To deliver orders
  • Employees or assistants
  • Insurance

All these costs need to come out of that $827.04 before you can think of earning any money.

And don’t forget your time – you need to factor the cost of the time you spend on your business, ‘charging’ your business at the very least minimum wage.

Even if you do survive the losses of year one, year two doesn’t look much more promising. Because again, the average gross profit is just $1,326.04. And you still have ongoing business costs. We estimated you’d probably make a loss in year two as well, based on LuLaRoe’s numbers.

In fact, we can’t see you ever getting to the point of earning anything near an income – or maybe even any decent money in net profit – from LuLaRoe. Only 9.61% of all LuLaRoe Retailers earned over $30,000 in 2021. And, yet again, this isn’t actual profit; this is income before business expenses.

In fact, statistically you are more likely to lose between $0 and over $10,000 (17.12% of all Retailers in 2021) than you are to earn over $15,000 (16.4% of all Retailers in 2021).

Don’t join LuLaRoe if you want to earn money

Given the above figures, the recruitment page on LuLaRoe’s website right now seems very misleading, in our opinion:

LuLaRoe invite you to become a ‘fashion entrepreneur’, but according to their own income disclosure statement, we think you’re more likely to become a fashion loser. Which is why we recommend saving your money (and your time and sanity) and looking elsewhere for an opportunity to earn money.

Read more about MLMs like LuLaRoe

Want to learn more about the MLM industry? You can read the experiences of some of the former MLM reps we have interviewed here:

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Photo by Keenan Constance