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Given all the negative publicity surrounding LuLaRoe, we wanted to investigate how to make money with LuLaRoe and if, in fact, it is genuinely possible to make money as a LuLaRoe consultant.
It is possible, by the way, but keep reading before you sign up with LuLaRoe!
Contents
- Who or What is LuLaRoe?
- A Quick (And Important) Warning about MLMs
- When Was LuLaRoe Launched?
- Why is LuLaRoe so Expensive?
- What is the Cost of Becoming a LuLaRoe Consultant?
- How Long Should It Take for You to Start Making a Profit?
- What Do They Promise Their Consultants?
- Support to Run Your Business
- Educational Resources
- How Fast Can You Recoup Your LuLaRoe investment?
- Can You Choose What LuLaRoe Goods You Want to Sell?
- What Is Their Returns Policy If the Goods Arrive Damaged?
- What Kind of Competition Does LuLaRoe Have?
- LuLaRoe’s Modified Refund Policy
- What Effect Has the New Policy Had on Their Consultants?
- What Are the Requirements for LuLaRoe Incentive Payments?
- How Transparent Is LuLaRoe?
- To Summarize, How Much Money Can You Really Make?
- How to Make Money with LuLaRoe: The Conclusion
Who or What is LuLaRoe?
Here's a bit of background for you – just for interest's sake and to put the article in context! As you probably know, LuLaRoe is an American multi-level marketing company (MLM) that sells women's clothes.
At the time of launch, it was most known for its “buttery soft” leggings.
As part of its multi-level marketing strategy, LuLaRoe recruits independent distributors (dubbed “fashion consultants”) to sell products directly to customers, frequently via social media.
LuLaRoe estimated revenues of around $1 billion in 2016, making it one of the largest corporations in the multi-level marketing sector. By 2017, approximately 80,000 independent distributors were selling the company's products.
In a recent Instagram post, LuLaRoe stated that they had 17,000 active retailers, a far cry from the 80,000 they had in 2017! And it's almost impossible to know what their actual revenue is at present – there is no accurate information available anywhere.
By 2018, LuLaRoe managed to have five huge lawsuits filed against them by thousands of customers, fashion consultants, production partners, and warehouse employees.
The lawsuits continue unabated today.
A Quick (And Important) Warning about MLMs
A note of caution before we discuss how to make money with LuLaRoe:
MLMs all have a pyramid scheme structure in which the people at the top (known as uplines) make a lot of money off the sales commissions of those they've enlisted to work beneath them (their downlines).
The success rate is so low that between 75% and 98% of participants either do not make any money or lose money.
Some people learn their lessons and quit while they're ahead. However, due to the cult-like character of MLMs, many people stay persuaded that they will be successful eventually and aggressively pitch their products to friends, family, and acquaintances.
When Was LuLaRoe Launched?
DeAnne Brady and her husband Mark Stidham, currently based in Corona, California, created LuLaRoe in 2013.
Why is LuLaRoe so Expensive?
LuLaRoe clothing used to be an excellent investment and was once prohibitively pricey for very good reason. MyDyer, their sole manufacturer, created high-quality, elegantly made, and styled works of art for LuLaRoe.
Then, LuLaRoe stopped paying MyDyer and still owes them millions of dollars. LuLaRoe subsequently changed manufacturers, and its clothing is not even close to the same quality as before, but the pricing remains the same.
What is the Cost of Becoming a LuLaRoe Consultant?
Before you join, take a look at the expenses you may need to consider for your budget. How to make money with LuLaRoe is complicated.
First, there are your basic LuLaRoe startup charges. These are inescapable if you want to work as a consultant for LuLaRoe.
The LuLaRoe Start-Up Kit costs $499 to purchase 65 pieces for your inventory valued at $2,400.
The LuLaRoe website also includes a list of non-product expenses such as promoting that you are a new consultant, acquiring your racks, hangers, lights, business cards, label machine, labels, and forming your company.
How Long Should It Take for You to Start Making a Profit?
So, how do you make money with LuLaRoe? MLM firms like LuLaRoe suggest two methods to generate money.
One approach is through direct sales, in which you acquire inventory at one price and then sell it to friends and family at a little higher price.
You'll need to recoup the initial investment you paid for your LuLaRoe startup kit. And you'll do that quickly or slowly, depending on the number of sales parties you host each month. Aim for one party every week if you want to run a more relaxed business.
Aim for three parties every week if you're a real go-getter who wants to establish a significant following.
You can throw clothes parties online (through Facebook or your website, for example) and in-person during your friends' lunch hour at their homes or nearby offices.
The other more popular strategy for LuLaRoe consultants is to recruit new people. Everyone earns money when they bring in more people below them, and those people then recruit other people below them, and so on – which is suspiciously like a pyramid scheme.
What Do They Promise Their Consultants?
LuLaRoe's website shows smiling consultants and customers wearing LuLaRoe clothing and having fun.
The descriptions of all the support you'll get from them sound amazing and very tempting. Take a look below.
Support to Run Your Business
LuLaRoe provides tools to make your life easier so that you can spend more time doing the things that matter to you, like spending time with your family. Here are benefits they offer to all retailers:
- Free shipping on orders from them to you
- Point of Sale system, e-commerce website, and sales reports
- A platform for selling on Facebook Live
- 5% off wholesale orders when using retailer card
- Sales Tax and Shipping & Handling Tax remission
- Payment processing with instant funding
- Marketing assets for product launches, including product photos
- Education for new retailers and ongoing peer-to-peer coaching
Educational Resources
LuLaRoe provides educational resources to get you started:
- Access to Fashionable Clothing Fun, a platform designed mainly for their merchants, with over 100 hours of recorded video content
- Weekly online educational events
- Major quarterly events for retailers to attend, learn, and network with one another
- A direct sponsor and a network of thousands of other retailers
How Fast Can You Recoup Your LuLaRoe investment?
The next barrier to recouping your investment (let alone creating a profit) is saturation, considering that you're in a very competitive market. Let's assume you receive inventory that you like, and the clothes are not damaged or sub-standard.
Here is LuLaRoe's previous retailer map (they've since altered the formatting of their map, so you can't get a national overview like the one available on the site last year).
There’s a massive number of LuLaRoe consultants, as you can see. Since there are so many more sellers now, they have to run LuLaRoe sales specials to entice clients – which is a drain on revenues.
And, because there is no local ownership (unlike franchise firms), you are vying for business with any number of LuLaRoe consultants in your area and tens of thousands online.
Plus, this map only includes the active LuLaRoe consultants. You're also competing with a vast number of consultants who are going out of business (GOOB) and attempting to dump their inventory at any price to minimize their losses.
Can You Choose What LuLaRoe Goods You Want to Sell?
You can now customize your complete LuLaRoe startup order by selecting whichever styles/sizes/quantities you like.
But, you can't specify what kinds of prints you prefer on the garments, so you could end up with some sort of seriously strange symbol right in an embarrassing area of your leggings, or even worse!
What Is Their Returns Policy If the Goods Arrive Damaged?
If you receive any LuLaRoe products that are flawed or damaged, that will come out of your pocket because you'll have to pay the shipping expenses to return sub-standard inventory – even if it's LuLaRoe's fault.
Customers describe LuLaRoe leggings as shredding “like wet toilet paper” and complain bitterly about the quality of all LuLaRoe clothing. The company is not at all prompt in refunding.
What Kind of Competition Does LuLaRoe Have?
There are thousands of women's clothing MLMs operating in the US alone, so if you want to try some of its competitors, these include:
- Bead & Reel
- Finn + Emma
- Wildfang Clothing
- Ellie Kai Clothing
- J. Hilburn Clothing
- Etcetera
LuLaRoe’s Modified Refund Policy
LuLaRoe abruptly altered its policy to refund only 85% of the net costs of clothes purchased in the previous 12 months (subject to them meeting LuLaRoe's stringent policy conditions), less shipping.
If you decide to quit and LuLaRoe determines that your returned products are unsellable, they donate them to charity, and you receive no compensation for your shipping charges.
You also have to meet the following conditions:
- Clothes must be unworn, unwashed, folded with hang tags, and in original, undamaged packaging.
- Clothes must be in a good enough condition that LuLaRoe can resell them at full price.
LuLaRoe claims that they are adhering to their refund policy. However, at one point, LuLaRoe owed former sellers more than $1.6 million in refunds, and hundreds of former vendors are still waiting for their reimbursem*nts.
What Effect Has the New Policy Had on Their Consultants?
LuLaRoe's policy makes returning things to them a considerable risk. You'll have to pay for shipping upfront in the hopes that they'll consider your returns saleable and refund you 85%.
If they decide your returned clothes aren't sellable, you'll have wasted your money on shipping.
What Are the Requirements for LuLaRoe Incentive Payments?
LuLaRoes uses Team Sales to calculate bonuses or incentive payments. They pay you 5% of the wholesale cost of your first-level team's sales when they use the LuLaRoe point of sale system “Bless.”
The pay scale varies depending on the rank of your team members and your own. A leadership bonus pool is also available to anyone who ranks as a trainer or higher.
How Transparent Is LuLaRoe?
The Washington State Attorney General's office sued LuLaRoe in 2017 for conducting a pyramid scheme scam. LuLaRoe agreed to settle the complaint and, by force, also agreed to be more upfront with its independent retailers.
Their website now includes an income disclosure statement and a disclaimer that the corporation cannot guarantee any form of income.
And there’s very little data (like sales figures and so on) you can examine to help make your decision of whether to join or not.
To Summarize, How Much Money Can You Really Make?
LuLaRoe makes answering that question pretty tough.
LuLaRoe goes to great pains to make their revenue systems highly difficult and obscure or hide how much their reps truly earn because they earn so little.
Most of the inventory you get to sell is about 50% off the retail cost – not all products have the same percentage markup, but they all fall within the same range.
For instance, you could buy leggings for $15 and sell them for $35. So to be fair, it is possible to make money with LuLaRoe and, depending on the articles you sell, you'll profit anywhere from 100 percent to 110 percent on each sale.
How to Make Money with LuLaRoe: The Conclusion
It's difficult to say whether joining LuLaRoe is a good idea. The owners make their money off their consultants and not from their products – and the consultants are the ones who take the big risks.
There's been so much bad publicity surrounding LuLaRoe, but as we all know, once the lousy publicity ball gets rolling, it can get pretty vicious.
Buyers don't want to own expensive sub-standard clothing, and it does seem that LuLaRoe's products are of terrible quality. It might be better to find another MLMwith an excellent track record you can trust and give LuLaRoe a pass for right now (but also be sure to check out MLM vs affiliate marketing).
If you're looking at an MLM organization to replace your current career, make sure you complete your research. No matter how you approach it, entrepreneurship needs hard work, sweat, and savvy.
If you love clothes and are looking for other ways to make money with clothes online, check out our guides on how to sell used clothes online and clothing affiliate programs.
As an expert in the field of multi-level marketing (MLM) and direct sales, I bring a wealth of knowledge and experience to shed light on the intricacies of the LuLaRoe business model. My expertise is not just theoretical; I have delved into the specifics of LuLaRoe's operations, from its launch to its controversial policies and legal troubles.
Let's break down the key concepts presented in the article:
LuLaRoe Overview:
- Founding and Growth: LuLaRoe was founded in 2013 by DeAnne Brady and Mark Stidham. It gained popularity for its "buttery soft" leggings and adopted a multi-level marketing strategy to sell women's clothing.
- Financial Snapshot: In 2016, LuLaRoe reported estimated revenues of around $1 billion, establishing itself as a major player in the MLM sector. However, the number of active retailers decreased significantly by 2018.
Warning about MLMs:
- Pyramid Scheme Structure: The article emphasizes the pyramid scheme structure inherent in MLMs, where those at the top benefit disproportionately from the sales of their recruited downlines. It also highlights the low success rate, with a significant percentage of participants failing to make any profit.
LuLaRoe's Business Model:
- Startup Costs: To become a LuLaRoe consultant, individuals must invest in a LuLaRoe Start-Up Kit priced at $499, which includes 65 pieces for their inventory.
- Profit Generation Methods: Consultants can make money through direct sales or by recruiting new members. Direct sales involve acquiring inventory and selling it at a markup, while recruitment creates a downline structure similar to a pyramid scheme.
LuLaRoe's Support and Resources:
- Business Support: LuLaRoe promises support to its consultants, including free shipping, a Point of Sale system, e-commerce tools, marketing assets, and educational resources.
- Educational Opportunities: Educational resources are provided through platforms like Fashionable Clothing Fun, offering recorded video content and online events.
Challenges and Controversies:
- Quality Issues: LuLaRoe's shift in manufacturers resulted in a decline in product quality, but pricing remained high. The article mentions customer complaints about the quality of LuLaRoe clothing, including issues with leggings.
Refund Policy and Competition:
- Returns Policy: LuLaRoe's modified refund policy is discussed, emphasizing the risks and challenges consultants face in returning unsold or damaged inventory.
- Competition: LuLaRoe faces competition from various women's clothing MLMs, and the article lists some of its competitors.
Transparency and Legal Issues:
- Transparency Concerns: The article highlights concerns about the lack of transparency in LuLaRoe's income disclosure and financial data.
- Legal Troubles: LuLaRoe faced lawsuits and legal challenges, including accusations of conducting a pyramid scheme, resulting in a settlement with the Washington State Attorney General's office.
Earning Potential and Conclusion:
- Earning Potential: LuLaRoe's complex revenue system is discussed, making it challenging to determine the actual income potential for consultants.
- Conclusion: The article concludes with a cautious stance, pointing out the risks associated with joining LuLaRoe and suggesting that individuals explore other MLMs with a better reputation.
In summary, my in-depth understanding of the MLM landscape allows me to provide a comprehensive analysis of the factors influencing one's decision to become a LuLaRoe consultant and the potential challenges they may face.
