You may come across LuLaRoe on Facebook and love the beautiful dresses. You also found that LuLaRoe’s business opportunity seems a nice way to make extra bucks. So, you are googling for more and wondering “Is LuLaRoe A Scam?”
First of all, I am not an Independent Fashion Retailer(distributor) of LuLaRoe, so you won’t see me selling you all those beautiful dresses in this article. What I like to share today is to reveal all my findings from LuLaRoe’s business model and its compensation plan then to evaluate whether it suits me or not.
Secondly, I can see you are doing your researches before really joining any MLMs, and you deserve a big HUG on this. You are showing me the first way how to avoid being scammed, so I like it.
Let’s see what I’ve found on LuLaRoe!
What is LuLaRoe?
-Summary of LuLaRoe-
Product Name: LuLaRoe
Founders: founded by Deanne Brady, Mark Stidham in 2012
Product Type: Fashion Apparel Multi-Level Marketing(MLM)
Price: $499-$10,000(My first red flag)
Rating: 20 / 100
LuLaRoe is founded by Deanne Brady, Mark Stidham in 2012. LuLaRoe got its name from Deanne’s first three granddaughters, Lucy, Lora & Monroe.
They mainly sell women’s clothes with unique and pretty prints. Their ambition is to improve lives and strengthen families through fashion. Social Selling Entrepreneurs are what they called themselves since they leverage social media so well.
LuLaRoe has reported sales of US$1 billion in 2016 which made it one of the largest firms in the multi-level marketing industry in the same year. By 2017, there were about 80,000 independent fashion retailers selling LuLaRoe’s clothing.
What’s inside LuLaRoe?
Cloth, cloth, and cloth! What you can find in a woman apparel store, LuLaRoe has similar items. But, I won’t list out every dress, legging, or denim jeans here. Otherwise, I will digress from my first intent – the business opportunity! I will mention all categories quickly to let you know what you can expect from LuLaRoe. Deal?
LuLaRoe mainly sells women’s apparel with the below categories. They also get some men’s & kids’ collection, but that’s not much.
Are LuLaRoe Products Good Quality?
I don’t wear LuLaRoe clothes, so I cannot give you my firsthand experience. But, I want to know what other people talk about the products from LuLaRoe, so I went deep on its BBB page for more details. Here are what I found:
Both sides of the comments are equally important for us because they are the references you might use if you meet the same problem from your customers.
It’s my first time to see there are some bad reviews in the highest rating comments on BBB, so it’s easy to get a conclusion that you might find dotted holes in LuLaRoe’s leggings after 1-6 washes.
I am sure you have some understanding of the product quality from LuLaRoe now.
How Does LuLaRoe Work?
In any MLMs in the industry, there are mainly two ways to make money with the compensation plan. It differs from each MLM’s compensation plan, but overall speaking, they look the same as below:
- Sell LuLaRoe’s products to get retail commissions
- Recruit people to become your downlines in your organization to make extra bonuses.
Before we go straight to the compensation plan, I would like to explain how you get started with LuLaRoe.
It’s an easy four-step to get started with LuLaRoe:
- Sign up under a sponsor or LuLaRoe finds you one
- Purchasing many LuLaRoe clothes as your inventory
- Onboard training
First of all, you need to find a sponsor to join LuLaRoe, this is mandatory. You cannot simply sign up on LuLaRoe’s website, and they will match one for you if you don’t have a sponsor. Once you submit your online application, you need to wait around 6-10 weeks to be approved. I believe you roll your eyes because it just takes too long.
The next step is to purchase the cloth from LuLaRoe as your inventory. According to LuLaRoe’s page, the initial inventory cost starts from $499.
When you start onboarding, your sponsor will walk you through how to sell lots of LuLaRoe’s clothes and the ways to make money. Just like other MLMs, you could host home or virtual parties to maximize your earning. Hosting home parties is a better choice since people tend to purchase clothes after they try to look themselves in the mirror. Right?
The Compensation Plan
There are several ways to get paid by LuLaRoe’s compensation plan, and it’s not far from other MLMs. I will try to explain to make you understand the game rules.
- Retail Commission: You sell LuLaRoe’s clothes to get approximately 35-50% commissions.
- Override Commission: Once you refer someone under you, you become a sponsor. At this rank or above, you are eligible to earn a 3% overrides commissions on the retail sales of any personally sponsored independent fashion retailers. As you rank higher, you will receive additional override commission ranges from 0.6%-1.8%.
- Leadership Pool Point: Trainers will receive 1 point for qualifying as a Trainer and 1 point for each First-level Leader in their Team. Coaches and Mentors will receive 2 points for qualifying as a Coach or a Mentor, 1 point for each First Level Leader and 2 points for each second level Leader on their Team. Leadership Pool consists of 1.2% of the Value of all Retail Sales transacted in a calendar month. The total dollar value of the Leadership Pool will be divided by the total points earned.
The above three ways to make money with LuLaRoe should be good for now. If you look for more details about the compensation plan, feel free to check this document or watch the below YouTube video:
How Much Do You Need to Sell to Stay Active?
There are different requirements for each level. For an independent fashion retailer, you need to sell at least one item a month, but it needs to process through LuLaRoe’s platform called “BLESS”.
- For a sponsor, you need to have at least one independent fashion retailer under you, and you also need to have personal retail sales totaling 65 pieces with a minimum of $1,950 in retail sales for one month.
- For a trainer, you must have at least 3 personally sponsored independent fashion retailers, have a total of 10 people in your Team. Besides, you need to have personal retail sales totaling 125 Pieces with a minimum of $3,750 in Retail Sales and team retail sales totaling 650 Pieces with a minimum of $19,500 in group retail sales.
- For a coach, you also need 3 personally sponsored independent fashion retailers, have a total of 10 people in your Team. Besides, you need to have personal retail sales totaling 150 Pieces with a minimum of $4,500 in Retail Sales and team retail sales totaling 850 Pieces with a minimum of $25,500 in group retail sales.
- For a mentor, you must meet the requirements of a coach, have at least 3 Leadership Lines with coaches or above, and 3 additional Leadership Lines.
Normally, the higher the ranking, the more requirements you need to achieve. Same as other MLMs, no surprise!
There are four rankings in LuLaRoe: Sponsor–>Trainer–>Coach–>Mentor.
What I Liked About LuLaRoe
TOP#1 Leverage The Social Media
LuLaRoe is one of the MLMs that leverage social media so well to get potential customer’s eyes. The traditional MLM companies rely on face-to-face selling & hosting home parties, and it’s not working that well in 2020.
Although LuLaRoe still encourages all independent fashion retailers to host home parties for a better result in sales, we still see their endeavors by the marketing strategies leveraging social media.
I believe the internet is the future for any MLMs, so it’s nice to see they are catching the last train.
TOP#2 Beautiful Dresses
Who doesn’t like a beautiful dress or a soft legging? The colorful and beautiful printed dresses speak for themselves and it’s also the reason why LuLaRoe’s products go viral rapidly on Facebook.
People like them because of their products and the marketing strategy, and LuLaRoe does a good job on this.
Ugly Truth About LulaRoe
TOP#1 Lawsuits After Lawsuits
LuLaRoe faced many lawsuits 2017 onward, and it’s very easy to find the cases if you do your researches online.
- In 2017, a class-action lawsuit filed in California accused LuLaRoe of being a pyramid scheme. According to the $1 billion lawsuit, LuLaRoe allegedly advised its fashion retailers to borrow money or take out credit cards, and some were even asked to sell their breast milk as ways to buy more LuLaRoe inventory.
- In 2018, LuLaRoe was sued by its chief clothing supplier, Providence Industries, for nearly $49 million because LuLaRoe didn’t pay its bills for seven months.
- In 2019, the Washington State Attorney General’s Office filed a lawsuit against LuLaRoe for making misleading income claims and encouraging its consultants to focus more on recruitment than selling clothes to customers.
- In Feb 2021, LuLaRoe is paying $4.75 million to settle allegations from the Washington state Attorney General’s Office that it operated as a pyramid scheme.
TOP#2 Low Income Potential
From the 2016 LuLaRoe Income Disclosure, we see the average of a sponsor is $6,781.84 in 2016. That is close to $566 per month. I guess you won’t quit your full-time job by only earning $566 a month, right?
It’s probably enough to cover some of your bills, but it’s far from a minimum wage in the U.S.
I also found two interesting truth by 2016 income disclosure:
- The total % of all U.S. retailers that make an earning is 27.33%+4.89%+0.61%+0.08%=32.91%, which means the rest 67% of retailers failed.
- If you sum up the total eligible U.S. retailers in 2016, 99.84%+17.88%+2.22%+0.3%=120.24%. I am not good at math, but I am 100% sure this is something wrong.
Let me know your thoughts in the comment below if I do a wrong calculation.
TOP#3 Home Parties
To maximize your earning, LuLaRoe encourages you to host home parties for a better result. I can understand the reason because it’s easy that we buy cloth after we try them on and look in the mirror.
This might be a good approach for people who also like the products and want to share with family, friends, colleagues, or neighbors, but it’s not my cup of tea.
TOP#4 Stockpiling Issue
If you want to keep active, you need to have both personal and group retail sales in a calendar month. This causes many distributors keep purchasing LuLaRoe’s cloth only to maintain their ranking and be eligible for the commission.
Many distributors have this stockpiling issue, just like the lady in the YouTube video I attached in the previous paragraph. Look at how many LuLaRoe’s clothes she has, and this doesn’t count the hangers or cloth racks you should prepare when you are about selling them.
Who’s LuLaRoe For?
Women who love fashion and want to open a small fashion boutique and sell clothes to other women. If you like this idea and will work your butt off to make it work, I don’t see any harm for a try.
If you are like me, shy & introvert & only wear t-shirts most time, you should probably consider other ways to make money online. I will reveal my way in one minute!
Can You Make Money Selling LuLaRoe?
Yes, although most people failed to make money through LuLaRoe, there are a few people who made it to Mentor ranking and created a decent income.
There was around 0.08% of all LuLaRoe members who made a $1,118,930.24 annual income in 2016. I know the percentage was quite low, but you cannot deny people did get a very nice income by LuLaRoe.
Is LuLaRoe A Scam?
Based on the truth that LuLaRoe does provide real clothes for all independent fashion retailer to sell, we cannot say it’s a scam or a pyramid scheme.
Before you consider joining LuLaRoe, I do hope you to rewind again for things I don’t like that much from LuLaRoe. You may face the same problems as the previous distributors.
If you have a “Nah!” for LuLaRoe, you might be interested in my alternative way to make money online:
My Alternative Way to Make Money Online
My alternative way to make money online is through Affiliate Marketing instead of promoting LuLaRoe’s products in person. Try to imagine you sell LuLaRoe’s products to your friends, family, or anyone you know, don’t you feel blushed once you say the first word about the cloth?
They might avoid you ever since, but doing affiliate marketing will save you from that:
- You don’t even need to buy any physical or digital products and sell to someone face to face.
- You also don’t need to convince people to join you as you downlines to build a team.
- You are not restricted to only promote LuLaRoe’s products. You can promote anything you like!
You only need to create a website or YouTube channel with quality content that makes people trust you then purchase them through your links.
The platform I am using currently is Wealthy Affiliate. The reasons for “Why Wealthy Affiliate?” are for all the training courses, every Friday night LIVE training courses, 24/7 sitesupport, and the most friendly community.
For more details or top secrets about Wealthy Affiliate, you could check my full review in the below link.
Wealthy Affiliate Income Proof
Here are some of the most active members from Wealthy Affiliate. Each of them did succeed in generating a sustainable income to replace their 9-5 jobs. You are more than welcome to check their stories HERE.
- I Made Over $1 Million With Affiliate Marketing.
- Can someone make a full time income promoting WA? You bet they can!
- What Does $1000 Per Day Look Like?$
- 40,000 In One Weekend
- A Very Humbling $12,803.26 Month – August Progress Report
- It’s Getting Better: $500+ in 2 Days
- Newbies Pay Attention! $5,195.20 Affiliate Check for June: Thanks WA!
- Joined the 10K Per Month Club. January Earnings $13,481.39
- New Record: $1,300+ Per DAY! Affiliate Marketing Works & Rocks!
- Made $7,395 in a WEEK: First Black Friday Results!
I hope you enjoy this review and you are more than welcome to share ideas or leave your comments below. I will reply as soon as I can, thanks.