There is so much to say about LuLaRoe that it's hard to know where to start. The company itself is a clothing MLM, which was incredibly popular not so long ago. LuLaRoe was known for having casual and attractive clothing. Their most popular items were leggings.
Things have changed dramatically since then. The saga started off with the LuLaRoe leggings, as customers were often finding that these ripped or tore after very little use. LuLaRoe appeared slow to respond to issues and other complaints emerged over time.
By the beginning of 2019, a vast number of LuLaRoe's previous distributors had left the company, many of whom are still waiting for refunds. There is a pending lawsuit against LuLaRoe from one of its suppliers too, along with talk of lawsuits from some previous distributers.
At that point, LuLaRoe's executives firmly stated that the company was starting over, taking advantage of the lessons learned. How well that process works remains to be seen. There's certainly no sign of the controversy letting up any time soon, yet you wouldn't know that from looking at the LuLaRoe website.
One other area to mention is the industry that LuLaRoe operates in. Clothing is a big business and one that is always popular. Companies that can find ways to be unusual and to offer something exciting have the potential to do well, despite the sheer amount of competition in the marketplace.
While clothing is a good industry in some ways, it can also be frustrating. Customers tend to be picky about what they wear and issues with sizing and refunds can get complicated fast.
Clothing is also a pretty bad choice for network marketers. Customers want to be able to try on clothing and have a large selection to choose from. There isn't any easy way to make those goals work in a network marketing context without putting distributors at a serious disadvantage.
In case you're still interested, LuLaRoe follows the two income approaches that you'll find in every MLM.
The first is that you make money selling the products. We'll talk about the specifics soon, but a key piece of information is that LuLaRoe uses a resale model that can get expensive for distributors.
The other approach is to build a team. This process basically adds to your income stream, as you still need to make sales either way.
I'll be taking a look at both of these areas as part of this post and also looking at whether LuLaRoe is currently viable as an income option.
LuLaRoe was initially famous for offering a relatively unusual range of clothing, including many options that are quirky or funky. The products are also targeted at both children and adults, making them popular among families.
The brand also made waves for its leggings. These came in a range of different patterns and were typically considered softer and more comfortable than most other legging options. These leggings ended up tearing easily, creating problems for distributors and LuLaRoe.
While LuLaRoe has made significant changes, they do still feature many of the same vibrant colors and unusual patterns. While the styles are good for making the company stand out, they do make it more difficult for people to make appealing outfits.
LuLaRoe also strongly relies on a fear of missing out angle by making some products only available for a limited time. The technique might work well enough for a bit, but it simply isn't sustainable. Customers catch on quickly and realize that the items they are rushing to buy aren't really as good as they seem.
The biggest question is whether people would buy the products. As some reviewers have pointed out, the quality isn't very different than other brands, the prices are fairly high and the styles aren't so unusual anymore.
Sure, LuLaRoe has unique prints that you won't see anywhere else. That's not necessarily enough to get people coming back for the items time and time again. For that matter, the bold prints of LuLaRoe aren't as popular now as they were a few years back.
Selling Products From LuLaRoe
While the prints from LuLaRoe won't suit everyone, there should be enough of a market to make money selling them. At least, that would be the case under most MLM models. LuLaRoe takes an unusual approach, one that places all of the risk on distributors.
The basic idea is that you need to purchase the products and then resell them. Buy low, sell at a profit. While the approach has risk, it can work with the right planning.
LuLaRoe didn't initially allow its distributors to make any choice at all. The revised version of the company does and initial inventory starts around $2,500.
Distributors are able to return inventory and get a refund if it doesn't sell. There's a catch though. Returned inventory needs to meet strict criteria and many pieces simply won't. After all, you need to market the pieces that you have. This will often involve allowing people to try them on.
At least, that was the case. LuLaRoe's site offers precious few details and it isn't clear whether the approach for returns has changed or remained the same.
LuLaRoe estimates that you can earn anywhere from 35% to 50% profit, depending on the products that you sell and the prices that you charge. While that's a decent return, let's be honest, there is considerable risk.
Ongoing Costs And Challenges
Most MLMs have some ongoing costs, such as a yearly fee or the need to buy some product each month. But, the purchase-first approach for LuLaRoe increases those costs dramatically. After all, you have to buy anything that you’re going to sell. This also means that the main way to make more money is to spend more first.
For the most part, that idea is retailing 101 and is the same concept as for any physical store. And, as with retailing, you are buying at a wholesale price, so the potential for profit is there. But, LuLaRoe distributors typically don’t have any sales training, which makes the process that much more challenging.
Besides that, you’re selling clothing. Doing this is always going to be more complicated than other types of products, because there are multiple sizes to consider, along with all the different styles. You also have to try and predict what people are going to be interested in.
Getting this right would be easier if you knew your customer base well but it will always be risky. There is a significant chance that you would be left with some items that you simply can’t sell, while you may sell out of other items. And, if you don’t sell enough pieces, then you end up losing money.
What’s more, selling LuLaRoe means that you have a considerable amount of clothing at hand. You’d then have to find a place to store the items and ways to display them. Doing so could add to your costs and is certainly something to seriously consider before you get involved. If nothing else, the clothing will take up space, which isn’t great if you have a small house.
Before I talk about the team aspect of LuLaRoe, I want to mention that these details are based on the previous version of LuLaRoe's plan. The company provides few details on their site about compensation, so it's unclear how much has changed.
Beyond simple sales, you can also earn money by recruiting other people into the company. You can do this at entry level in the company, which is as a Fashion Consultant/Sponsor. Here you can earn 5% income from the orders that the people you recruit make.
The next rank up is a Trainer, which is where the team building component starts to be significant. At this level, you can earn more income from the people below you and there is also a greater focus on managing a team.
There are multiple different ranks beyond these first two and both the requirements and the bonuses increase with each rank. To reach those higher ranks, you also need some higher ranked people within your team, such as in the example below.
The overall design means that much of the income potential comes from recruitment and building a team. You can still make money with just selling the products but it would be extremely difficult to turn that into a decent income stream.
Additionally, the larger your team is, the higher the workload for maintaining it. For example, you’re likely to have to coach and encourage many members, which could include teaching them how the compensation plan works and how to effectively make sales. This can get frustrating and time-consuming fast, especially as you still need to make your own sales.
There is also a purchase requirement tied to the various ranks. For example, you need to order 175 items each month to be able to earn any bonuses from the people you recruit. What that calculates to would strongly depend on the products you buy. But, you’re likely to be spending several thousand dollars to meet that requirement.
One other aspect is that very few distributors ever make it into the higher ranks. This is particularly obvious in the company’s Income Disclosure Statement, which looks like this:
The percentages overlap somewhat because distributors may hold multiple ranks within a single year. But, less than 20% of distributors reach the second rank and almost all eligible (99.84%) are in the first rank for at least some of the year.
What’s more, many individuals aren’t even eligible, which is clear from the left column. This is a concerning pattern, suggesting that some people buy the initial kit but aren’t successful enough to make money.
Now, even at the lowest rank, you could still earn income, especially if you make regular sales. But, you don’t get the various bonuses that the team offers, so your potential would always be somewhat constrained.
While making money through LuLaRoe is theoretically possible, I wouldn't recommend it. That's not because of the MLM model either. There are simply too many issues with LuLaRoe that limit your income potential.
The first is the company's reputation. LuLaRoe has gone through a lot of bad press and is still facing a lawsuit from a supplier. Even if the owners manage to dramatically turn the company around and make it profitable, the process isn't likely to be fun for distributors.
LuLaRoe's history may also make it more difficult to make sales and recruit people into the company. Who is going to want to join a company that is still getting flack for not paying all the distributors that have left?
If all of this weren't enough, you also have to contend with the purchase-first model. Purchasing products to resell is tough enough on its own. Trying to do this for clothing adds on a whole new layer of difficulty. Honestly, people put a lot of time and effort into getting their clothing right. You don't want to be the person who has to contend with customers who change their mind or want a refund.
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