Everyone hates your MLM: There’s drama with LuLaRoe

Buckle up kids, this is a good one in the world of MLM. Nikki introduced me to a Facebook group of former (and some still current) LuLaRoers called “LuLaRoe Defective/Ripped/Torn Leggings and clothes”  and there is some good DRAMA coming from the group. And its about f*cking time. Someone needs to pay for all the annoying Facebook groups we’ve been auto added to after all these years*.

What is LuLaRoe

In case you’ve grown up in Manhattan and only run in hip Manhattan rich mom circles and have never hear of LuLaRoe: LuLaRoe is a designer and seller of women’s clothing that uses a multi-level marketing model to distribute products or “comfy mom MLM clothing” company or “looks like a closet threw up on you MLM” company or “If Alice Cullen from Twilight Movies 3-4 was part of a Clothing MLM” company or “The MLM company who made leggings like this” company:

They are one of the largest multi-level marketing companies with over a billion + in sales. Started in 2012 by a Mormon woman named DeAnne, they sell products to consumers via social media, mostly in a live-auction format online through their “retailers” (aka your acquaintances from high school who auto-add you to Facebook groups and events) who host Live streaming Facebook events unboxing and showing off the latest LuLaRoe shipments in various sizes and patterns, occasionally finding that UNICORN patten which is to die for and in very limited release and usually looks like this:

If you say SOLD in the comments of the live stream, you somehow eventually get the products you want (after paying for them within 24 hours through a special link.) It’s Really simple.

The drama

Let’s get to the good stuff: According to many former consultants, current consultants, overall great MLM lurkers like myself and sleuths like MommyGyver.com, LuLaRoe is going to the toilet. They’ve had major leadership changes, DeAnne kicked her nephew who was the voice of LuLaRoe off the leadership and he’s talking (and apparently while employed by his aunt, enjoyed “talking” to some of the MARRIED LuLaRoe consultants if you know what I mean (*Sex, I mean SEX*)). The explosive growth of LuLaroe means the market is oversaturated. There used to be just 2,000 consultants nation-wide in 2015, and the number has jumped to 80,000+ this year.

And then there’s the Refund Policy change. Back in April, due to an overwhelming number of consultants GOOB (say it. Outloud.), which means “Going Out of Business” in LuluSpeak, and heavily discounting their inventory to get rid of it, LuLaRoe changed their return policy and promised A 100% refund of unsold inventory as long as it was resell-able. That’s right, 100% refund for unsold inventory plus they’d cover shipping for the returns! Nice, right? There was no expiration date communicated.

Then just a few weeks ago, without warning, they reversed the policy going back to the policy that existed before: A 90% refund for unsold inventory, in original packaging, retailer pays shipping.

Okay- bummer of a policy change, but 100% refund was too good to be true, right? The big issue was— many consultants had started the refund process back in August or even early September and they were told by LuLaRoe they were shit out of luck. This new policy is effective immediately, even if the retailers were waiting on LuLaRoe to send them their return labels so they could send back their inventory.

So to recap: Consultants are already frustrated because of an overcrowded marketplace where they can’t sell much or used to sell but due to competition, can’t any no longer. So they find out they have a great opportunity to get out (GOOB) without losing much or having to eat inventory costs, and they are excited. Or consultants signed up after the new policy was implemented because it seemed “risk-free.” Then suddenly the policy changes, leaving many consultants in the hole for thousands if not tens-of-thousands in inventory.

Imagine that for a second. You own $22,000 worth of this:

Let’s talk about it:

A company that gives retailers, whether still in business or going out of business a 100% refund of returned inventory? That’s unheard of. My dad is in retail and I’ve worked for him: He pays a 25% restocking fee (so he gets 75% refund) and the product better be in perfect condition when it’s returned. It’s up to the manufacturer’s discretion whether they’ll issue a sales return authorization. And he pays the shipping to get it back to them.

Another point of contention is that retailers are upset because many of them were bonused because of how much inventory they bought. There were incentives LuLaRoe ran to encourage retailers to buy more inventory. And LuLaRoe is refunding the consultants, less any bonuses they made. OF COURSE. If you MADE money because of the amount of inventory you bought, when you return that inventory, they are going to refund you LESS your bonus….

The 90% refund policy at the retailer’s shipping expense was a very generous policy in the first place. It sounds like LuLaRoe wanted to try something for a temporary time and decided to go back to the original policy. That is an understandable business decision. The problem is they did it without warning and are screwing consultants who were already in the process of returning product. THAT is not cool. Policies changes all the time. But they should grandfather in people already in process or working under the old policy.

People were Duped by LuLaRoe

Maybe. If you were packing up your boxes, waiting on return labels from LuLaRoe on 8/31 and got notice on 9/5 you were no longer going to get 100% refund and had to pay to ship the product back, I’d say you were duped. But you also got into bed with a pretty shady company.

LuLaRoe consultants, as most MLM members do, claim to be small business owners, but they are selling product they buy from a company that doesn’t let them pick their products. That’s right— you can pick the style (The “ugly ass leggings that rip a week in” and “jean jacket that looks like my babysitter wore it in the 80s” are two style options) and the sizes, but the patterns they send are completely at LuLaRoe’s discretion. You are surprised as a retailer when you open your packages. That’s why the “Unicorn” is such a treasured find.

LuLaRoe requires an upfront purchase. Of course any successful business needs to purchase inventory. But dictated by the manufacturer? They should recommend you start with a $4,000 package of X, Y and Z ugly-ass styles. Not require it. Sounds like some duping to me… except….

Retailers should know better. If McDonald’s came to you and said “We want you to open a franchise but you can’t pick the type of food we send you other than the quantity of “mains, sides and desserts” and you have to order enough to feed 150 people for opening day.” You’d say, “Hell no, thank you” and take your hard earned $4,000 initial investment elsewhere. LuLaRoe is doing the same thing. Except, unlike a McDonald’s franchise owner, you’re not an owner. You are at their mercy, at the mercy of their policies. You’re an “independent consultant “ with no real independence. You can’t make product, pricing or placement decisions. They make it for you. And you knew that when you signed up. So… were you duped…. really?

*That time I stop being bitchy

Real people have been hurt by this “Drama” and I want to recognize this. People who just wanted to make a little extra money believed in their friends who convinced them this was a good idea. They thought if they took this one risk they could make a difference in their family’s lives. I recognize this and I do have sympathy.

But at the same time, I also wonder when the “get rich quick” MLM schemes (or even “Make an extra little bit of money quick” MLM schemes) are going to teach some real lessons? Small business ownership is hard. Small business ownership is stressful. Only 40% of small businesses are profitable and 50% fail within 5 years. And I’m talking about REAL small businesses (read this if you still think MLMs are) not MLMs. 99.7 % of MLM participants lose money and the average annual income is $5,000_1. 

So a business (or your acquaintance from high school in a Facebook message) claiming to have the answer for your family’s financial pain points if you “just have a few minutes for coffee” needs to start being met with so much more skepticism than it is. You can only get duped if you let yourself get duped.

Remember…If it looks too good to be true…then it’s probably an MLM.

Have any great LuLaRoe drama to share?

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