LuLaRoe Review: $5000 lucky leggings lottery?
LuLaRoe was founded in 2012 and was incorporated in California a year later in May, 2013.
Heading up the company is the co-founder husband and wife team, DeAnne and Mark Stidham (CEO).
LuLaRoe itself is an amalgam of the names of DeAnne Stidham’s first three grandchildren.
The LuLaRoe website very much presents Stidham (then DeAnne Brady) as the driving force behind the company.
Prior to LuLaRoe DeAnne had found success in network-based marketing.
It was during this time that she learned an important lesson; if you want to be someone who gets things done, act like you already are.
This self-empowering idea crystallized in her mind and directly led to her success with LuLaRoe.
DeAnne had long dreamed of one day creating her own clothing line. With the help of her husband Mark, LuLaRoe was launched.
Despite my best efforts I was unable to ascertain which companies DeAnne Stidham had success with prior to LuLaRoe.
Nonetheless LuLaRoe’s commercial success can’t be denied, with the company reporting around $1 billion in sales as of 2016.
LuLaRoe hasn’t had any run ins with regulators, however the company has defended numerous civil actions filed by former affiliates and customers.
In February, a lawsuit in Pennsylvania alleged the company collected sales tax from customers in states that actually don’t have a sales tax.
In March, after concerns about the quality of the brand’s apparel resulted in thousands of complaints on its Facebook and Twitter pages and inquiries with various municipal business bureaus, two LuLaRoe customers in California filed a class action lawsuit over the damaged goods.
The most prominent of these was a $1 billion dollar proposed class action filed in October, 2017.
Three former affiliates alleged LuLaRoe
encouraged them to borrow money, get loans, take out credit cards, and some were even asked to sell their breast milk to attain funds to purchase inventory.
The lawsuit was voluntarily dismissed without explanation on January 12th, 2018.
Read on for a full review of the LuLaRoe MLM opportunity.
LuLaRoe originally sold maxi skirts (ankle-length, yeah I had to look that up).
In 2014 other skirts and dresses were added and in mid 2014 LuLaRoe debuted their own leggings.
Since then LuLaRoe has primarily been known for their leggings, although the company website also details dresses, skirts, tops, layers and kids lines.
The production and development that goes into each style, print and design touches the hands of thousands of artists and craftsmen around the world. From Korea to Guatemala, to the US and Vietnam, together we are blessing the lives of over 100,000 families.
Product categories are featured as “collections” on LuLaRoe’s website. No retail pricing is provided.
The LuLaRoe Compensation Plan
LuLaRoe’s compensation plan pays residual commissions using a break-away structure.
Direct commissions are paid until recruited affiliates reach the Trainer rank. From there volume generated can be earned on through bonuses that must be qualified for.
Note that commissions are paid out on the wholesale value of LuLaRoe clothing sold.
LuLaRoe Affiliate Ranks
There are five affiliate ranks within the LuLaRoe compensation plan.
Along with their respective qualification criteria they are as follows:
- Affiliate – sign up as a LuLaRoe Independent Fashion Retailer
- Sponsor – run at least ten pop-up boutiques, generate at least $10,000 in retail sales volume and then recruit at least one affiliate
- Trainer – sell at least $3750 to retail customers (min 125 pieces of clothing), generate $19,500 in downline retail sales (min 650 pieces of clothing), recruit and maintain at least three affiliates and have a total downline of at least ten affiliates
- Coach – sell at least $4500 to retail customers (min 150 pieces of clothing), generate $25,500 in downline retail sales (min 850 pieces of clothing), recruit and maintain at least six personally recruited affiliates (three Trainers or higher) and a total downline of at least ten affiliates
- Mentor – maintain Coach volume requirements and recruit and maintain at least six Trainer or higher ranked affiliates (three Coaches or higher)
- Mentor (ongoing monthly qualification) – maintain six personally recruited Trainer or higher ranked affiliates and three unilevel legs with a Coach or higher in them (doesn’t have to be personally recruited)
Note that the downlines of Trainer or higher personally recruited affiliates do not count towards total downline quotas.
A “piece of clothing” refers to everything except LuLaRoe’s leggings.
The sale of one pair of leggings counts as half a piece of clothing.
The average price paid for each piece of clothing sold must equal $30 or more to satisfy rank qualification requirements.
Finally, a “pop-up boutique” is basically what LuLaRoe calls home parties.
A pop-up boutique can also refer to an affiliate setting up a temporary LuLaRoe shop outside of a home residence (not sure of the legalities of this).
LuLaRoe pay residual commissions via a unilevel compensation structure.
A unilevel compensation structure places an affiliate at the top of a unilevel team, with every personally recruited affiliate placed directly under them (level 1):
If any level 1 affiliates recruit new affiliates, they are placed on level 2 of the original affiliate’s unilevel team.
If any level 2 affiliates recruit new affiliates, they are placed on level 3 and so on and so forth down a theoretical infinite number of levels.
LuLaRoe only pay residual commissions on retail sales generated within the unilevel team.
Payable residual unilevel team commissions are determined by rank:
- Sponsors earn 5% on level 1 (personally recruited affiliates)
- Trainers and above earn 5% on level 1 and 3% on level 2 onward (excludes affiliates under a personally recruited Trainer or higher ranked affiliate)
Coach and higher ranked LuLaRoe affiliates earn a bonus percentage on wholesale volume generated by second level and deeper Trainer or higher ranked affiliates.
A second level Trainer or higher ranked affiliate is the first Trainer or higher ranked affiliate under a personally recruited affiliate in each unilevel leg.
A third level Trainer or higher ranked affiliate is the second Trainer or higher ranked affiliate under a personally recruited affiliate in each unilevel leg.
The Wholesale Bonus is paid on the downline under this second level Trainer or higher ranked affiliate according to rank:
- Coaches earn a 1% Wholesale Bonus on second level Trainer or higher ranked affiliates
- Mentors each an additional 1% Wholesale Bonus on third level Trainer or higher ranked affiliates
LuLaRoe take 2% of company-wide wholesale volume each month and place it into the Leadership Pool.
Trainer and higher ranked affiliates can qualify for shares in the pool as follows:
- Trainers receive one share
- Coaches receive two shares plus one point for each personally recruited Trainer or higher ranked affiliate and two points for each indirectly Trainer or higher ranked affiliate (one per unilevel leg)
Fast Start Bonus
If a new LuLaRoe affiliate sells 175 pieces of clothing (min $5250 in retail volume) within their first three months
- they receive a free 50 piece order of clothing and
- their upline receives a $500 cash bonus
Cruise Fast Start Bonus
LuLaRoe appear to run cruises a few times a year for their affiliates.
To qualify for the cruise, an affiliate must “cruise qualify”. For some reason cruise qualification criteria is not provided in the LuLaRoe compensation plan.
Nonetheless, the Cruise Fast Start Bonus is achieved if a LuLaRoe affiliate “cruise qualifies” each of their first consecutive six months with the company.
- the qualifying affiliate receives a $2000 cash bonus when they attend the cruise and
- their upline receives a $1000 cash bonus
LuLaRoe fail to provide information on what it costs to sign up as an affiliate.
When you click “join the movement” on the LuLaRoe website, you’re told you need to “find a retailer”.
When you click the “retailer map” button, you’re able to enter personal details to connect up with a LuLaRoe affiliate.
This is pretty hopeless as far as being upfront and disclosing LuLaRoe affiliate costs.
My own research has revealed the common figure quoted for LuLaRoe affiliate membership starting at around $5000.
This is includes a selection of clothes, however other than sizing and type, the affiliate doesn’t seem to have any control over what styles they receive.
LuLaRoe markets women’s clothing. They apparently have a men’s line however other than a few tops, I didn’t come across anything substantial on LuLaRoe’s website.
As a twenty-thirty something male, I’m obviously not LuLaRoe’s target market. So I’ll spare you my thoughts on the company’s patterns and designs.
What I will get into however is consumer behaviour and how it fits into LuLaRoe’s business model.
As I understand it a LuLaRoe affiliate blows thousands of dollars on clothes, and has absolutely no clue what patterns they will receive.
This is by design, with the intention to create a lottery style draw.
You see, LuLaRoe only markets a set number of each clothing pattern they come up with. This has led to what are referred to as “unicorns”, that being rare patterns in demand.
Here’s one take on how this plays out;
You’ve got to have those leggings! Maybe it’s because you think the pattern is cute, or maybe it’s because the pattern expresses something about you or your personality, (like those fun lipstick leggings for a cosmetologist).
You start watching every Facebook Live show you can looking for those leggings but it seems they are nowhere to be found. You know that only a certain number of that print were made which makes them rare – to you.
They are almost as rare as a unicorn sighting… get it?
Everyone’s LuLaRoe unicorn could be different, or sometimes there are designs that are so widely adored that they are instantly dubbed “a unicorn” by the LuLaRoe community.
These “hipster lions” below? Total unicorn. People are nuts for them! (Me, too.) They are all but impossible to find.
Again, I know I’m not LuLaRoe’s targeted demographic… but what is this madness?
LuLaRoe’s lottery style distribution is terrible for both their affiliates and retail customers.
If you’re a LuLaRoe affiliate and spend thousands, only to receive dud patterns nobody wants – what do you do?
Well, according to CEO Mark Stidham you uh… just keep searching until someone buys your inventory.
No, you’re stale. Your customers are stale. Get out and find new customers.
If you bring a new customer in, then your inventory isn’t stale.
The problem is, you try to sell to the same group of people day after day after day.
Stidham made the above comments in response to criticism regarding LuLaRoe affiliates reportedly receiving “stale inventory”.
The comments were made on a webinar purportedly broadcast to some 80,000 LuLaRoe affiliates.
In the same webinar Stidham referred to former LuLaRoe affiliates complaining about the business as “pigs”.
You cannot wrestle with the pig without getting a little mud on ya. Don’t wrestle with the pigs, ignore them.
In the face of mounting backlash, LuLaRoe deleted the otherwise publicly available webinar recording.
In reality Stidham’s solution isn’t practical. With no control over what patterns they receive, LuLaRoe affiliates are going to be left with inventory they can’t move.
Not even at a discount, as apparently that’s a “culture” LuLaRoe corporate frown on.
We want to maintain the integrity of the LuLaRoe brand for the benefit of all Independent Fashion Retailers.
If Retailers sell clothing to one another at discounted rates, it can have a negative impact on the broader Retailer community.
When we’re talking a five thousand minimum buy into the business however – affiliates buying what they can’t sell or use has inventory loading written all over it.
Even more so when you consider the spiral some LuLaRoe affiliates might find themselves in if they keep buying inventory lottery tickets in the hope of receiving sellable product (perceived or otherwise).
This, as it were, is a key point of contention in the multiple lawsuits filed against LuLaRoe by former affiliates.
For their part LuLaRoe do accept returns, however an even if goods are returned as they were sent out, the company only refunds affiliates 90% of what they paid.
That’s $500 lost on just the initial buy-in… plus shipping and however much else an affiliate might have spent on the LuLaRoe lottery.
For retail customers, who has time to sit through an endless amount of Facebook “live from my basement” sales webinars?
If you have an item of clothing in a design/style I want, sell it to me or I go elsewhere.
Who are these morons sitting around on social media all day hunting down this unicorn design or that?
Keep in mind this is all artificial scarcity. Someone at LuLaRoe marketing came up with a number of X pattern leggings to manufacture and if you want that particular pattern, better hope you catch someone’s Facebook live show at just the right moment.
And does anyone think groups of LuLaRoe affiliates working together aren’t keeping close tabs on what patterns are rare?
I mean it’s not like they’d stoop so low as to try to flog these items at ridiculous prices, right?
LuLaRoe’s lottery distribution is completely anti-consumer and I have no idea why anyone outside of the pay-plan is falling for this nonsense. Honestly, are there no alternative legging manufacturers out there?
Assuming LuLaRoe’s unicorn clothing designs are in genuine demand because of the style and not because affiliates know the company only made X of them, one possible remedy would be the random inclusion of unicorn items in orders.
I can’t imagine leggings cost too much to make (surely <$5 easily), so perhaps LuLaRoe could stick to generating unicorn patterns for their leggings. Scrap the rest and for the love of god let affiliates choose what designs they order.
Naturally unicorn designs would be exempt. You either randomly get one or more in your order or you don’t.
At least that way even if you don’t, you’ve got inventory to sell you actually believe you can sell.
And $5000 is clearly way to much to expect affiliates to pay for inventory. I understand shipping might be restrictive but surely $500 or less would still work for affiliate orders?
With respect to LuLaRoe’s compensation plan, it’s a neat unilevel that, as downline affiliates rank up, forces uplines to focus on new recruits and building their remaining legs.
Granted there might be less of a desire to see downline’s promoted if it means losing direct volume commissions, but there are other ways to indirectly earn on this volume.
One thing I wasn’t clear on is whether LuLaRoe tracks actual retail sales.
Retail is mentioned a lot in their compensation plan, but I couldn’t help but notice commissions are paid out on wholesale volume.
If this is calculated at the time of purchase (by an affiliate), then there’s a good chance no retail records are being kept – meaning in effect LuLaRoe is primarily generating revenue and paying commissions out on affiliate purchases.
But personally I just can’t get past the lottery distribution system.
Points for being unique, sure, but as far as I can see the only party that benefits from the lottery distribution 100% of the time is LuLaRoe corporate.
Screwing over your affiliates and customers isn’t a viable business model. Or at least in a truly competitive market it shouldn’t be.