This was submitted in response to one of our articles on the LuLaRoe business opportunity scam. My responses are in bold. The bottom line is that this consultant makes some unsubstantiated earnings claims (that’s the norm in MLM), but other than that, she does little to debunk the articles we’ve published about LLR.
My reply is really long, I hope you’ll let it post. I read over your article and felt it deserved a thorough reply and rebuttal. Before anyone blames me for trying to benefit in any way from this, I don’t know how I could. I’m an anonymous internet stranger and will not be giving my name or contact info here, so there is no possible way I could gain from my reply to this post. I am just a consultant who has had the opposite experience and can point out things you have blatantly wrong.
I’m a current LuLaRoe (LLR) consultant (trainer). My husband and I both addressed some of these as he is involved in my business, so sorry for any inconstant I/we statements. My hubby has a normal company job and he works from home, so he has time to help.
I read this article today, I have never been to this site before. Google suggested this article to me on my phone today, so I hope my perspective is welcome. I wanted to give my perspective as a consultant for about 1.5 years. The article here has not been my experience at all. I’ll give a brief background then address the items I took issue with.
First, LLR is a business and I doubt it was ever sold to anyone as anything different, assuming you weren’t recruited by someone dishonest and that you read all the contracts you signed. If you want to get into the clothing small business arena, there are plenty of sites you can purchase wholesale cloths to sell 100% as you see fit. Google how to start a mobile boutique to get started down that path. I chose LLR because I wanted a middle man that provides the services that they do.
Unfortunately, multi-level marketing is not really a business. Yes, it’s marketed as a business. But no, it is not. You don’t OWN anything. You don’t even have a reasonable chance of turning a profit, since 99% of people who get involved with MLM lose money.
Being that it’s a business, you should expect to put in $ and time upfront and not make a lot, or even lose, the first year. We followed that model and still made a little over 30K my first year after taxes and expenses and building my inventory to over 5k+ items.
We currently sell an average of 15k-20k monthly (since Feb 2016 consistently and continually growing), mostly online with little work. As of now, 3/23/17, we’re just under 15K and have a week to go, and I have basically taken the month off. I took 2 trips and didn’t do any live sales or other client engagement that I usually do. All I have really done this month is take pictures, post inventory, answer a question here and there, and ship. This month I’ve worked about every other day for maybe 3 hours, if that most times.
You’re saying that you work about 45 hours per month and sell an average of $17,500 retail per month. At an average of $30 per piece sold, that means you’re selling almost 600 pieces a month? I don’t believe you, but it is possible. In my experience, those involved with MLM underestimate the amount of time they spend working by a good amount. But let’s just assume for a moment that you’re telling the truth on your amount of sales and your time commitment.
So after that year of investing, here is about what my numbers look like today based off of $20K in sales a month:
– Of that $20K I reinvest about 30% back into inventory (I have a positive bank account that I use to pay the CC I order with for points, and I put 30% back into that account to keep it up)
– That puts me at $14,000 for the month after reinvestment
No. Your cost on $20,000 retail is $10,000. You’re not going to use a fake figure here and get away with it.
– Based on my taxes this year my tax guy said to put aside 30%
– After taxes that puts me at $9,600 profit
Corrected to $7,000.
– I have just under $600 in monthly reoccurring costs (subscriptions, assistant, rentals, insurance, ect)
– So my ending profit for a $20k month is about $9k after taxes.
Corrected to $6,400.
– If I can keep up $20K a month I’m looking at $108k AFTER TAXES and expenses for the year. So far I’m beyond that.
Except you said it’s $15,000 to $20,000 per month. Now you want us to assume it’s $20,000 every month. Which is it?
— Note: you only technically get about 50% profit per item if you calculate the cost you paid for it. I only reinvest about 30% because I basically went into this expecting to lose $ the first year and reinvested every penny, so I really just considered the second year a clean slate as I had all the inventory, no debt, and a positive business bank account.
So the correct number to deduct is 50%. You can’t calculate your true profit unless you deduct the actual costs of the item, which is 50%, not the lower 30% which you prefer to use.
— We are fortunate enough to be able to do this the first year, not everyone is, I understand that.
–I also ran the business on a $12k credit card. I nearly maxed it and paid it off many times over in 2016 (and got lots of points!). That was the risk I took, the possibility of a maxed-out card and no sales.
This is a business. You invest in it and you run it. If you come in expecting to make money right away, you will fail…just like any start-up business in the world. The only exception would be buying a store worth of inventory up-front, which I know someone who did that and hit the ground running, but she had the capitol and experience running a clothing store.
Again, MLM is not a business.
So here are my takes on your article:
-pays an additional Social Security self-employment tax of 7.5% on any income due to not being actually “employed,”
Unless you make yourself an LLC and separate your personal finances from your business…as anyone should do. Forming an LLC negates that extra tax and protects your personal assets. (may very by state?)
You’re wrong. Forming an LLC does not make you exempt from self-employment taxes.
-has part of the cost of their order go to their uplines as commissions
So false its like you did no research what-so-ever. Currently upline bonus is calculated based on orders, but that has nothing to do with what a consultant orders for themselves to sell. The cost of items are the same regardless of the upline involved. Now, if LLR built that cost into the wholesale product, I am unaware and it hasn’t affected me, the cost is the cost.
The products are priced at wholesale with the commissions for the upline in mind. One of the reasons why MLM products are so expensive is because of the levels of commissions that are paid. So YES, part of the purchase price of the products goes directly to the upline.
-and shoulders all of the risks of being in business without any of the advantages
LuLaRoe is pretty clear it’s a self-run business. You are not an employee…but that’s the premise of this entire site right, any business model that isn’t working for a company as an employee is a scam right?
I work for myself and I decide how to operate my business (with some licensing restrictions), what other advantages are there?
MLM is not a business. You don’t own anything. You don’t decide how you market the products. You don’t decide how much to sell them for. LuLaRoe the company OWNS you. You are at their mercy. They can terminate your contract at any time. Then you have no products to sell to your customers.
-statistics have shown that 99% of MLM members lose money, and those that don’t lose money make minimum wage or less, unless they are at the top of the pyramid benefiting from others’ losses.
Slightly true for us until we started LuLaRoe. My wife has done tons of direct sale companies, but she never lost money, just never made enough to matter until LLR where she makes a good income off of sales alone. (and yes, a bonus)
After doing plenty of other MLM companies, we can honestly say LLR is very different.
Yes, of course, you’re the exception. You always made money. It’s the other dummies who make up the 99% who lose money. Unfortunately all MLMS are the same… almost everyone will lose money, but they are being sold a dream of the “opportunity” or the “possibility.” And their odds of winning are even worse than the odds of winning at a craps table in Las Vegas.
–-The cost of joining LuLaRoe STARTS at over $5000 for inventory, plus the necessary non-inventory materials which can’t be sold. That’s your money sent to LuLaRoe and your upline (your recruiter and her recruiter, too)
Again, false, the start-up cost is the cost of the inventory you buy. Again, you don’t pay your upline, they make bonuses calculated with the number of items you order (soon to be changed to sales), but not one penny of that comes from anyone below them. It’s a % of LLR profits with the number of orders from the people under you (again, soon to switch to sales)
The start up cost is high for a reason, to try to keep people who aren’t serious out. Kinda like the reason everyone joins Mary Kay or Pampered Chef, it so cheap, you can join just to get the discount if you want.
Also, if you buy $300 of cloths and have a party, who are you targeting? Who wants to come try on 7 different items, that may or may not be in your size? You need multiple sizes in each item to be viable in a clothing business, its just common sense.
So not false at all? Consultants really do spend $5,000 to start up? Yes, of course they do. Sure, it’s inventory. But the investment is only recouped if you’re able to sell the inventory. That’s the rub. I suspect that (like all other MLMs), there are tons and tons of pieces of clothing sitting in people’s homes that will never be sold.
Yes, I understand the idea that the cost is high to make sure people are serious. That’s a typical ploy used by MLMs. It sounds great! The real truth is that the more they can get people to spend up front, the better off the company is. Because once people get in and realize what a scam it is, they’re unlikely to buy much more. It is much better to get them to spend a boatload of money up front.
-many consultants report items missing from their inventory order, with their money taken and kept by LuLaRoe, and the missing pieces showing up MONTHS later
You have the option to have them send it later or get an immediate refund. There have been times when inventory was an issue, just like every other young company on the planet.
That all seems to be worked out now. I can tell plenty of horror stories outside LLR on the same issues (MLMs and non-MLMs alike)
The instance of problems seems much higher with LuLaRoe based on reports in the media.
– LuLaRoe prohibits advertising
No, they don’t. I and many other consultants advertise in many ways, paid advertising on FB, Google word ads, local papers, banners in public areas near events and so on. They even have a huge folder full of approved advertising products to download and use for free. And you can have a website as long as you don’t have your inventory posted or post sales through it.
Can you cite this claim?
I personally just ran an advertisement on FB a few days ago and have people contacting me because of it.
So more accurately, the company SEVERELY RESTRICTS advertising. Oh sure, you can advertise, but you can only say certain things. And you can’t actually show your inventory in those ads, etc.
-Consultants are limited to selling one-on-one and through Internet “pop-up parties,” which require HOURS of work photographing items, presenting each individual item on Facebook or Periscope, and tracking “sold” comments – not to mention invoicing and packaging for shipment. At $25 for a pair of leggings, your $12.50 “profit” is a mirage with this selling model.
I take pictures for 2 hours one day a week. I don’t upload a single item to Facebook, there are tools to help with that or tools to not do that at all and bypass FB completely to display items. When I have a customer that wants to shop online I send them a temporary link to a site that has all my inventory sort-able by item and size, no FB involved unless that’s where they contacted me.
I sold 25 items the other night online while I was sleeping for a total of $804.53 (not counting the shipping paid by customers). This morning I pulled and shipped all items (plus some others that sold since) in about 1.5 hours. I put the bin full of packages at my mailbox and USPS took it.
So let’s say 4 hours work, and after taxes and reinvestment, I made $394.23 profit, or roughly $98 per hour.
In my experience, participants in MLM severely underestimate the amount of time spent working and overestimate the amount of profit they make. You’re also calculating your profits incorrectly, and it’s more like $281 or $70 per hour. Most would say that’s still good money, but that figure doesn’t reflect all the other time you spend working, which you’re unlikely to tell us about. You *might* be making about $20 or $30 an hour, which sounds great unless you factor in all the risk. When the whole thing comes tumbling down and you’re left with thousands of dollars of unsold inventory, that’s going to change the financial picture dramatically.
-the reality is long days and late nights, ignoring your family in a desperate attempt to make your “business” work
It’s a business. You get out what you put into it. We find plenty of time for family while running the business. Did she spend a lot of time at first getting it going? Sure, but again, it’s a business and we planned for that going in.
Where do I get a job where I get to make good pay and work when I feel like it? I’ll take it!!
Sure, anyone involved in a business venture should expect to work. (Not saying MLM is a business, but you know what I mean.) I think the point being made in the original article is that the opportunity is sold as a way to make full-time money with part-time hours. The idea is that you will make a lot of money with very little effort, but the reality is completely different. It’s sold as a way to make easy money, but then when that doesn’t happen, people come along and say the consultants shouldn’t have expected to make easy money. Well which is it?????
-That “free” cruise that the envy-baiters are showing off on Facebook? You will only qualify if you buy enough inventory. That’s enough money from you to pay for several cruises.
This statement is 100% false. Qualifying for the cruise works 100% off of your sales. 2016 was to sell $12k for 4 months in a row, 2017 will be to sell $12k for 6 months in a row, and they said they are doing 2 ships because this year we had 1 cruise chartered and a second half booked, so next year 2 whole ships.
Your statement here shows you did zero fact checks
We went on the cruise and had a blast. We used the points we get on our CC from the inventory purchases to pay for our travel to/from the port.
So the money that we spent that could have just bought us a cruise? Yes, we spent it on inventory, sold it for a profit, and still got the free cruise. Seems like a better option. I like math!
You can SAY it’s based on sales, but the truth is that it is based on ORDERS you place with the company. LuLaRoe doesn’t check to see if you have sold the products. The qualification occurs when you order products from the company, end of story.
-Lots of consultants:
Yes, it does feel like a lot of consultants. People who follow solid business practices aren’t suffering at all. How many Gaps are there in the US? And we get new customers all the time new to LLR, the majority of women in the country have never heard of LLR or think its only leggings. These new people typically spend $150+ on their first visit to our in-home boutique.
The difference is that there are a limited number of Gaps. And each Gap store isn’t recruiting new Gap stores to spring up right next to them.
–The issue of not being able to pick your patterns you mentioned earlier?
This is why. We don’t compete. Because we all have different patterns we often refer to others when a customer is looking for something.
This isn’t like Mary Kay where we all have the exact same items.
I like the theory of having different patterns so everyone doesn’t have the same stuff for sale. But the idea that you never get to pick patterns and you’re at the mercy of whatever the company sells you… that’s a terrible business model for the consultant.
-In addition, you must compete with the over 108,000 LuLaRoe items on eBay, put there by desperate consultants and ex-consultants trying to get back some of their lost investment.
The issue with people on ebay selling cheaper will only last so long, and honestly, it hasn’t hurt our sales. Maybe our sales will even go up when its all over.
The products will be on eBay as long as LuLaRoe is in business. People can’t sell these products at retail, and they’re looking for a way to get their money back. Yes, SOME consultants are doing well selling the products. Many others are not. Especially when they’re trying to sell unpopular prints.
– In addition to competition from eBay and other LuLaRoe consultants, your customers can find cheaper, higher quality leggings on sites like Amazon and Alibaba, among many others.
Personal preference. Most people like the leggings because of how soft they are. Quality is pretty subjective and hard to prove. I’ve been wearing leggings for a long time and I prefer the LLR ones, but everyone has different preferences. Just because some people prefer the other leggings that might be heavier material, does not mean it’s better quality. It depends what each individual is looking for.
I agree with personal preference but the holes in the LuLaRoe leggings are out of control. That’s going to be devastating to the company on a long term basis.
Extremely small %. LLR home office reports it is less than 1%. The clothing industry standard is 2% (I think that’s what I read). If you join a FB group dedicated to defective items, you’re going to see a lot of defective items.
In 1.5 years as a consultant I’ve had 6 things returned to me for defects.
And I have to be honest here. A large portion of the customers having issues with holes in the leggings are too big to wear the legging they are having issues with. We don’t talk about it a lot, but talk to a LLR consultant who is on the edge of being too big to wear the TC leggings, she will most likely tell you there really is a size limit before you are putting too much of a strain on the material. The TC leggings have a size limit, its just a fact.
Also on defects, there was a rash of items made in a certain factory in a certain timeframe that was responsible for the majority of the issues. It’s been corrected I have seen very few defects within my circle of consultants outside of that instance.
I suspect that LuLaRoe is downplaying the number of defective item reports that they’re receiving. They have to. They know this is a crisis, and it is going to spiral out of control.
Unfortunately, the defects aren’t just because fat women are wearing the products. Products are arriving with holes in them. Consultants are giving instructions for washing that include treating the leggings very delicately. Why? Because they know the chances of holes and tears are great, regardless of how much you weigh!
-LuLaRoe has instructed its consultants to check each item for defects before trying to sell it – what??
I agree: What!!??? Because that’s not true at all. Some do it on their own because they like to waste time. I don’t check my items nor have I been instructed to. It’s really a non-issue overall.
With the level of defects, you can’t call this a “non-issue.”
– Customer Service is 2 hours, after which many calls are disconnected
Who told you this? I don’t think I’ve ever waited more than 20 minutes. Plus, refunds for defective items are done with a simple email with a picture and the refund is usually processed within a week.
Apparently your experience is different from the experience of others. I find the whole issue troubling.
-LuLaRoe keeps your money, calling it a credit for your next inventory purchase
Again, completely made up, see above
-It looks like you have lost triple your money on those defective leggings: the $12.50 you spent for them and the $25 you refunded to your customer.
– You spent $12.50 for them.
– Your customer bought them for $25
– You refunded them for the $25
– You are back at -$12.50
– LLR refunds you within 7 days after an email at $12.50
– You are now even on the item. Congrats, we have worked through a simple math word problem!
You’re right that the original statement wasn’t mathematically correct. Unfortunately, the consultant is still out $12.50 if she can’t get resolution from LuLaRoe. And according to the media reports, consultants are having problems with the company standing behind their product and issuing refunds.
Oh, and be careful how and where you vent your frustrations about these problems – your contract actually prohibits you from saying anything “negative” about LuLaRoe. One Rep reported being banned from continuing to use her Facebook group to sell after sharing complaints about not receiving inventory, even though she and her downline still had thousands of dollars in remaining inventory.
Do you have a cite for this? Or a reference to the “one consultant”? It takes a lot for home office to step in for anything. They will ignore rules being broken indefinitely as long as it isn’t hurting everyone as a whole. This sounds made up or there is more to the story.
We were on the cruise where the founders took several Q&As where people complained over and over and got professional courteous answers.
Every company will have some sort of professional conduct clause. Welcome to life.
Taxes, yep, there was an issue, and LLR might have to pay up. Won’t affect consultants.
They’re a young company, it happens.
You’re right. The clause isn’t in the contract, it’s in the Policies and Procedures handbook: “Speak well of the Company, other Independent Fashion Consultants and our competitors.” And you can read here about women who say consultants have been cut off by the company.
-The new pay system
Yeah, this is a source of pain and new consultants may have to use the system that is only on IOS right now.
I can’t argue here. Poor planning and complete BS.
Some people have gotten rich off them, some get scraps, some get none. It’s the nature of a sales driven business.
I tell people thinking about joining not to count on building a team and making $ off bonuses. I get a decent amount for having people under me (on top of my sales above). Its worth the extra time to help the people under me in my opinion. I don’t share what the amounts are because I don’t want new people to be chasing it.
You don’t have to recruit to make $ with LLR, that’s the difference from other MLM companies.
If you do the math, you see how impossible it is for virtually everyone to make money from bonuses. It’s not like a real sales business. MLM is set up in a way that almost everyone fails. More than 87% of consultants get no commissions.
And ALL the multi-level marketing companies say “we’re different… you don’t have to recruit.” They HAVE to say that in order to remain legal. They all have a product that is the “front” for the recruiting scheme. Without the product they are obviously a pyramid scheme. With the product, they are a thinly veiled pyramid scheme that APPEARS to abide by the law.
I have personally never heard of an issue, they have a pretty bad rating though. Maybe I’ll take some time to read through the complaints
But keep in mind, BBB is a business and takes payments from other companies for rating systems. Many companies that have good ratings coincidentally have accounts with BBB, I (husband here) know because I’ve seen it from the inside.
I don’t necessarily place a lot of reliance on the rating itself. I think what is more interesting is all of the complaints and what people are saying.
Yeah, it happens. Happens at my (husband) job to
Please let me know if you are a working adult who has never had conflict or drama at work, I’d love to look into the company!
-Speaking personally, what is most abhorrent to me about LuLaRoe and all MLMs is their psychological manipulation. It starts with selling to you – not selling a product, but selling hope
I personally wasn’t sold hope. I was sold an independent business without the hassle of learning the product distribution/wholesale system.
I got out of it what I was sold, and so have many many others.
No one sold me a get rich quick scheme, and if they would have tried, I would have used my head to think it through.
If you were pitched a get rich quick scheme and threw in $5k+ without doing research, that was a very expensive lesson.
I suspect you were the ONLY person who wasn’t sold hope. Because that’s what the company and the consultants promote. The HOPE that you can work part time hours and make full-time money. The HOPE that you can sell enough of these products to recoup your initial investment. The HOPE tha you can make any profit whatsoever.
Here is a typical claim from a recruiter:
- The average number of pieces sold at a popup boutique is 25. By doing one in person or online popup per week (5-6 hours total per week) you can pay yourself back in 4 months. By doing 3 popups per week (or 12 large online events) you can pay yourself back in approx 1 month
● How many businesses can you invest in where you can pay off your initial investment within a matter of months and be profitable?
● $1,440/month is $17,280 per year, $2,880/month is 34,560, and $5,040/month is $60,480 per year!
● The above scenario is considering you are doing your business part time (but working it as a business)
● You can also build a team and increase your income
Tell me that’s not selling hope!
-But any “business opportunity” that requires you to SPEND money is not a job, it’s a scam.
Well, you got something right! A business opportunity is not a job, its an opportunity that you an choose to take or not.
Completely wrong. Please let me know what line of business ownership you can get into and not invest anything or take risk.
That’s the issue with most of the consultants that I see fail.
They thought there was no work, they’d throw some stuff online and that’s it. Wrong, it takes work.
What you are referring to is a job. A job where you interview and the only risk is you won’t like it and have to decide if you should quit
This was starting a business. It takes work and usually takes a loss the first year.
But again, it’s not really a business. It’s a fake opportunity meant to LOOK like a business. You own nothing. LuLaRoe can cut you off at any time and you are left with nothing.
-LuLaRoe has their (your) money, so there is no need for them to worry about defective clothing, incorrect billing, or anything else that’s keeping you up at night
I personally have not had the issues you bring up. I know some have, but from my personal circle, it seems like a very small minority and LLR is a pretty personable group of people and seem to genuinely care about the consultants.
It seems a number of consultants would beg to differ.
I think I addressed most of your article. It seems like you either got bad info, just plain wrong info, or only reached out to people who had bad experiences or didn’t realize they were starting a business with risk, not a guaranteed job.
You’ve really done little to debunk the article. All we have from you is unsubstantiated earnings claims. I’ve been around the block enough to know that MLM participants who want to recruit others and/or defend their participation will inflate the amount of money they’re making and report a much lower time commitment than they’ve really put in. I’d love to see any sort of documentation that supports your claims on your sales.
I can appreciate that you like the company and want to defend it. I can admit that you *may* be profiting. If that is the case, you are one of the select few.
The fact remains that all MLMs are grand schemes that are made up to look like real businesses, and women are losing thousands of dollars chasing a dream that they have almost no chance of achieving.