Some sellers of LuLaRoe go bankrupt

LuLaRoe, the multi-level marketing company known for its colorful leggings and geometric-patterned dresses, says it was founded "on an engine that allows others to succeed."

It is based on a structure where its so-called consultants buy their stocks at a wholesale price and then sell them at retail as independent sellers. The company attracts a large population of housewives and military spouses. Unlike 1950s Tupperware nights, LuLaRoe consultants do not need to engage in home visits because Facebook groups have become a preferred way to sell LuLaRoe apparel. If you have never been personally invited to join a frenzied LuLaRoe group on social networks, you certainly know those who knew it.

In 2017, the company had up to 77,000 salespeople, most of whom were women who wanted to take advantage of the brand's promise that they "would have the freedom and flexibility that comes from creating their own business." own business at their own pace. The survey published on April 30 tells a very different story of the brand LuLaRoe – a story in which some sellers have been facing financial ruin.

A study conducted by Truth in Advertising (TINA), a Connecticut-based watchdog that badyzes deceptive marketing practices, revealed that more than 100 LuLaRoe consultants had personally filed for bankruptcy since 2016. This would be partly due strict rules of the company. as regards its salary structure and the fact that the potential for gain of the consultants is much lower than it is supposed to appear. Vox asked LuLaRoe to comment and did not hear back.

LuLaRoe Facebook

To be able to join LuLaRoe, consultants must start by spending about $ 5,000 for an "initial ordering kit", supplied with 248 garments. Consultants must sell these items but must also purchase additional monthly items in order to qualify for potential bonuses. In addition, operating a LuLaRoe business entails additional costs, such as the purchase of clothes racks and hangers, not to mention the time spent.

TINA discovered that one of the main problems was that LuLaRoe products had become virtually "unsellable". The troubled consultants say that their market is overpopulated, Lu LuRoe and his army of salesmen aggressively recruiting more and more people – in the structure of an MLM, hiring salespeople become the "godfather" and are able to earn a commission on the income of recruited salespeople, called "downstream". TINA reports that there are too many sellers and not enough buyers. According to TINA, some consultants ended up with unsold garments worth up to $ 15,000.

TINA also found that LuLaRoe used deceptive marketing practices and misrepresented how sellers can become "sellers social entrepreneurs". LuLaRoe extols financial freedom in its marketing materials and claims that bonuses of several thousand dollars can be paid if consultants climb the company's sales levels. TINA, however, found that the average annual bonus paid to LulaRoe sellers was actually only $ 92. He also discovered that many sellers do not even earn enough money to recover what they originally invested in LuLaRoe. TINA concludes that sellers are more likely to go bankrupt than to raise the levels of LuLaRoe sellers.

The TINA survey, which revealed bankruptcies of LuLaRoe sellers in 33 US states, is hardly the first to highlight LuLaRoe's allegedly problematic and often misleading practices. The company has been described as a "scam" by Bloomberg and "pyramid scheme" by former disgruntled consultants. In January, the state of Washington filed a clbad action suit against the company for deceptive practices, accusing LuLaRoe of focusing on recruiting instead of selling its products.

"LuLaRoe fooled consumers into believing that it was part of his pyramid scheme with misleading claims of high profits and refunds for unsold merchandise," said Washington Attorney General Bob Ferguson. Business Insider. "Instead, many Washingtonians lost money and ended up with piles of unsold products and broken promises in LuLaRoe. It's time to hold LuLaRoe responsible for his deception. "

According to Bloomberg, more than a dozen private lawsuits filed by LuLaRoe sellers are still pending. The company has been sued by unpaid suppliers, who claim to have used front companies to hide their badets from creditors (the company has denied these claims).

Despite the bad press, many sellers have chosen to leave LuLaRoe, in what has been called a mbad exodus. The company would now have 35,000 sellers. But these salespeople found that it was not so easy to leave: they will not be reimbursed the full amount of their expenses, in accordance with the company's return policy. Some also complained of being liable for repayments for months, even after taking all necessary steps to close their business.

These are all telltale signs of the problems at LuLaRoe. And although the company insisted in February to turn the page and quell the concerns of consultants, the TINA survey revealed that many people are still falling prey to the false promises of LuLaRoe and they pay dearly.

Want more stories from The Goods by Vox? Sign up for our newsletter here.