People and Lifestyle

LuLaRoe consultant claims she was urged to stop paying bills and pawn her car as she went broke selling leggings


caption
LuLaRoe sellers say the business is putting them into debt.
source
Facebook/LuLaRoe
    Some LuLaRoe sellers claim they are going
    broke

    Sellers also complain that LuLaRoe isn’t paying refunds
    for damaged merchandise

    The company says it doesn’t encourage sellers to put
    their personal finances at risk to sell LuLaRoe

Some LuLaRoe merchants claim they are going broke trying to sell
the the company’s brightly colored leggings, dresses, and shirts.


Quartz
interviewed several sellers, some of whom said they
were encouraged to open multiple credit cards and pawn off
belongings so they could invest more money in LuLaRoe inventory
to help their businesses thrive.

But what the women say they ended up with instead was thousands
of dollars of debt.

“I was urged to stop paying my bills to invest in more
inventory,” one merchant told Quartz. “I was urged to get rid of
television. I was urged to pawn my vehicle. I just had to get on
anxiety meds over all of it because I’ve started having panic
attacks.”

Another seller who opened three credit cards to bulk up on
inventory told Quartz: “There was a point in time
where I had $8,000 worth of inventory sitting in my home while I
was running up to food banks to feed my family. I really feel
like I failed my family.” Quartz said the sellers it
spoke to chose to remain anonymous for fear of retribution from
the company.

LuLaRoe encourages its sellers – or consultants, as the the
company calls them – to bulk up on inventory to achieve greater
success, according to company conference calls. But Justin Lyon,
LuLaRoe’s chief marketing officer, told Quartz:
“Retailers should absolutely never put their
personal financial situation at unreasonable risk to establish or
operate their retailer business. Period. If any retailer is
encouraged to do that, we do not support it.”

LuLaRoe

caption
LuLaRoe’s army of consultants has exploded in the last couple years.
source
Facebook/LuLaRoe

Tens
of thousands of women have entered the business of selling
LuLaRoe clothing after seeing their friends marketing it online.
The number of consultants selling LuLaRoe products
doubled over the course of just five months, from 38,277 in
September 2016 to 77,491 in February 2017, according to data
obtained by Business Insider.

Some merchants – including one profiled
by Business Insider
last year – have
successfully turned selling LuLaRoe into a six-figure income
job.

But as the business has exploded in popularity, the pool of
merchants is getting bigger, competition between sellers is
getting fiercer, and many merchants are finding it harder and
harder to turn a profit. That has led many consultants to get out
of the business by selling their inventory at extreme discounts,
which is making it even even more difficult for sellers – whom
the company calls “consultants” – to succeed.

LuLaRoe Katy Perry

caption
LuLaRoe hired Katy Perry to perform at a recent convention for consultants. Deanne Stidham, founder of LuLaRoe (left) stands with husband Mark Stidham and Katy Perry (center).
source
Instagram/@deannelularoe

The company
has also been dealing with a manufacturing problem that resulted
in complaints from thousands of customers who said
its popular leggings were tearing apart
in as little as a few
hours of wear. LuLaRoe launched a
return policy
in April in response that promised customers
refunds, credits, or replacements for their damaged clothing.

But now some people are claiming they
aren’t getting their refunds
.

The money LuLaRoe sellers earn

Data obtained by Business Insider in March showed that more than
80% of LuLaRoe’s representatives generated less than $5,000 in
sales last month, including 10,834 who sold nothing. The average
representative sold about $3,387 of LuLaRoe in the month.

LuLaRoe is a private company and does not disclose data on
representatives’ estimated profit.

The company requires an initial investment of $5,500 in inventory
to become a consultant, but according to
one estimate, based on figures from a LuLaRoe seller
,
representatives must invest at least $15,000 in inventory and
sell it at a markup of more than 40% to turn a profit.

LuLaRoe disputes this claim.

The company says its consultants can turn a profit on less than
$5,000 in monthly sales, and noted that it gets repeated
re-orders even from small sellers and has a 90% retention rate
among its sellers.

LuLaRoe

caption
LuLaRoe’s top sellers on a cruise in February.
source
Instagram/LuLaRoe

Some
representatives say it’s been getting harder to make money
selling LuLaRoe because they are competing with so many more
sellers now, and they have to run promotions to attract customers
– which is a drain on profits. Some newer consultants have also
complained that they are getting repeat patterns and damaged
goods in their shipments from LuLaRoe.

Christina Hinks, 36, of Cary, Illinois, told Business Insider
that she got a shipment of 290 products from the company in
December and most of the dresses, leggings, and shirts were made
out of the same Aztec-printed material. Representatives don’t get
to select the products they sell.

“I got 290 pieces of redundancy. They must have been on an Aztec
kick,” she told Business Insider in March. “I’m in Chicago.
There’s no way I could sell that here.”

She said she ended up selling the entire batch of products to
another representative on the West Coast, where the Aztec print
is more popular.

Where the real money is

The most lucrative route at LuLaRoe is to manage a team of
sellers, which is how representatives earn bonuses from the
company.

Representatives try to recruit their friends and family to sell
LuLaRoe with them, so they can be promoted to the status of team
leader – what the company calls “sponsors” – and eventually to
even higher leadership positions.

About 17% of LuLaRoe representatives qualified as sponsors –
meaning they had at least one other representative under them and
sold a minimum of 175 products per month – in 2015, according to
a LuLaRoe
income disclosure statement
. Sponsors earned an average bonus
of $4,751 per person that year.

The share of qualifying sponsors fell to roughly 12%, or 8,955
people, in February of this year, according to data reviewed by
Business Insider.

Higher levels of leadership come with higher bonuses. So-called
“coaches,” for example, earned an average bonus of $210,338 in
2015. In February, 284 people out of 77,491 representatives
qualified as coaches and 46 people earned the highest rank of
“mentor.”

Overall, only 13% of representatives were paid bonuses in 2015,
according to a LuLaRoe
income disclosure statement
.

About 71% of those representatives earned an annual bonus of
$1,000 or less. Roughly 3% earned bonuses of between $7,500 and
$50,000.

So it’s possible to make a lot of money selling LuLaRoe, but only
a tiny fraction of representatives make it to the top, according
to the data available.



Source link