Skip to main content

Is LuLaRoe Going Out of Business? Is It a Scam?

Kierstin studied business communications at Northwestern Michigan College.

Initially, many excited entrepreneurs jumped aboard LuLaRoe's direct-marketing-fueled clothing craze, but now, some are doubting the company's health.

Initially, many excited entrepreneurs jumped aboard LuLaRoe's direct-marketing-fueled clothing craze, but now, some are doubting the company's health.

Back in the fall of 2017, my feeds were filled with a whole lot of #LuLaHate as consultants found out the hard way that LuLaRoe's 100% refund on unsold inventory for sellers deciding to close up their digital shops was no more.

Looking more deeply into the drama, I found that many consultants called it quits as a result of this policy change. Since then, the company has also faced legal troubles with their primary distributor (link at the bottom of this article). While these things don't necessarily indicate a failing business, many see them as signs that the brand may be on its way out.

The reality of direct sales is that a lot of people dive in, a lot of people jump back out, and then, inevitably, more people dive in after them. That's good news for LuLaRoe since they make thousands upon thousands off of each new consultant's initial startup whether or not that consultant decides to stick around. Still, there are plenty of other factors that don't necessarily bode well for the company's future. Each of the statements listed below will be explored in more detail in the following sections.

10 Reasons Why LuLaRoe May Be Failing

  1. Their customers aren't satisfied.
  2. Consultants feel cheated by the new return policy.
  3. Consultants don't get to pick their merchandise.
  4. Their founders are not transparent.
  5. Their clothing is overpriced and low-quality.
  6. Their style is outdated.
  7. Their business model isn't sustainable.
  8. They rely on consultants—not customers—for income.
  9. The market is oversaturated.
  10. Consultants are punished for marketing their products.

1. Their Customers Aren't Satisfied

To clarify, the company's customers are their direct sales consultants—those who purchase inventory for resale—not the actual end-customers making individual clothing purchases. With a model that relies heavily on social media, news of dissatisfaction is spreading like wildfire across the very places that consultants are encouraged to sell their LuLaRoe inventory.

Never forget that in the end, consultants are LuLaRoe's customers. Unhappy consultants = unhappy customers = fewer new buy-ins = less money for LuLaRoe. So, maybe the company is still somehow staying afloat, but if they don't shake up their business model and redeem themselves among their base, they may be well on their way out.

2. Consultants Feel Cheated by the New Return Policy

Lots of direct-sales consultants get peeved with their company's policies, right? Very true, but many of them don't have the amount of money invested that LuLaRoe requires their consultants to spend up-front. LuLaRoe consultants must invest into product lines whose success depends largely on fashion trends and supply and demand. Many customers will pay big bucks for a unicorn pattern but wouldn't even pay an Old Navy end-of-season-clearance price for most of LuLaRoe's other patterns and styles.

Now, back to that return policy. As LuLaRoe states, they didn't get rid of their 100% refund return policy; they just went back to the old policy of a 90% refund. Of course, to even receive the 90% refund, consultant-returned merch has to pass some pretty strict standards to be considered resealable. Those standards include but are not limited to merchandise that was purchased by the consultant within the past year with tags still attached in packaging that hasn't been damaged.

Why Is This a Problem?

Most consultants immediately unstuff their big ol' boxes of brightly patterned leggings, perfect-T's, and various feminine-monikered tops, skirts, dresses, and cardigans to display at shows and on their social media. That's how consultants make sales. This return policy leaves a lot of consultants scrambling to sell their products before closing up shop as they face a pretty sizable loss by choosing to return unsold merchandise to headquarters. Yet, the reason a lot of those products haven't sold in the first place is that they're butt-ugly or no longer in style.

Just because brightly colored and absurdly patterned leggings are waning in popularity doesn't mean LuLaRoe's consultants can return their piles of unsold inventory.

Just because brightly colored and absurdly patterned leggings are waning in popularity doesn't mean LuLaRoe's consultants can return their piles of unsold inventory.

If I start a business with LuLaRoe, I lose control of my ability to make wise fiscal choices right from the start because consultants don't even get to pick their sizes with their first order.

3. Consultants Don't Get to Pick Their Merchandise

And here is the fatal flaw in the LuLaRoe business model—the supposed business owner (the consultant) does not get to pick which specific products they purchase for resale. Yet, they must carry inventory.

This doesn't make a lot of sense from an investment perspective. If I decide to start a little boutique selling, say, all handmade items from Etsy Wholesale (no, I've never daydreamed about this—not once), I get to decide how much of each product I will purchase, what colors they'll come in, and what sizes I want to carry. I can see what sells then adjust my future purchases accordingly. Sure, I probably won't be able to return unsold items to the wholesaler, but that's a risk I'll have to keep in mind when choosing said colors, sizes, and amounts.

If I start a business with LuLaRoe, however, I lose control of my ability to make wise fiscal choices right from the start because consultants don't even get to pick their sizes with their first order. Seriously! You get to pick a starter kit, and pre-selected products are shipped to you in varying sizes, styles, and colors. It's then your responsibility to earn a profit from those products without taking into account any variables like who your personal target market is, what markets are available in your area, and what styles appeal to those markets—all for a fantastically frightening startup cost of around $5,000 (at least).

Scroll to Continue

Read More From Toughnickel

Why Is This a Problem?

Here's a quick reminder of what a $5,000 investment can buy you besides a boatload of ugly, overpriced clothing:

  • A semester of college
  • $5,500 in a few years via investment in a mutual fund
  • Raw land
  • A used car
  • A downpayment on a brand new car
  • Your property taxes for the next two years
  • The startup costs of a business that relies on your talents and interests (like photography or interior design)
  • Wholesale inventory that you have carefully curated after studying your market

4. Their Founders Are Not Transparent

In late 2018, one of LuLaRoe's founders, DeAnne Stidham, went live on Instagram. When consultants resorted to asking her when (or if) they'd receive refunds for merchandise and attempted to address other business concerns, Stidham's response was to name-call and block her "haters."

Why Is This a Problem?

Any time you're making a business investment you should expect transparency.

5. Their Clothing Is Overpriced and Low-Quality

Most direct-sales products seem overpriced compared to regular retail brands. I know this, but I also like the idea of supporting someone selling locally. However, LuLa's stuff just seems crazy expensive for what you're actually getting.

For instance, taking a look at my local LuLaRoe group, I could nab a very thin, brightly patterned, open-front cardigan for $55 plus shipping. For $75 and free 2-day shipping, I can get a soft, cotton-knit, open-front cardigan from Everlane in a pretty neutral gray and see the factory it's being produced in.

Why Is This a Problem?

Looking out for a pair of patterned leggings akin to LuLa but without the inflated price? Nowadays, you can find that for less than half the price of the direct sales company's offering with easy returns via Amazon.

LuLaRoe seemed like a cool opportunity for people who love fashion, social media, and making tons of money, but for many consultants, that dream did not become a reality.

LuLaRoe seemed like a cool opportunity for people who love fashion, social media, and making tons of money, but for many consultants, that dream did not become a reality.

The boldness that was once right on-trend isn't quite so popular these days, yet LuLaRoe continues to send consultants styles that are difficult to market.

6. Their Style Is Outdated

When LuLaRoe first popped up, everyone (including me) freaked out that you could get leggings thick enough to avoid any wardrobe malfunctions. While the patterns seemed cool at first, clothing trends quickly moved on to more neutral and minimalistic styles. Unfortunately, LuLaRoe consultants are usually sent only a handful of solid-colored pieces among the piles of zigzags, polka dots, and poorly-placed patterns that create the illusion of period stains (seriously, just Google "Lula Bloopers").

Why Is This a Problem?

The boldness that was once right on-trend isn't quite so popular these days, yet LuLaRoe continues to send consultants styles that are difficult to market. Look, I'm not saying that there aren't a lot of cute styles to be found with LuLaRoe—there are. But for the consultant, it can be difficult to create real-world outfits out of a single batch of product. In a home-based business, time really is money, and the more time you spend trying to sell a product, the less money you're really making.

7. Their Business Model Isn't Sustainable

Why do people purchase LuLaRoe? Is it for the quality? Maybe. Or maybe it's for the perceived quality (the garments are now manufactured the same way every other pair of leggings or tunic top is manufactured—usually overseas). Is it for the price? No. The prices are high. Okay then, is it for the styles? Also maybe. But most major retailers are now offering similar styles at cheaper prices.