Uh Oh, Is LuLaRoe Going out of Business?

Updated on September 22, 2017
Kierstin Gunsberg profile image

Kierstin is a business communications student at Northwestern Michigan College.

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This past weekend my feeds were filled with a whole lotta #LuLaHate as consultants found out the hard way that LuLaRoe's recent 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 are calling it quits, but this isn't necessarily an indication that LuLaRoe as a company is failing. That's just the reality of direct sales - a lot of people will dive in, and a lot of people will jump back out, and then, inevitably, more people will dive in after them. That's good news for LuLaRoe since they're making thousands upon thousands off each new consultant's initial startup, whether or not that consultant decides to stick around.

Here's what's not looking so good for LuLaRoe: they're losing customer satisfaction and 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 = less startup sales for LuLaRoe = less money.

So no, LuLaRoe isn't going out of business - yet. But if they don't shake up their business model and redeem themselves among their base they may be well on their way out.

But 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 invest into a product that relies heavily on fashion trends and supply and demand (many will pay big bucks for a "unicorn" pattern but wouldn't even pay an Old Navy end-of-season-clearance price for most of the 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 re-saleable, and those standards include, but are not limited to merchandise that was sold within the past year, tags attached, with packaging that hasn't been damaged.

Many 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. This return policy leaves a lot of consultants scrambling to sell their products before closing up shop as they face a pretty sizable loss if they choose to return unsold merchandise to headquarters. Yet, the reason a lot of those products haven't sold in the first place is because they're butt-ugly.

And here is the fatal flaw in the LuLaRoe business model: The business owner (consultants) do not get to pick which specific products they will purchase for resale, yet they must carry inventory. It 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, what sizes I want to carry and 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 the said colors, sizes, and amounts.

But if I start a business with LuLaRoe I lose control of my ability to make wise fiscal choices right from the very start because LuLaRoe 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 will be shipped to you in varying sizes, styles and colors and then it's 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 kind of styles appeal to those markets - all for a fantastically frightening startup cost of right around $5,000 (at least).

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
  • A(n interest bearing Money Market account)
  • A downpayment on raw land (or, where I come from, the entire asking price!)
  • A used car
  • A downpayment on a 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.

To me, LuLaRoe's policies and business model are a perfect storm to fail and the reason I've never included LuLaRoe in any of my "Best Of" direct sales lists.

Here's a few more reasons you'll never see me singing praises for #LuLaRoeBlessings

With LuLaRoe's new return policy many consultants are left in the gutter with thousands of dollars worth of merchandise that just isn't selling.
With LuLaRoe's new return policy many consultants are left in the gutter with thousands of dollars worth of merchandise that just isn't selling. | Source

The Products Are Really Expensive

I know, this seems like my dumbest reason for not sharing the LuLa love, especially considering that most direct sales products seem overpriced compared to regular retail brands, so I'm just going to get it out of the way now. I will absolutely pay $30 for a t-shirt from say, Everlane where their company model leaves a ton of transparency on a good-quality product that will be on-trend for the next decade, yes.

I will not, however, pay $30 for a t-shirt that is on-par quality-wise with a favorite tee from Gap or Old Navy where I'm gonna rack up points for shopping and earn cashback to boot. As a budget-conscious consumer I find many LuLaRoe items to be unwearable in my every day because they're comfy clothes that come at a fancy-clothes price. I'll buy my comfy clothes at a discount and if I'm looking to dress up a little more I'm going to skip on over to J.Crew's clearance or even ThredUp where I know I'll get free shipping, easy returns and reliability of service and quality.

LuLaRoe Stopped Making Their Clothes in The U.S.

Straight up, I am not an elitist when it comes to buying clothes. I frequently purchase whole-season hauls from all of the popular clothing stores that we all feel a pang of guilt purchasing from but the prices are just so good. We know we're getting those great deals at a price - cheap labor in foreign countries. That's the hard truth. I do it knowing I can provide my kids with season-appropriate clothing and gear at a price that won't throw our family so out of budget that we have to scramble when it's time to pay our bills. Okay.

Part of the appeal of LuLaRoe early on was that, sure their clothes were twice the price of traditional retailers, but they were being made responsibly in the U.S. so the price made sense! Not anymore. Now you'll find that besides the U.S., LuLaRoe clothing is made in Mexico, Guatemala, China, Vietnam and Korea. So for a company that's outsourcing their clothing in exchange for cheap labor you'd think that the prices would come down a bit to reflect that, but no. Realistically, their competition now for product and quality is in stores like H&M and Old Navy, yet those retailers offer much cheaper prices (I can get a t-shirt with a similar LuLaRoe style for around $12 at Old Navy).

For people who love fashion, social media, and making tons of money, LuLaRoe seemed like a cool opportunity.
For people who love fashion, social media, and making tons of money, LuLaRoe seemed like a cool opportunity. | Source

The Styles Are Mostly Outdated

When LuLaRoe first popped up everyone (including me) freaked out that you could get leggings thick enough to avoid any wardrobe malfunctions and work-ready dresses that could be dressed up or down depending on the day. And, while the patterns seemed cool at first, they don't always make for great Instagram shots and eventually we moved to more neutral and muted styles while LuLaRoe consultants are usually sent only a handful of solid colored pieces among the piles of zigzags, polkadots and poorly-placed patterns that create the illusion of period stains (seriously, just Google "Lula Bloopers"). The boldness that was once right on-trend isn't quite so much these days, yet LuLaRoe continues to send consultants styles that are difficult to match.

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, on-trend 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.

The Model Sets You Up To Fail

Think about this for a second: Why do people purchase LuLaRoe?

Is it for the quality? Maybe. Or maybe it's for the perceived quality (again, the garments are now manufactured the same way every other pair of leggings or tunic top is manufactured now).

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.

From what I can see, people buy LuLaRoe because of FOMO. Seriously, the whole "we only produce *this many* pieces of this pattern" thing creates a lot of fear of missing out for consumers. OMG WHAT IF I NEVER GET TO SEE THAT SPLASHY POPPY PRINT ON MY LEGS IF I DON'T BUY THIS PAIR OF $25 LEGGINGS PLUS $8 IN SHIPPING RIGHT THIS VERY MINUTE?!

Here's the thing though. I don't think FOMO is sustainable when it comes to retail. Fight me on it if you want but I'll just give you two words: Beanie. Babies.

Just as my parents and I began to realize that Beanie Babies were glorified crane-machine prizes, consumers eventually realize that LuLaRoe snags, tears and pills just like any of the the lesser-priced items in their closets and after a while - I'll make an educated guess here - that many are not repeat LuLa customers.

So where are all of LuLaRoe's customers? Like I said before, they're the consultants themselves since LuLaRoe doesn't get paid for the sales that consultants make. See? If me, my sister-in-law and my mom all decide to each start our own LuLaRoe business that's at least $15,000 for LuLaRoe. Let's say I go crazy and I'm like "Wow, I'm going to buy a bunch of inventory because I just know that the more I have the more I can move and the more I move the more I'll make" and I take out a loan and invest another $3,500 in inventory. That's $18,500 dollars for LuLaRoe! Let's say that my mom, my sister-in-law and I all bomb out and we sell nothing. THAT IS STILL ALMOST $20,000 FOR LULAROE AND YES I'M SHOUTING BECAUSE HOLY COW.

We tried, we opened that stuff, we put it on the pretty blue hangers and Instragrammed the you-know-what out of it and let our friends try it on hoping it would sell but it didn't sell because guess what? Everyone else and their sister-in-law and mom are selling LuLaRoe too. And all of those consultants are thousands more in LuLaRoe's pockets. LuLaRoe's once white-hot image of cute, rare clothes is no longer so rare. All I have to do is search "LuLaRoe" in my Facebook search and I can find a dozen consultants in a 50 mile radius, giving me the ability to hunt down the exact patterns, styles and sizes I want. Just like what I do when I shop on H&M.com. LuLaRoe's once genius business-model of supply-and-demand has backfired on consultants and bored the rest of us.

So, let's say we want to return that inventory because 70% of it didn't sell and we need to get out from under the debt. Well guess what? We're now at LuLaRoe's mercy as to whether the packages that were opened are considered "damaged" after opening them to market our product.

So, essentially, LuLaRoe punishes business owners for doing exactly what a business owner should do - market their products.

That's not a business model, that's a scam.

Waiting for a response from LuLaRoe on whether you'll receive any kind of refund? According to the rest of the internet, you'll probably be waiting a while.
Waiting for a response from LuLaRoe on whether you'll receive any kind of refund? According to the rest of the internet, you'll probably be waiting a while. | Source

Hey Former or Current LuLaRoe Consultants!

-Tell us seriously, did you make your investment back?

See results

Have You Ever Sold LuLaRoe?

Or are you thinking about selling LuLaRoe? Do you love it? Do you hate it? I want to know! Comment below and feel free to use a fake name and remain annonymous!

© 2017 Kierstin Gunsberg

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    • profile image

      Dee dee 3 weeks ago

      I like lularoe. It is way overpriced and after buying about $300 worth I think I’m over it. I found a “buttery soft” pair of leggings that feel just as good as Lula but were 6.99

    • profile image

      Nikki Pilia 5 weeks ago

      My coworker introduced me to LuLaRoe in the fall of 2015. I fell in love with the buttery soft leggings and funky prints. She immediately started building a team and by January of 2017 she put in her teaching resignation later. To me, I thought that was crazy. I started asking her questions and I thought that I could sell some clothing to make extra money on the side. My end game was never to quit teaching, but to pay off my car early. I submitted my paperwork on Leapday 2/29/16 and patiently waited in the 'Queue' for my phone call on May 4th, 2016. I told my sponsor that I was going to give it 6 months. I personally never carry a balance on a credit and am not considered a 'risk taker' so I searched for a card with 14 months at 0% interest so I would give myself time to recoup the money. My negative experiences with LuLaRoe mostly deal with how the company is being run and extreme lack of communication between departments. First, as I was waiting in the 'queue' for weeks on end we were given choices of onboarding packages which ranged from $4800 to over $9000 with a 'free bonus item'. When I onboarded I chose package 2 and received 'free' Classic tees. Without notice, within several days of my call,LuLaRoe announced from here on out consultants have to buy package X and the only free items would be the poorly selling men's Patrick Tees. I had several friends now stuck with that option and it was more money than what they were planning on spending. LuLaRoe does encourage consultants to invest back into their inventory. I knew early on that I was not going to go into debt for this. I carried limited inventory with about 8 items per size. It worked out pretty well; and I have a great local community of retailers where we would swap 'older' inventory every month so we could have 'new inventory' without buying it. LuLaRoe does encourage it's retailers to build a team; that was never on my agenda. However, my sponsor rose through the ranks quickly to the point where her bonus checks were several grand a month. Initially LuLaRoe based their bonus checks based on buying..not selling. All my sponsor had to do was sit back and maintain the minimum order to collect her check each month. LuLaRoe did switch to sales based bonus checks this past spring. Throughout my time as a consultant I placed 11 orders. Of those 11 only 1 was actually correct. LuLaRoe prides themselves on 'hand selecting' pieces...obviously they can't count. I would call to get my orders corrected; consultants don't lie when they say they are on hold for 2+hrs and then have the phone drop the call. I would then get random deliveries for 2 Randys or 1 Cassie. To this day, I have no idea how many pieces that I was shorted. Specialty orders were also a nightmare. They would announce on a call that they would go live in a couple hours. This would create panic and cause the ordering system to crash. If a consultant was lucky enough to place a specialty order sometimes the items wouldn't ring up bundled, they would be double charged, still receive an incorrect order or one with a backorder slip. In the agreement that I signed, it said that items would be shipped from 3-5 business days after my order...shipping times were consistently getting slower and slower. As someone living on the East Coast some orders took 3 weeks to get to my door, which is ridiculous. The returns for damages process also changed various times during my several months. First you had to send back the item; then you could keep the item and take a picture and email it in; then it was fill out a formstack...If you tried to call to see that status of your damage report they would tell you to fill out another email. By December of 2016 I realized that I was putting in way too much time and effort to continue selling LuLaRoe. I started the resignation process in January 2017, but again that took 3 months! From several phone calls and emails; the departments to talk to each other. I never received an estimate on how much I was getting back...honestly, my check was for more than I was anticipating so I didn't complain. I am just glad to be done with that headache. After I started my resignation process, LuLaRoe basically decided to become a 'closed bank'. They said that they would be running a 'hard credit' pull on all consultants---that alone I would never have agreed to. All consultants would have to put new purchases on the LuLaRoe issued debit card. All deposits would go into a LuLaRoe account. If you wanted the money transferred to your personal account there was now fee for each transaction. I am surprised that there have not been more voices speaking out on the business transgressions. As for my former sponsor...she is now back to teaching.

    • profile image

      Notsaying 8 weeks ago

      I am so fed up with LULAROE, they started accepting returns for people going out of buisness but it is taking over 4 months to receive a check after they go through your inventory and confirm. And they have no idea when your check will be cut just same generic messages saying they process in order received. I had to pay 800 to ship my items back and have been waiting for months and months for my return check.

    • profile image

      Danielle 8 weeks ago

      I had so many friends investing in LuLaRoe. When I saw the business model though I felt bad for my friends because they were so enthusiastic about it, but they were dumping LuLaRoe with so much hard earned money in hopes of a better opportunity, but one by one they all eventually went out of business. LuLaRoe could be so much better to it’s consultants, but it specifically chooses not to because it’s only invested in making money, it doesn’t actually care about the consultants and that business model has always been destined to fail. It bothers me how many women they have scammed. Also making it available to so many women without requiring any permits or licenses, it was only a matter of time where the painted picture would draw thousands of women in to become consultants with the idea of owning their own “lucrative” business which is the exact reason buying wholesale is not available to everyone (you have to have permits etc) because if everyone has access to it, why even go to the stores anymore? No retail business would make any money

    • Kierstin Gunsberg profile image
      Author

      Kierstin Gunsberg 2 months ago from Traverse City, Michigan

      Morgan, eight months with no resolution is terrible! Thanks for sharing your story though, because I think that as people research companies to join, this information will help them to steer clear of LuLaRoe.

      I can understand why you feel badly about this situation and feel like it's your fault but if you take a minute to put it in perspective it's clear that your motivation was good and you invested in this company thinking it would benefit your family. In the grand scheme of things, there are so many truly awful things you could put your family through from a place of selfishness but this isn't one of them. You are as much a victim to LuLaRoe's bad practices as your family is and hopefully, going forward, you can see that.

    • profile image

      Morgan Lane 2 months ago

      I was one of those retailers who exited prior to the policy reversal. Guess what? Didn’t matter. They drug their feet in processing my resignation so I got screwed with the old buy back policy. So here’s a timeline- resigned in August 2017, they finally accepted my resignation around THANKSGIVING! I immediately sent my return inventory back first week of December. That alone cost me $300 in shipping. They didn’t “receive” for 8 more weeks even though they had possession of it. Jan 29th I got an email confirming my return and that all items were approved and my case was being sent to accounting to cut my check.....that was 5 weeks ago. At this point it’s feeling more like grand theft under false pretenses and I’m wondering if I’ll ever get a refund check. Worst decision I ever made. I am so ashamed and embarrassed I put my family through this nightmare.

    • profile image

      AZAlicia 2 months ago

      You hit the nail on the head with every reason, I have not purchased many Lula items... I saw the scam when I first researched and I researched a lot. They disgusted me.

    • Kierstin Gunsberg profile image
      Author

      Kierstin Gunsberg 3 months ago from Traverse City, Michigan

      Yikes, Single Wing! That's too bad to hear that the quality of the outfit was so low. I do know a few years back I had friends wearing LR and their stuff did feel very soft and high quality but as I mentioned in this article, that's changed. I hope the consultant you were purchasing from has found a better venture and that you can find some higher quality comfy clothes for your next vacay!

    • profile image

      Single wing 3 months ago

      I bought several outfits ...solid with matching prints no mixing of prints...just wore one while on vacation at beach....First wear the long shirt( I forget the name but it covers the butt) it pills up like crazy....never worn before and now feels like a really old shirt...also the lady I bought from is OUT ...she closed up before the end of 2017..

    • Kierstin Gunsberg profile image
      Author

      Kierstin Gunsberg 4 months ago from Traverse City, Michigan

      William, I just checked Ink Sewn out and it looks very promising! I love that they drop ship, it makes no sense to carry inventory, and I love that the products are produced in the U.S. That makes the price WORTH it.

    • Kierstin Gunsberg profile image
      Author

      Kierstin Gunsberg 4 months ago from Traverse City, Michigan

      Yikes, Joanne! That's terrible! I wonder if you could sell them on Ebay since they still have tags and make back part of your investment.

    • profile image

      Joanne Wolftail 4 months ago

      I am unfortunately a Customer of Lularoe, i have spent Thousands of dollars with them From the very beginning of the Orders I made (in the last week of September), things were a constant mix-up. I received 2 or 3 of just one design that I wanted, so basically, they stole from me right at the start. Most LLR Consultants that I know of pressure and bully you into ordering from them, causing incredible debt. They just don't care. I have ordered some of LLR most envied pieces from their Elegant Collection. I can go on forever with stories about what I've been put thru, finally ordering only because I felt pressured. Lets put it this way, there is Thousands of dollars of LLR in my Closet that I don't really want. All of those Elegant pieces still have the tags on them, I was so disgusted when I received them that I just opened up the packages and hung them up, tags still on.

    • profile image

      No name 5 months ago

      Worst decision I ever made was to become a consultant and put my family in a debit I didn’t make back. Company (LLR) doesn’t have much concern for anything except their wallets.

    • profile image

      Tired Mommy 7 months ago

      I officially was "released" as a consultant about 2 weeks ago. I was one of those people who startedthe exit process and then gotthe lovely policy change surprise

      I'm business minded, I get why they changed. They could have handled themselves better and treated us like a person.

      Lularoe was a huge boost to my confidence pre and post partum. I lost all my baby weight after 2 kids (in 3 Years) and overtime I fit into my old clothes. Clothes from Banan, free people, etc. (clothe si should say I could afford before having kids

    • FlourishAnyway profile image

      FlourishAnyway 8 months ago from USA

      A friend is spamming me with this ugly stuff on FB and I've never purchased any of I because I just don get the appeal. I thought I was the only one who failed to catch the LuLa bug.

    • Kierstin Gunsberg profile image
      Author

      Kierstin Gunsberg 8 months ago from Traverse City, Michigan

      Nice! Smart move, Linda! Especially after I was post-partum with my second babe in just as many years, I saw the appeal of LuLaRoe - it looked comfy, loose where I wanted it to be, and even though I wasn't a fan of a lot of the prints I could see pairing some of them with solids. So, when I was building my post-partum wardrobe I looked into buying some t's and leggings there because my friend had a pair and they really were super soft, but $200 would have bought me about 3 outfits and I ended up just going to my usual stores and grabbing all of their sale leggings and tunics at a fraction of the cost of LuLaRoe. Those tunics and leggings got spit up on, pooped on, peed on - you get it - I had to toss a lot of it a year later and I didn't bat a lash because my investment was minimal.

      I appreciate a great direct sales company, but their model is sneaky and from what I've heard, their products aren't what they used to be.

    • Linda Courtney profile image

      Linda Courtney 8 months ago from Bensalem, PA

      I always love to find LulaRoe in the thrift stores for $1 or $2. I know I can turn around and sell them on Ebay for $20 or $30 easy. I always wondered why though. The clothes are so basic and ugly to me. I think people are just buying them because somehow the name became hot. Who cares what the clothes look like? Always wondered how something like that could last. No, I would never spend $5K to direct sell them. I will still pick them up at thrift stores for cheap and resell though.

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