Uh Oh, Is LuLaRoe Going out of Business?
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
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).
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.
Hey Former or Current LuLaRoe Consultants!
-Tell us seriously, did you make your investment back?
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!
Questions & Answers
© 2017 Kierstin Gunsberg