LuLaRoe

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LuLaRoe
Private
Industry multi-level marketing
Founded 2012
Founders
  • Deanne Brady
  • Mark Stidham
Headquarters Corona, California, United States
Area served
United States
Key people
Mark Stidham (CEO)
Products Women's apparel
Website lularoe.com

LuLaRoe is a United States-based multi-level marketing company that sells women's clothing.[1][2] LuLaRoe was founded in 2012[3] by Deanne Brady and her husband Mark Stidham, and is based in Corona, California.[4] As a multi-level marketing company, LuLaRoe recruits independent distributors (referred to by the firm as "fashion consultants")[4] to sell products directly, often through social media.[1] LuLaRoe reported sales of approximately US$1 billion in 2016, which would have made it one of the largest firms in the multilevel marketing industry at the time,[4] and by 2017 there were approximately 80,000 independent distributors selling the company's clothing.[2]

The company has received criticism and lawsuits from distributors and consumer advocates over several issues related to its business model and for problems with the quality and design of its products.[4][5][6] In October 2017, a class action lawsuit filed in California accused LuLaRoe of being a pyramid scheme.[7]

History[edit]

LuLaRoe was incorporated on May 1, 2013. The company's name was derived by combining the names of Brady's first three granddaughters; Lucy, Lola, and Monroe.[8] The firm initially focused on selling maxi skirts. Within that year the company grew to 10 employees, 145 distributors, and $3 million in sales.

In 2014, LuLaRoe added skirts and dresses to its product line. The firm also began designing its own custom fabrics. In mid-2014, LuLaRoe introduced a line of leggings, which would go on to become LuLaRoe's most prominent product. With 23 employees and 750 distributors the company did $9.8 million in sales.[9] By July 2015 the firm had 2,000 distributors.[9] In an August 2016 interview, LuLaRoe's CEO Mark Stidham claimed that the firm was on-track to exceed US$1 billion in sales, and that LuLaRoe had 26,000 distributors and was shipping approximately 350,000 units a day.[9] By April 2017, LuLaRoe had more than 80,000 distributors.[2]

In early 2017, a class action lawsuit was filed against LuLaRoe by customers, who complained that the firm's proprietary point-of-sale software incorrectly calculated sales tax rates on interstate sales, and in jurisdictions which do not charge sales tax on clothing. These complaints, combined with complaints over poor quality, led to the company's Better Business Bureau (BBB) rating being downgraded to "F" in January 2017.[4][5][10]

In October 2017, a class action lawsuit filed in California accused LuLaRoe of being a pyramid scheme. Plaintiffs in the suit allege the company engaged in "misconduct, including unfair business practices, misleading advertising, and breach of contract."[11][12] According to the $1 billion lawsuit, which LuLaRoe argues is baseless and inaccurate, the company allegedly advised its distributors "to borrow money … take out credit cards, and some were even asked to sell their breast milk …" as ways to buy additional inventory.[13][14]

In January 2018, the National Down Syndrome Society (NDSS), a charity which had previously worked with LuLaRoe, ended its relationship with the company after a top distributor mocked people with mental disabilities during a livestream sale. The NDSS requested that LuLaRoe sever ties with the distributor, but LuLaRoe declined, stating that they accepted the distributor's apology. The video, and LuLaRoe's reaction to it, prompted widespread online criticism.[15][16][17]

Business model[edit]

LuLaRoe clothing is only sold by the company through multi-level marketing (MLM) distributors. These distributors purchase inventory from LuLaRoe wholesale, which they then resell to consumers. LuLaRoe distributors are required to purchase an initial inventory of clothing and marketing materials which cost between $4,925 and $9,000 (as of 2017) and are recommended to keep around $20,000 worth of inventory on hand.[4]

Distributors can be compensated from two potential revenue streams: from direct sales to customers, and from a commission based on sales made by "downline" distributors that they recruit.[3] According to the company's income disclosure statement, in 2015 the average annual commission earned from downline distributors was $85.[8]

LuLaRoe distributors sell LuLaRoe products through a party plan, through pop-up boutiques, or online using private groups that they have set up on Facebook. During a pre-scheduled online event, LuLaRoe distributors use live streaming video to present their current inventory to members of their Facebook group, with the distributor appearing on-screen to exhibit and describe each item.[1]

LuLaRoe distributors are disproportionately more likely to be in poorer rural areas than urban ones. An example cited by Quartz notes that LuLaRoe lists 10 distributors in Manhattan (population of 1.6 million), and 10 distributors in Pueblo, Colorado (population of 110,000).[6] This is consistent with other contemporary MLMs, which have concentrated in rural areas that have been slower to recover from the 2008 economic crisis.[6]

Products[edit]

LuLaRoe's main products are brightly-patterned leggings, shirts, and dresses. The company's clothes tend towards modesty, based partly on the Stidhams's Mormon religious beliefs.[3][2] LuLaRoe releases 5,000 copies of any given pattern, and once a product has sold out it is generally not reissued.[7] LuLaRoe distributors can choose styles and sizes, but not specific patterns, and each distributor is provided different products for their inventory. Distributors have noted that some patterns (known as "unicorns") are significantly easier to sell than others.[8][6][18]

The garments are manufactured in Asian and Central American factories via MyDyer, a Los Angeles-based apparel company which also produces for other retailers.[7]

Product quality and return policy complaints[edit]

In late 2016, LuLaRoe began receiving many reports from customers that the firm's leggings ripped and developed holes easily, in some cases shortly after being worn for the first time. In January 2017 the BBB downgraded the company's rating to "F" in response to the company's failure to address complaints, as well as for issues with charging sales tax in places which do not levy sales tax on clothes.[5] Customers also shared photos of the ripped leggings on social media, and created a Facebook group related to the complaints which had 16,000 members by March 2017,[19] the same month a class-action lawsuit was filed against the company by a group of customers. LuLaRoe's head of production attributed the damage to a production process that weakens the fibers while softening them.[2]

By April, the Facebook group had 26,000 members. LuLaRoe's CEO initially downplayed the damage rates as statistically insignificant, but in response to the complaints, on April 24, 2017, the firm implemented new policies to make it easier for customers and distributors to receive refunds on defective merchandise. The BBB rating was still "F" as of May 2017.[20][21][2]

In August 2017, multiple distributors complained on social media that they had still not received the refunds promised to them by LuLaRoe.[22] In September, LuLaRoe abruptly ended the changes to its return policy, which it had described as a "waiver". Distributors now receive only 90% of cost and pay for shipping and handling, along with other stricter stipulations. The change in policy prompted a backlash on social media, and a petition to grandfather-in the old policies for distributors who were in process of canceling their distributorships.[23][24] As of March 2018, some sellers had complained that they had not received their refund checks for returns made under the April 2017 policy.[25][26][27]

See also[edit]

References[edit]

  1. ^ a b c Johnson, Megan (July 8, 2016). "Today's Tupperware party is held on Facebook". The Boston Globe. Retrieved January 20, 2017.
  2. ^ a b c d e f Peterson, Hayley (April 25, 2017). "LuLaRoe is refunding everyone for pants that customers say 'rip like wet toilet paper'". Business Insider. Retrieved April 25, 2017.
  3. ^ a b c Diep, Francie (December 15, 2016). "Why Do So Many Women Love LuLaRoe?". Pacific Standard. Retrieved January 16, 2017.
  4. ^ a b c d e f Berr, Jonathan (March 2, 2017). "LuLaRoe's business is booming, but some sellers are fuming". CBS News. Retrieved March 26, 2017.
  5. ^ a b c Schreiber, Sarah (27 February 2017). "[Updated] LuLaRoe Is Under Fire for Allegedly Overcharging Customers". Good Housekeeping. Retrieved 17 May 2017.
  6. ^ a b c d Wicker, Alden (6 August 2017). "Multilevel-marketing companies like LuLaRoe are forcing people into debt and psychological crisis". Quartz. Retrieved 19 September 2017.
  7. ^ a b c Suddath, Claire. "Thousands of Women Say LuLaRoe's Legging Empire Is a Scam". Bloomberg Businessweek. Retrieved 14 May 2018.
  8. ^ a b c Peterson, Hayley (September 2, 2016). "Inside one of the fastest-growing clothing companies". Business Insider. Retrieved January 16, 2017.
  9. ^ a b c Interview with Mark Stidham, CEO of LuLaRoe American Dreams radio show, August 4, 2016. Retrieved April 23, 2017.
  10. ^ Berr, Jonathan (24 February 2017). "Fashion marketer LuLaRoe sued over sales tax charges". CBS Moneywatch. Retrieved 17 May 2017.
  11. ^ Prinzivalli, Leah. "LuLaRoe Is Getting Sued for Being a 'Pyramid Scheme'". Self.com. Condé Nast. Retrieved 26 October 2017.
  12. ^ Matousek, Mark. "LuLaRoe is facing a class-action lawsuit from consultants who call it a 'pyramid scheme'". BusinessInsider.com. Business Insider. Retrieved 26 October 2017.
  13. ^ ""My downfall": Retailer says she was misled by LuLaRoe". CBSNews.com. CBS. Retrieved 1 November 2017.
  14. ^ Associated Press (27 October 2017). "$1B suit claims LuLaRoe encouraged women to sell breast milk for inventory". NYPost.com. NYP Holdings. Retrieved 1 November 2017.
  15. ^ McNeal, Stephanie (29 January 2018). "People Are Horrified With LuLaRoe For Standing By A Retailer Who Mocked Down Syndrome". BuzzFeed News. Retrieved 29 January 2018.
  16. ^ Cremen, Alanea (29 January 2018). "LuLaRoe sided with retailer who mocked those with special needs and people are not happy". WBIR. NBC News. Retrieved 29 January 2018.
  17. ^ Farzan, Antonia Noori (29 January 2018). "People Are Mad at Gilbert LuLaRoe Sellers for Mocking People With Disabilities". Phoenix New Times. Retrieved 29 January 2018.
  18. ^ McCarthy, Amy (16 June 2016). "The Rabidly-Followed Leggings Brand You Can Only Buy on Facebook". Racked. Vox Media. Retrieved 31 January 2018.
  19. ^ "LuLaRoe leggings complaints grow". ABC13 Houston. 9 March 2017. Retrieved 17 May 2017.
  20. ^ "LuLaRoe | Reviews and Complaints". www.bbb.org. Better Business Bureau. Retrieved 17 May 2017.
  21. ^ Schreiber, Sarah (25 April 2017). "You Can Now Receive a Full Refund for Your Defective LulaRoe Clothes". Good Housekeeping. Retrieved 17 May 2017.
  22. ^ Snachez, Hazel. "LuLaRoe Retailers Claim They Have Not Received Promised Refunds". CBS New York. CBS Broadcasting Inc. Retrieved 23 August 2017.
  23. ^ "Petition says LuLaRoe changed its return policy for retailers ending their business". WMTW. ABC News. 15 September 2017. Retrieved 18 September 2017.
  24. ^ Statz, Augusta (18 September 2017). "LuLaRoe changed their return policy". RTV6. Archived from the original on 2017-09-22. Retrieved 18 September 2017.
  25. ^ Jones, Tom; Consumer Bob (6 December 2017). "Former Sellers of Lularoe Clothing Worry About Return Policy". NBC 7 San Diego. Retrieved 29 January 2018.
  26. ^ Ebben, Paula (9 January 2018). "LuLaRoe Still Owes Mother $7,000 Months After Refund Offer". WBZ. CBS News. Retrieved 29 January 2018.
  27. ^ Allen, Jaclyn (15 March 2018). "Lakewood mom waits months for promised LuLaRoe refund". 7NEWS. Retrieved 20 March 2018.

External links[edit]