Is LuLaRoe a Pyramid Scheme?
Probably, it’s hard to tell. LuLaRoe claims to be a ‘Multi Level Marketing’ company. MLMs share many qualities with Pyramid Schemes but are a bit different. Because they share so many qualities it can be incredibly difficult to tell if the company is a legitimate marketing company or a pyramid scheme.
How to spot a Pyramid Scheme:
The US Government’s Federal Trade Commission has more information about pyramid schemes to help.
- Large profits are based primarily on recruiting others not on the real sale of goods.
- Recruits are forced to buy more products than they could sell often at inflated prices.
- People at the bottom (new recruits) make excessive payments for inventory that accumulates in their basements.
- Many schemes will claim product sells like crazy — but actually sales only occur between people inside the structure or to new recruits. Check to see if price is inflated.
How does LuLaRoe stack up?
- If you look carefully at the compensation plan for LuLaRoe much of the big profits come both directly and indirectly, from recruiting others to sell LuLaRoe.
- In order to join those recruits have to buy thousands upon thousands of dollars of merchandise. See: LuLaRoe: Cost to Get Started
- Members of LuLaRoe encourage distributors to pass around inventory between themselves. Inventory is traded among distributors because inventory purchased from LuLaRo is random (you cannot choose the patterns, sizes, etc). Distributors are also encouraged to purchase more in order to get more chances to get the more rare (“unicorn”) items.
- The leggings, dresses, and more aren’t valued at what the company says they are (check out ebay.com for LuLaRoe for current market pricing by checking sold listings).
LuLaRoe probably is a Pyramid Scheme
Pyramid schemes will disguise themselves as MLM or direct sales companies, and it appears that LuLaRoe is doing that because of the red flags above. Whether it’s a pyramid scheme, a scam, or just an unhealthy business, LuLaRoe shares many bad qualities with Pyramid Schemes. These qualities make it a dangerous opportunity and everyone should probably avoid LuLaRoe.