Author: Sarah

Is “It Works!” A Pyramid Scheme?

Is “It Works!” A Pyramid Scheme?

It Works! sells the weight loss and cosmetic wrap products (“crazy wrap thing”). It Works! claims to be a ‘Multi Level Marketing’ company. MLMs share many qualities with Pyramid Schemes. Because they share so many qualities it can be incredibly difficult to tell if the company is a […]

Last Week Tonight: Multi Level Marketing

Last Week Tonight: Multi Level Marketing

Check out this great video from John Oliver about Multi Level Marketing

Who’s Making Money With LuLaRoe?

Who’s Making Money With LuLaRoe?

Who is getting paid and how? Details!

Consultants (bottom level) pay up front costs to sell products and get initial inventory. They then try to sell that inventory (and more) to get back the initial money they spent, and make more. They make less money if the products sell for less money.

Sponsors (next level) are eligible to make up to 5% of the orders by the consultants they sponsor (the consultants they recruited to sell Lularoe), BUT in order to receive the bonus sponsors must purchase 175 pieces during the month for which that bonus is calculated.

Most people are at these two levels

LuLaRoe provides an income disclosure statement[1] which shows the percentage of consultants at the different levels in the company (see pie chart). Using this we can start to get a handle on the number of people rising to higher ranks. Reportedly LuLaRoe added around 33,000 consultants in a year[2]. This would mean we could estimate around 6 would be mentors, and less than 200 would be trainers.

And many more complicated levels At each level higher the compensation gets more complicated. Each higher level is even more difficult to reach, requires even more inventory purchase by consultants in the downlines, and as we know from the disclosures very few consultants reach those levels. However, it’s at these highest levels where the biggest bonuses are paid.

trainer pyramid

Digging into the Income Disclosure Statement

The income disclosure statement from LuLaRoe’s website tells us a bit more about bonuses. However it only tells part of the story. This statement does not include any information about earnings or losses based on selling the products. It also doesn’t account for any expenses. Therefore, while these are called bonuses, really consultants could earn a bonus but still end up losing money in the end because of expenses or unsold inventory.

Most people earn no bonuses

This means they most rely on the sale of the product to earn back the money they have spent to purchase inventory, cover expenses, etc. This can be difficult because of a variety of factors and can result in consultants ultimately losing money.

Bonus structure encourages buying and stockpiling

In order for everyone involved at the various levels to make more money, everyone — consultants, trainers, and coaches need to buy more wholesale inventory and encourage others to buy more inventory even when the inventory they already have is not selling

Consultants (bottom level) are required to purchase a substantial amount of inventory to get started. Sponsors (next level) must purchase additional inventory to get their bonuses. In order for trainers (higher levels) to earn bonuses on their downline — both trainers AND their downline must buy more wholesale inventory. 

This can lead to people feeling like they should buy more one month in order to get their bonus, thinking they will be able to sell it later. This can lead to a really bad cycle. Too much inventory and a lack of sales leads to debt, a feeling that you must buy to get bonuses and maintain status with the company to get out of debt, only to have it start again next month.

LuLaRoe doesn’t publish it’s compensation plan on it’s website, but it is available from LuLaRoe consultants who will share it as part of recruitment. Here are two examples:
lulashoppe.com/lularoe-compensation-plan
llrteamuplift.com/lularoe-compensation-plan

See Also: Is LuLaRoe a Pyramid Scheme? 

Is LuLaRoe a Pyramid Scheme?

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 […]

Joining Jamberry

Joining Jamberry

Jamberry is a multi level marketing company which sells a nail ‘wrap’ product (kind of like a polish replacement). It’s relatively easy to find information about Jamberry, their company, products, and compensation plan. You can sign up on their site to become a consultant and […]

Becoming a Stella & Dot Stylist

Becoming a Stella & Dot Stylist

Stella and Dot is a multi level marketing company which sells jewelry. They are known for their trunk shows and stylists who help customers with creating overall looks to go with the jewelry.
You can find vague information about Stella and Dot’s compensation and initial costs on their website. You can sign up on their site to become a stylist and they will assign you a sponsor if you don’t already have one. Anyone can also buy jewelry from the site directly.

It’s a lot harder to find details about exactly how everyone makes money and gets promoted, details about training, and a good idea about the costs of being a Stella and Dot stylist. Most of this information is given to new stylists after they purchase their starter pack. [1] [2]

What does it cost to get started?

To begin selling Stella & Dot as a stylist you purchase a starter pack. Starter packs sell from between $199 and $699.

$199-$699 starter pack

Other expenses
Personal sales website is free for 60 but after that is $129 for a year or $39 per quarter.
Additional samples may be purchased at 50% off and are suggested to improve trunk shows
You can also purchase things like lookbooks and emarketing

Do you need inventory? Can you just sell online?

The Stella & Dot FAQ don’t really give a straight answer here, but in order to become a stylist you must at least purchase an initial starter pack with samples. Most of their training materials appear to encourage selling at trunk shows (with samples and ordering) and supplementing with online trunk shows and ordering.

Stella & Dot does offer an online affiliate program which is not available to stylists and does not require inventory.

Encourages personally purchasing to meet quotas and get bonuses

Because commission structure requires stylists sell a certain amount each month, stylists may be encouraged to purchase that amount for month regardless of whether customers want to buy jewelry. It seems like a good idea because otherwise the stylist is letting down their sponsor and missing out on the opportunity to get commissions or other incentives (free stuff, etc).

This cycle of personal purchases to meet quotas can lead to debt, stress, and problems. Personally purchasing to meet qualified volume requirements is never a solution, ask sponsors for other solutions — introduce you to new leads, co-host an online trunk show, etc.

Who is getting paid and how? Details!

Stella & Dot is pretty clear with their compensation, however detailed information is generally shared after stylists join the company and receive their training materials.

Digging into this a bit more, it gets pretty complicated there are levels based on the number of stylists you’ve recruited onto your team, and quotas for personal sales in order to continue receiving the bonuses from building a team.

commisions

Commissions
Stylists make commissions based on their personal qualified volumes (25-35% depending on how much they are selling. Once they’ve recruited leaders can make commissions on the sales of the stylists they’ve recruited.

4-9% on the first line’s or first level’s commissionable volume
   During a new stylist’s Jump Start period (first 60 days) you can get an additional 3%
0-5% on the “second line’s” or second level’s commissionable volume

Where you fall in these ranges depend on your rank (higher ranks get higher percentages)

Other requirements and bonuses
Group Qualifying Volumes – that is the first three levels must sell a certain amount of qualified volume in order for everyone to maintain their levels.
There are promotion bonuses for reaching new pay rank. These range from $100 to many thousands of dollars.
‘Generations’ also affect compensation by allowing you to extend commisions beyond the first two levels.
Discounts and product credit awards are also awarded at various ranks

Stella & Dot LevelsStylists
A qualified stylist is a stylist who has sold $500 PQV (PQV is personal qualified volume or personal retail sales). Weekly commissions of 25%-35% (higher amounts if more PQV during that month). A lead stylist has one qualified leg – a leg means that the stylist has started a tree of stylists or the stylist has sponsored one other stylist (who can then go on to sponsor sylists).

Team Leaders
At this rank, there is the introduction of the Group Qualified Volume required to be promoted and hit the monthly pay rank. This is the amount of qualified volume sold by the stylists in the first three levels. For associate stylists the GQV is $3,000 but this goes up to $12,500 for Star Stylists. Personal qualified volumes go up at this level as well. Associate stylists are required to have $1,000 in personal qualified volume sales. Team leaders have to have multiple qualified legs.

Team Directors
Directors are required to have Star stylists in their legs. The number of stars and star legs determine what level of director. The total qualifying volume (whole organization not just the first three levels) must be balanced across legs, so no one leg can account for 50% of the TQV. $12,500 of the group qualifying volume must come from your non-star group.

Executive Directors
Executive directors require everything that team directors do but they must have a newly promoted star stylist from their first level every rolling 12 month period.

compensation plan
It’s really really complicated

Return policy has important exceptions

Samples and display jewelry are treated differently when it comes to returns. Given that you must purchase starter packs to become a stylist, be careful with the amount and kind of jewelry purchased at these prices because it may not be possible to return them.

“Returns or exchanges are accepted on unworn items in resalable condition (excludes sale items, Display Items and Business Supplies, which are Final Sale).”

[1] [2]

LuLaRoe: Cost to Get Started

LuLaRoe: Cost to Get Started

Lularoe is a multi level marketing company which sells clothes. They are known for their leggings which come in limited edition patterns. Consultants sell clothing at parties. What does it cost to get started? By looking at training documents created by independent consultants it appears […]

MLMs Break the Internet

MLMs Break the Internet

If you heard about something that seemed like it might be too good to be true, your first reaction would probably be to Google it. Maybe if you’re really suspicious, you might add “reviews” or “does it work?” to your search. We trust the internet […]

LuLaRoe Leggings

LuLaRoe Leggings

Fun and Unique patterns

LuLaRoe leggings come in a variety of fabrics (manufactured abroad). Rarer patterns are dubbed “unicorns.” Consultants may not have more than one of a given pattern.

They are often described as comfortable, modest, and of good quality with a great fit.

“Like butter”
The leggings are often described has having a buttery texture that is super soft.

Common complaints

No returns and difficult exchanges
Most consultants appear to offer exchanges with the merchandise they have in stock, but they don’t allow returns.

Inconsistent quality and fit
Products are made of different fabrics, in different countries, and are of varying quality. Some of this appears to be part of the interest in LuLaRoe sales model (scarcity of certain types of fabric shiny vs tshirt etc), but it also manifests in many customers being unhappy with quality and hit or miss on particular fit.

Inconsistent pricing
Different leggings and different consultants will sell at different prices. Also, prices may be different in different social networks — if a lot of people are selling then prices will go down. Check out ebay for lower prices (here’s pricing for sold leggings on ebay to give you an idea).

ebay listing

Check out these other Leggings

American Apparel
These leggings have great patterns and feel good that American apparel is made in the USA (sweatshop free!). Prices are a bit higher than LuLaRoe but quality is consistent, and returns are easier. Free shipping for purchases over $50.

Zella Leggings from Nordstrom
When found on sale their price point is similar to LuLaRoe but their quality is outstanding. Consistent quality, fun patterns and colors, and larger sizes. Free shipping and free returns.Check out the reviews (good and bad), and the transparent pricing.

Society6 Leggings
Check out Society6 for the best patterns. Though prices are a bit higher each and every purchase goes to support the artist who created the design (learn more). Products are produced on-demand to avoid waste and keep the business sustainable. Support artists and wear awesome clothes!

ModCloth Leggings
Always cute and unique with great prices, ModCloth has tons of fun patterns and colors in sizes which range from XS-4X. Check out outfit photos to see the fit on real women in your size, and reviews which comment on fit and feel. Free exchanges, easy returns, and hundreds of reviews from women of all sizes.

Before purchasing, consider that your purchase supports the business practices described here. In addition to the information above, LuLaRoe has an incentive structure that leads us to recommend considering alternative products.

American Apparel Leggings are made in the USA
American Apparel Leggings are made in the USA
Awesome reviews, free shipping and returns
Awesome reviews, free shipping and returns
Society6 Leggings have awesome designs and each purchase pays an artist
Society6 Leggings have awesome designs and each purchase pays an artist
ModCloth Leggings have reviews and photos from women of all sizes.
ModCloth Leggings have reviews and photos from women of all sizes.