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? 

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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.

The US Government’s Federal Trade Commision has more information about pyramid schemes to help.

How to spot a Pyramid Scheme:

  • Large profits are based primarily on recruiting others not on the real sale of goods.
  • Recruites 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 are only occuring between people inside the structure or to new recruits. Check to see if price is inflated.
  • Commissions for recruiting new distributors, no legitimate product or service, OR separate up-front membership fee (having a product/service doesn’t remove all danger).

    Pyra

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
  • The inventory is encouraged to be passed inside members of the structure because inventory purchased from LuLaRo is random (you cannot choose the patterns, sizes, etc). Or recruits are encouraged to purchase more in order to get more chances to get the more rare 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).
  • Though there are not direct commissions for new distributors, compensation is based on the number of distributors on your team, and bonuses are paid for reaching the next the next levels sooner, each require recruitment. In this way, there are indirect commissions for recruiting new distributors.
  • There are costs to join. Inventory, and materials for selling LuLaRoe (“starter kit”) are rolled up and you cannot become a consultant without purchasing a starter kit.

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.

What do you think?

More Resources

Investopedia: What Is A Pyramid Scheme

How Pyramid Schemes Work

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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.
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