We need your help! We’re looking for earning or income disclosure statements from the following companies: Paparazzi Accessories Senegence (Lipsense) Younique These documents do not tell the whole story. However, this data helps people decide if it makes sense to join and sell the products. […]
Essential Oils can be dangerous. People selling the essential oils for companies create articles and guides in order to sell more oils. This can make it difficult to find good truthful information about safe ways to use oils. Additionally, members selling dōTERRA and Young Living […]
Pyramid Scheme Allegations
CBS News story with detailed information around the $1 billion lawsuit filed in October alleging LuLaRoe is a pyramid scheme. Also references LuLaRoe’s own legal action against critics.
Fortune.com article explaining LuLaRoe and referencing the lawsuit filed in October alleging LuLaRoe is a pyramid scheme.
Teen Vogue’s includes the court documents here:
Additionally, previous legal battles over product quality and payment processes were also reported on by CBS News.
Today reported on product quality lawsuits
LuLaRoe also sued for improperly collecting sales tax
Local news outlets also reported on the LuLaRoe lawsuits. Please comment with additions to our roundup! Thanks.
According to the official dōTERRA compensation plan, advocates make profits on the dōTERRA items sold to retail customers or preferred members. Profits are the amount sold over wholesale costs. Additionally, advocates can make money on bonuses paid based on the wholesale purchase volume of the […]
It’s hard to tell if Du North is a pyramid scheme… and that’s not a great sign. Du North Designs sells leggings directly and through distributors. Most of their business and their stated business model is “Multi Level Marketing.” MLMs share many qualities with Pyramid Schemes […]
BuzzFeed and Inc Magazine reported changes to LuLaRoe’s return policies which is bad for consultants.
People must buy lots of inventory to get started selling with LuLaRoe (see: Getting Started with LuLaRoe). This seems okay because the company had a return policy which claimed to cover 100% of returns. However, it was already full of fine print and it was pretty easy to get into a situation where sellers were losing thousands. The return policy is now even more strict, covers less, and isn’t a 100% refund.
Check out the original articles for more information
LuLaRoe is not a great option to join if you’re looking to start a business. Be sure to do a lot of research about LuLaRoe. Many people have lost a lot of money with LuLaRoe. Also check out: Is LuLaRoe 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 […]
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 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. 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.
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:
See Also: 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 […]