Lularoe is a clothing company based in Corona California. They have been designing and producing their own line of fashion since 2013. Rather than using traditional avenues, Lularoe uses a Network Marketing downline of ‘retailers’, to sell their clothes.
Here at The Finance Guy, we believe that you can’t make money with MLM, but we’ll take a closer look at Lularoe to see if they are the exception. We want to know if becoming a Lularoe retailer is a money making opportunity, or just another MLM.
What is the Lularoe Opportunity
We looked at the official Lularoe Opportunity, and we learned that if you become a retailer, you can:
Be Your Own Boss
Have More Time for What Matters
Live the Best Life
Achieve Your Dreams
It all sounds wonderful, but we still don’t understand how it all works, so we looked at this video:
This video got some alarm bells ringing! First is the fact that it costs $5,000 - $6,000 to get started with Lularoe. Now that might not sound like much for a new business, but in MLM terms, it is very expensive!
If the high start up costs aren’t enough, we then learn that you need to spend even more money on set up costs such as hangers, clothes racks etc. Don’t have that sort of money available? Well the video suggests that you simply find the money by borrowing from friends and family, or using a low rate credit card.
To us, this is a major concern! They are suggesting that you get into debt to start your Lularoe reailer business. It’s important to understand that if you borrow money, you are increasing your risk. After all, if your Lularoe business doesn’t succeed, you’ll still be in debt
The video goes on to explain that the average Lularoe retailer makes their money back within 3 - 4 months. She also claims that she herself broke even on her money much faster than that! It certainly sounds appealing, however we did find it interesting, her personal link is no longer valid. We therefore get the impression that this Lularoe retailer is now out of business
We shouldn’t take this one retailer as the rule, so we thought we better take a more detailed look at the Lularoe Opportunity
How Do You Make Money With Lularoe
To understand how retailers make money, we thought we better look at the compensation plan, or as they call it, the Lularoe Bonus Plan. The video told us that retailers can make $16 - $17 per item sold. That is assuming that clothes are sold at the full SRP and does not include any other costs of sales
Like all MLMs retail sales are not the only way to make money with Lularoe. You can also generate an income from building a dowline and earn commission from the activities of your recruits.
Before you can earn any ‘residual commission’, you need to qualiify as a ‘Lularoe Sponsor’. To do this you need to complete at least 10 pop-up boutiques, and generate at least $10,000 in sales. To some, this may look like they want you to grow your business before you sponsor others. To others it may look like Lularoe is tempting retailers to spend up to $10,000 on inventory to promote themselves
If you do manage to qualify as a Lularoe sponsor, then you can earn a 5% commission on the wholesale price of any clothes bought by other retailers you invite to join Lularoe. But you could earn even more!
If you continue to grow your Lularoe business (and have those you recruit do the same), might make it to the level of ‘Trainer’. At this point you can also earn 3% on the purchases of your second generation, or the friends of your friends who are recruited.
To become a Lularoe trainer, you need to meet the requirements shown below:
If you continue to grow your Lularoe business, you might qualify to be a ‘coach’ and earn an additional 1%. Keep going and you could become a ‘Mentor’ and earn even more. We’d love to say that we understand how much you can earn at this level, but the best we can offer is this diagram:
There’s also a leadership pool, and a fast start bonus, but you can read all about them in the bonus plan. To us they were uninteresting. What we really wanted to know is, does this opportunity really work.
How Much are Lularoe Retailers Earning
To find out how much Lularoe retailers are making, we looked at the 2016 Lularoe Income Disclosure statement. The commissions paid in 2016 are shown in the table below:
Before we look at the above table, notice that 72.63% of Lularoe retailers did not qualify so earned absolutely no commission at all in 2016. Another 27.33% Earned less than $45,000. In other words 99.96% of Lularoe Retailers earned less than a full time income in 2016
As we continue to look at the income disclosure, things get a little confusing… For example, if we add up the ‘eligible retailers’ in the ‘Sponsor’, and ‘Trainer’, categories, we get 117.72%. If we add up all the eligible retailers, we get 120.24%. It could be that our math is off, or it could be that Lularoe is trying to make their opportunity look better than it really is
While the data available is inconclusive, we are left with the opinion that most Lularoe Retailers are losing money. Even by their numbers less than 1% earn a full time income. The most prominent video we could find about Lularoe was from a retailer who quit just 2 years after posting it.
Why is it Difficult to Make Money With Lularoe
We think that the reason it’s hard to make money with any MLM, is because it’s a flawed system! There is no doubt that many network marketing companies are very profitable, but that’s not what we are looking at. Our research suggests that less than 1% of people who become Lularoe retailers will turn a profit.
Even though Lularoe might be making a good profit, that does not mean that you can make money by becoming a retailer. At the end of the day if you join any MLM, you become a customer of that company, not a business partner. Their goal is to sell you product, not to make you a business partner
Another issue we have with Lularoe, is that as far as MLMs go, this one is expensive. It costs a lot to join, and it appears that it costs a lot to maintain. While there is nothing in the documentation, we have found evidence that Lularoe retailers are investing a lot of money in their ‘pop-up’ stores. In fact several have gone so far as to purchase trucks such as the one shown below:
What we see when we look at Lularoe, is a very risky venture. To sign up, you’ll need to invest at lease $5,000. Then to make the the business work, you might end up purchasing a truck, paying to have it painted and fitted to a ‘mobile pop up’. Even if you do everything that successful Lularoe retailers do, you still have to consider that only 1 in 2,500 Lularoe retailers earns a full time income
Should You Join Lularoe
The only reason to join any MLM, is if you are already using their product and are happy to refer them to others. At the end of the day, network marketing is sales, if you’re not looking for a sales job, then this isn’t for you!
If you are a salesperson, and you want to sell clothing, then we suggest that you consider other options before committing to the Lularoe opportunity. Even with their inconclusive numbers, less than 1% of Lularoe retailer are making a full time income. Let’s not forget that this income doesn’t include expenses. It’s quite possible that most Lularoe retailers lose money
As always we welcome your feedback in the comments section below. We'd love to hear what you think about Lularoe, especially if you can share your personal experiences with the company
For more posts like this, look at our list of mlm reviews.