Chances are, if you’ve been on Facebook lately, a friend or family member of yours has been pitching their Lularoe business venture. The multi-level marketing model allows women to sell a variety of clothing on their own.
“LulaRoe exists to provide an opportunity for people to create freedom by selling comfortable, affordable, stylish clothing, and offering its Retailers the independence to set their own pace and schedule.” the site reads. While the company boasts freedom and independence when it comes to making your own money, stories are now starting to come out that being a Lularoe consultant may cause more harm than good.
Two new class-action lawsuits have been filed against the retailer, claiming that the company is running a pyramid scheme. To make matters worse, the lawsuits are alleging that Lularoe has been convincing women to max out credit cards, spend tens of thousands on merchandise, and even sell their own breast milk to afford the clothes.
The lawsuit arguing that the company’s main source of income is not, in fact, from the sales of the clothes to customers, but by all the money the sellers spend on inventory.
“Consultants are instructed to keep around $20,000 worth of inventory on hand, and are inundated with the phrase ‘buy more, sell more,'” read the lawsuit. “These incentives mean new consultants are aggressively pressured to continue purchasing wholesale inventory even when the inventory they have is not selling, is unlikely to sell, or is piling up in their garage.”
Even when the sellers did make money from selling the clothes, Lularoe encouraged them to use those earnings to buy more goods from the company. Apparently, Lularoe offered bonuses to those who purchased the most inventory, regardless of how much they actually sold.
Both lawsuits argued that the company targeted women (mothers in particular), leading them to believe that they’d be able to make money from home. However, Lularoe apparently will not accept any unsold clothes, causing the women involved to lose thousands of dollars.
Because so many women have been lured into the Lularoe business venture, it’s extremely difficult to sell enough clothes to make decent money.
“The vast majority of consultants sitting at the bottom of defendants’ pyramid were and remain destined for failure and unable to turn any profit. Some resulted in financial ruin due to the pressure to max out credit cards and to take loans to purchase inventory.” the October 23rd lawsuit read.
One of the plaintiffs said that she was encouraged to take out multiple lines of credit and that one Lularoe “mentor” encouraged the selling of breast milk to afford the clothes.
The initial Lularoe policy allowed sellers to return their unsold items for 90% of its value, but the policy changed in April of 2017, letting clients return the items for 100% value, including shipping costs.
Then, without warning, the policy went back to the 90% value return. However, the plaintiffs from the lawsuit filed on October 13th are claiming that they received no return whatsoever.
“We decided to end the [100% refund] when it became evident that a good number of retailers were abusing the program by returning product in extremely poor condition and providing inaccurate claims, as well as a retailers using it as temporary solution to struggles in their business,” Lularoe stated. “So our longstanding Returns on Cancellation of the Agreement policy, which we believe is generous, remains unchanged.”
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