The untold truth of LuLaRoe

LuLaRoe has become a cult favorite clothing brand in America over the last few months. And their popularity, fueled by the way they are often sold — in Facebook events and in-home pop-up boutiquesmakes women fight to get their hands on them.

As a friend of mine puts it: "There is something to be said about the fact that grown women are swearing, crying and threatening people over leggings with cats on them." Here's a look at the LuLaRoe phenomenon.

A grandmother grew LuLaRoe into a billion-dollar business

DeAnne Brady Stidham is the Corona, CA mom and grandmother who founded the company in 2012 with her husband Mark. She named the company LuLaRoe after her three oldest grandchildren, Lucy, Lola, and Monroe.

The company is perhaps best known for its leggings, but the impetus for the business started with a skirt and social media. Stidham said on a video on her website that she had designed a maxi skirt for her daughter Nicole, and after her daughter posted a picture of the finished skirt on Instagram, her friends wanted their own skirt.

Stidham said she started with 44 orders for skirts, and sent them to a professional to make them. Then she had several hundred more made, and sold 300 skirts in three days at in-home parties she held, which grew to several hundred more. It was her husband Mark who suggested making this into a real business.

A spokesperson for LuLaRoe tells me that Stidham "has had over 30 years of experience selling dresses and clothes through home parties" as well as being a "top producer" in the "direct sales and network marketing industries for over 15 years." She had wanted to have her own clothing line for years, according to the company website.

LuLaRoe has boomed ever since. They are a privately held company, so they don't release exact sales numbers, but a spokesperson for the company said that they "joined the $1 billion + club" in 2016.

The Mormon founder built LuLaRoe around the concept of fashionable modesty

The fashion site Racked writes that "modesty" was behind the brand. "As a member of the Mormon faith," the site explains, "Stidham wanted to create comfortable clothing that was also modest for women who were unsatisfied with clothing options at traditional retailers."

The article notes that "LuLaRoe is incredibly popular in the modesty movement," and sites like the Modern Modesty blog and others praise the clothing for having "modest but cute" styles. But the popularity of the brand was spread to women through all walks of life, Racked notes.

LuLaRoe fans say the leggings are "like butter," and they go crazy for the "unicorn" pieces

While some critics snipe that women look like toddlers in the clothing, others adore the fashions.

My friend Cathie Blackwell Havlin of North Haledon, NJ tells me the leggings are "like butter," a common phrase LuLaRoe fans say when it comes to the softness of the clothing. She also finds the Randy baseball shirt "absolutely fabulous" and praises the Irma top as going well with "leggings, jeans, a scarf or a sweater/cardigan layered look."

One of the things that women get excited about regarding LuLaRoe are the "unicorn," (as in, rare) clothing items. Since LuLaRoe has limited runs for each item with a maximum of 5,000, the company told me, and, some as few as 2,500, Certain popular prints are very hard to find, and very much in demand. Some of the leggings, which typically go for around $25, have reportedly been resold on eBay for as much as $100 each.

LuLaRoe includes tall and plus-size women

Unlike other clothing lines which seem to treat big and tall women as an afterthought, LuLaRoe sells all of its items in what it calls "tall and curvy" sizes, as well as regular sizes. This has pleased those who have otherwise had a hard time finding clothing to fit them.

A spokesman for the company tells me: "We have a great presence in the tall and curvy category and we feel that every size should feel confident and beautiful." The spokesperson also says that Stidham "wants every person to feel as beautiful as they are, and to be comfortable, secure and confident."

It's crazy expensive to sell LuLaRoe

LuLaRoe is a multi-level marketing company — just like Amway, Pampered Chef, and Mary Kay. And the business is targeted to (and typically sold by) women — particularly millennial moms who would like to earn money while staying at home with the kids.

But unlike many other MLM companies, which generally cost a few hundred to get started, LuLaRoe reportedly requires an investment of somewhere between $5,000 and $6,000, according to published reports. I asked LuLaRoe about the amount to join, but they wouldn't confirm the exact figures. A spokesman for the company explained that "LuLaRoe is a privately held company and we do not release financial information," and that this amount is "confidential to the Independent Retailers."

The spokesperson also told me: "LuLaRoe differs from many other brands and companies, wherein our Independent Retailers actually own their inventory. We want our Independent Retailers to have sufficient initial inventory to be successful. This creates a unique barrier to entry, recognizing that this business takes a high level of commitment and hard work. We continue to have a waiting list of people excited to join LuLaRoe."

Multi-level marketing means getting your friends and family to buy and sell stuff

While the company does not require its fashion consultants to recruit others, as some MLM companies do, the way to make real money and move up the ranks with LuLaRoe is by getting other people to work under you, because you make a percentage of their sales.

So that can mean hitting up those you know — not just to buy your clothing, but also to sell it. Also, LuLaRoe suggests you make a list of 50 people you know who can host your parties. If you've ever had friends or relatives be involved with multilevel marketing, you know this can be very annoying. In addition, such pity purchases, as they are called, cannot sustain a business.

The way that LuLaRoe clothing is sold takes time and energy to run online auctions or in-person sales. Critics also snipe that it's too much work for the buyer. Scary Mommy writes that the process is too difficult for consumers. "If you want me to buy your s***, LuLaRoe, make it easy," Christine Burke says. "I jump through enough hoops during the day; don't make buying leggings into a 12-step process involving a cat fight, Paypal, and an invoice that has to be paid within 13 minutes or my prized one-of-a-kind Buzzard print leggings will be passed on to the next buyer."

The writer also complained about being added to LuLaRoe Facebook groups without her permission. "I tried to leave a LuLaRoe group three times last week. Three times, people," she said. "Forget Trump and his wall. Just station a bunch of LuLaRoe consultants on the border. Ain't no one getting into the country on their watch, yo."

The FTC says the chances of success at any multi-level marketing company are slim

LuLaRoe is hot now, and women have made money selling it, and many people love the clothing. But when it comes to MLM companies in general, the Federal Trade Commission is skeptical. An article on their website says that 50% of MLM salespeople leave the company in one year, and 90% within five years. It also says that while 39% of small businesses earn a profit "over the lifetime of the business," the reality is that "less than 1% of MLM participants profit." The article claims that "MLM makes even gambling look like a safe bet in comparison."

The consultants have to pay for everything out of their own pockets

Not only must each consultant cough up some cash to get started and pay for inventory, but they have to pay for everything associated with marketing LuLaRoe. The company's own income disclosure statement says that "The expenses a Consultant incurs in the operation of the Consultant's LuLaRoe business can vary widely and can be several hundred dollars or thousands of dollars annually." This isn't exclusively the money it takes to become a consultant, but could also include "advertising and promotional expenses, training, travel, telephone and internet costs, business equipment, and miscellaneous expenses," according to the company's website. That means paying for hangers, shipping and handling costs, boxes, website costs, and everything connected with selling LuLaRoe products.

Also, since the consultants are independent contractors, according to the agreement they sign to work selling LuLaRoe, they will have to pay self-employment taxes on their earnings. They also do not qualify for unemployment insurance nor do they receive health insurance.

​ The vast majority of LuLaRoe consultants do not make bonus money

People who sell LuLaRoe can make money without bonuses, but much of their compensation plan talks about the bonuses. But by LuLaRoe's own admission, over 78 percent of its consultants earned no bonuses in 2015. And the website says that "the average annual bonus payments made by LuLaRoe to ALL U.S. Consultants at all ranks (which includes Eligible and Ineligible Consultants) in 2015 was $91.65, and the median annual bonus payments made to ALL U.S. Consultants at all ranks in 2015 was $85.80."

The company also states that "the average annual bonus payments made by LuLaRoe to Eligible U.S. Consultants at all ranks in 2015 was $424.81, and the median annual bonus payments made to Eligible U.S. Consultants at all ranks in 2015 was $397.69." While this does not count the money consultants make from simply selling the clothing, it is still a sobering set of numbers.

The site PinkTruth.com broke down how hard it is to make the bonus money, noting that people reportedly have to order at least 175 pieces of clothing in a month to be eligible, which works out to about $3500 worth of orders each month. That's a lot of merchandise to sell at once.

LuLaRoe gets an F from the Better Business Bureau

The company reportedly added 33,000 consultants in 2016, and, if the recent negative feedback online is any indication, it appears that the company is experiencing growing pains. The Better Business Bureau's website shows that as of March 2017, they have received 216 complaints about the California-based company — most in the past 12 months.

And while many of the consumer reviews on the BBB website are positive, 40% are negative, complaining about everything from the quality of the clothing to the way they treat their consultants.

I asked the company if they wanted to comment on whether they were experiencing growing pains, and a LuLaRoe spokesperson said: "We feel very fortunate to have experienced the growth that we have. That growth certainly has not come without its challenges, for which we're grateful. It's humbling and with it we know comes a great responsibility. We have a commitment to those that count on us and want to provide them with strong systems and service. We strive every day to be better than we were the day before."

Some LuLaRoe consultants have vented on Glassdoor

There are a slew of negative reviews on Glassdoor from LuLaRoe fashion consultants, some of whom gripe about the company growing too fast, and there being too many consultants in their geographic region. In addition, consultants are not allowed to choose the patterns in their inventory, and that has become an issue for those who get stuck with patterns such as these. There are also some positive reviews as well.

A spokesperson for LuLaRoe told me that while consultants "cannot choose colors or prints, this is part of the magic of LuLaRoe, and something our Independent Retailers and Consumers love!" The company continued, saying that "this model continues to be disruptive in the marketplace and creates excitement and anticipation."

​There is a rising number of complaints about the quality of the leggings

Part of the growing pains that LuLaRoe is experiencing is with the leggings. NBC's Today Show ran a report in March 2017 on the issue of the quality of the product, and how many women were noticing holes in the leggings these days.

I spoke with Julie Dean of Medford, MA, who is an administrator at the Facebook group LuLaRoe Defective/Ripped/Torn Leggings And Clothes. She told me she was "a huge LuLaRoe fan," owning at least 50 pairs of leggings, shirts, dresses, skirts and sweaters." But she said she recently has noticed problems with the clothing.

Dean told me she found "defects in four out of the last six pair" she purchased. "One I never even got on before my finger went through the fabric," she said, "one had one leg at least two inches shorter than the other. One had blowouts all through them by the end of the day; the other were sized so small I gave them to a nine year old. That in itself tells me the defect rate is much higher than they are saying." She said the Facebook group is about making the "corporate office accountable for the defects in the clothing they are producing."

Some LuLaRoe sellers are even advising people to treat the leggings like pantyhose and be careful with them.

I asked LuLaRoe about this issue, and a spokesperson responded: "We're disappointed when anyone is ever not completely satisfied with their experience, and we're trying to get to the bottom of this. If we can find a way to improve something to make it a better product that's what we're always aiming to do. We stand behind our brand and the products we make. We have very strict quality guidelines that we adhere to. Our products go through a third-party auditing company to ensure we are producing the best products possible. Our damage rate is far less than the industry standard. We looked closely to determine if this is a widespread production problem or specific product failure, and our results showed that is not the case."

​The company's ordering software allegedly overcharged customers

There's now a lawsuit against the company over their "Audrey" ordering system, which collected sales tax when they shouldn't have been. The lawsuit, filed in federal court in February 2017, states: "Defendant overcharges buyers up to 10.25% every time a consultant who lives in a jurisdiction that taxes clothing makes a sale where delivery is made to a jurisdiction that does not," and that LuLaRoe "is aware of these tax collection and assessment procedures and knows how to assess sales tax on its clothing sales."

I asked LuLaRoe about this, and their spokesperson said: "We are fully aware of this issue and have invested significant resources to address it. A former technology vendor had a software failure that misidentified the accurate location of certain customers. When affected customers have contacted us to identify their proper location, we have immediately issued them a refund for incorrect sales tax collection. In addition to contracting a new point of sale vendor to accurately identify sales tax, we are proactively working to ensure that all affected customers are refunded for incorrect sales tax collection. We have an independent, dedicated account of all sales tax collected that is segregated from the operating funds of the company. LuLaRoe is committed to our thousands of passionate Independent Retailers and consumers who love and support our quality brand."

​What's next for LuLaRoe?

If the company successfully resolves the complaints some people have against them, they could have a great future due to the popularity of their clothing.

A spokesman for the company told me, "We make timeless silhouettes and we are always coming up with great additions to our line. The future is bright." In addition, they passed along these quotes from founder DeAnne Stidham:

"If I could share one thing with your readers it would be this — love yourself. Being at the age that I am, I've watched every aspect of emotions that women feel, and felt every aspect of emotions that women go through. I try to encourage women to love themselves and their bodies. I want them to smile at themselves when they look in the mirror and say, "Dang! I look good today!" If they are able to walk out the door holding their head a little higher, feeling good about who they are, maybe they will brighten someone else's day, lift others where they're able to, strengthen the relationships in their own life and find more happiness."

In addition, fashion trends can change on a dime, as anybody who has a tiered prairie skirt in their closet can attest to, so LuLaRoe will have to keep up with trends to stay successful.