LuLaRoe, multi-level marketing company that is known for colorful leggings and geometric patterns dresses, claims that it was based "on the driving force, to help other people succeed."
It is built on a structure where its so-called consultants buy your inventory at wholesale price and then sell it for retail sale as independent sellers. Business has attracted a large population of military wives and housewives. In contrast to the Tupperware party in 1950, LuLaRoe consultants do not necessarily need to make home visits, as Facebook group has become the main method for the sale of apparel LuLaRoe. If you've never been personally invited to LuLaRoe frenzied group on social networks, you definitely know people who have.
In 2017, the company had as many as 77,000 vendors, most of whom were women seek to cash in on the brand promise that they would "have the freedom and flexibility that comes from building your own business at your own pace." But a new study published April 30 says quite another brand story about LuLaRoe – one where some sellers are facing financial ruin.
A study conducted by the Truth in Advertising (Tina), Connecticut-based hour, which analyzes the deceptive marketing techniques, found that more than 100 consultants LuLaRoe personally filed for bankruptcy since 2016. It is reported that this is partly due to the strict regulations and rules of the company with respect to its fee structure, as well as the fact that the revenue potential for consultants & # 39 is much lower than it is made to appear. Vox reached for LuLaRoe for comment and did not hear.
To join LuLaRoe, consultants should begin to spend about $ 5,000 for a "set of initial order", which comes with 248 pieces of clothing. Consultants should sell these items, but also need to buy additional monthly points to be eligible for the bonus potential. And additional costs to run the business LuLaRoe how to pay for clothes rack and hangers, not to mention the time spent.
One of the main problems TINA found that LuLaRoe products have become almost Struggling advisers say their market is crowded, as LuLaRoe and its sales force had been aggressively recruiting more people to join the «unsellable.» – in the structure of direct sellers who recruit Become "and" higher can earn commission from the salaries of their recruited seller, called "downline." According to Tina, there are too many sellers and not enough buyers. Some consultants Tina stuck out as much as $ 15,000 in the amount of unsold clothes.
Tina also found that LuLaRoe uses deceptive marketing practices and making misleading statements about how sellers can become "social entrepreneurs sale.» LuLaRoe promotes financial freedom in their marketing materials, and argues that there are thousands worth Dollars & # 39 ; bonuses that will be made when consultants climb seller tier companies. Tina, however, showed that the average annual bonus paid to sellers LulaRoe was actually only $ 92. It also found that many sellers do not even have enough money to get back to what they originally invested in LuLaRoe. Tina finds that retailers are likely to end up bankrupt than to move up in tier LuLaRoe seller.
The investigation Tina, who found LuLaRoe dealer bankruptcies in 33 states, with the & # 39 is probably the first to illuminate the problematic messages and often misleading LuLaRoe practices. Company label "scam" on Bloomberg and "pyramid" disgruntled former consultants. In January, Washington State has filed a lawsuit against the company for deceptive practices, accusing LuLaRoe focus on recruiting instead of actually sell their products.
«LuLaRoe tricked consumers into buying into their pyramid flattering requirements of high profits and compensation for unsold goods," said Washington Attorney General Bob Ferguson Business Insider. "Instead, many Washingtonians lost money and left piles of unsold goods and unfulfilled promises from LuLaRoe. It's time to spend LuLaRoe responsibility for his deception. "
There are more than a dozen private lawsuits from LuLaRoe sellers still currently waiting for, according to Bloomberg, and the company has filed a lawsuit against unpaid suppliers who claim that it uses front companies to hide their wealth from creditors (the company denies these statements).
With all the bad press, many sellers prefer to leave LuLaRoe, in what was called the mass exodus. The company is currently reported to be up to 35,000 merchants. But these vendors have discovered that it is not easy to just walk away they will not be returned in full & # 39; the amount that they spent with the company's return policy. Some of them also complained that they were owned by a refund within a few months, even after they have completed all the necessary steps to close your business.
All this is clear evidence that there is a problem in LuLaRoe. Even though the company insisted in February that he was turning over a new leaf, to calm misfortunes consultants investigation Tina says many people still fall victim LuLaRoe false promises, and to pay for it dearly.
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