LuLaRoe is making some women rich, while thousands struggle to make a profit
LuLaRoe, the retailer known for its brightly patterned leggings and a cult following among millennial moms, has exploded in popularity. That's making it nearly impossible for some of its sellers to turn a profit. The company relies on "consultants" to sell the clothing it makes at parties held in their homes. Some — including one profiled by Business Insider last year — say they've turned it into a six-figure income job. But the number of consultants selling LuLaRoe products has doubled since then, from 38,277 in September to 77,491 in February, according to data obtained by Business Insider. That's making it harder for the sellers — who buy the merchandise from LuLaRoe — to turn a profit. It's just another in a string of problems that LuLaRoe is facing after its explosive growth. The company is also dealing with a manufacturing problem that has it facing complaints from thousands of customers who say its popular leggings are tearing apart in as little as a few hours of wear. More than 80% of LuLaRoe's representatives generated less than $5,000 in sales last month, including 10,834 who sold nothing, the data show. The average representative sold about $3,387 of LuLaRoe in the month. CBS MoneyWatch reported some of these details earlier. LuLaRoe is a private company and does not disclose data on representatives' estimated profit.
The company requires an initial investment of $5,500 in inventory to become a consultant, but according to one estimate, based on figures from a LuLaRoe seller, representatives must invest at least $15,000 in inventory and sell it at a markup of more than 40% to turn a profit.
LuLaRoe disputes this claim. The company says its consultants can turn a profit on less than $5,000 in monthly sales, and noted that it gets repeated re-orders even from small sellers and has a 90% retention rate among its sellers.
Some representatives say it's been getting harder to make money selling LuLaRoe because they are competing with so many more sellers now, and they have to run promotions to attract customers — which is a drain on profits. Some newer consultants have also complained that they are getting repeat patterns and damaged goods in their shipments from LuLaRoe.
Christina Hinks, 36, of Cary, Illinois, said she got a shipment of 290 products from the company in December and most of the dresses, leggings, and shirts were made out of the same Aztec-printed material. Representatives don't get to select the products they sell.
"I got 290 pieces of redundancy. They must have been on an Aztec kick," she told Business Insider. "I'm in Chicago. There's no way I could sell that here."
She said she ended up selling the entire batch of products to another representative on the West Coast, where the Aztec print is more popular.
Where the real money is
The most lucrative route at LuLaRoe is to manage a team of sellers, which is how representatives earn bonuses from the company.
Representatives try to recruit their friends and family to sell LuLaRoe with them, so they can be promoted to the status of team leader — what the company calls "sponsors" — and eventually to even higher leadership positions.
About 17% of LuLaRoe representatives qualified as sponsors — meaning they had at least one other representative under them and sold a minimum of 175 products per month — in 2015, according to a LuLaRoe income disclosure statement. Sponsors earned an average bonus of $4,751 per person that year.
The share of qualifying sponsors fell to roughly 12%, or 8,955 people, in February of this year, according to data reviewed by Business Insider.
Higher levels of leadership come with higher bonuses. So-called "coaches," for example, earned an average bonus of $210,338 in 2015. In February, 284 people out of 77,491 representatives qualified as coaches and 46 people earned the highest rank of "mentor."
Overall, only 13% of representatives were paid bonuses in 2015, according to a LuLaRoe income disclosure statement.
About 71% of those representatives earned an annual bonus of $1,000 or less. Roughly 3% earned bonuses of between $7,500 and $50,000.
So it's possible to make a lot of money selling LuLaRoe, but only a tiny fraction of representatives make it to the top, according to the data available.