At least 24 women who sold products through LuLaRoe, a women’s apparel company that relies on independent distributors to sell products (not unlike Avon, for example), have filed for bankruptcy in the past two years.
Buzzfeed reports that many of the women and couples who filed for bankruptcy experienced a “quick downward fall” in profits around 2015. One woman who filed reported that while she made a little over $61,000 in profits in 2016, from January to July of 2017 she only made around $10,547. Many of these woman also possess credit card debt from investing money in the brand.
To become a LuLaRoe salesperson, you’re required to buy what the company calls “onboarding packages” full of clothing, which can cost anywhere from $4,925 to $9,000, CBS News reported. LuLaRoe also recommends that salespeople keep about $20,000 in inventory at any given time. LuLaRoe and dozens of other companies use this model to lure in women with promises of owning your own business and being your own boss, but women who sign up and invest thousands of dollars often lose more money than they gain.
CBS News also reported that LuLaRoe salespeople say they are punished for voicing concerns about the company, such as issues with its sales model or defective merchandise.
Sales reps who have publicly raised concerns about LuLaRoe’s business practices have found themselves punished by the company, which refuses to honor their orders, sources said. LuLaRoe encourages salespeople to report fellow vendors who speak negatively about it to its compliance department, they said.
“... always know that we are fierce defenders of the Culture of LuLaRoe,” Stidham wrote in a Jan. 10 email to consultants. “If you see something not in line with the culture, see it as your responsibility to report those things.”
Now, LuLaRoe is facing a $1 billion class action lawsuit from women who claimed the company was running a pyramid scheme. The plaintiffs in the suits argue that the company constantly encourages vendors to buy more merchandise, but then people have difficulties actually selling that merchandise because of a saturated market.