LuLaRoe: Tacky Leggings, Pyramid Scheme, or Both? | Is Multilevel Marketing a Legitimate Strategy?

hello this is dr grande today's question is can i analyze the company lularoe and multi-level marketing companies in general the circumstances behind some of the difficulties with lularoe were explored in a docu-series on amazon called lulu rich just a reminder i'm not diagnosing you by this video only speculating about what could be happening in a situation like this if you enjoyed this video please like it subscribe to my channel and consider supporting me on patreon i will put the link to patreon in the description for this video so first i'll look at the background in this case then i'll offer my analysis lularoe was incorporated in 2013 by a married couple dean brady and mark stidham the company is based in corona california both diane and mark are members of the church of jesus christ of latter-day saints which i will refer to as lds dan was from a large family she was number 10 of 11 children she had a history of being an entrepreneur she would purchase and resell clothing mark was also oriented toward being in business for himself the couple had met on an airplane and would eventually marry they would have 14 children several of them adopted some of these children as well as other relatives worked in leadership positions in lularoe the name lularoe actually came from three of the grandchildren of deanne and mark the basic structure of lularoe went something like this they manufactured various items of clothing maxi dresses were popular early on and then in 2014 they added leggings to the product line it would become one of their more popular products lularoe would have retailers which were also called fashion consultants or distributors purchase products to get started in the business the minimum startup cost was around five thousand dollars these retailers would sell directly to the public as well as attempt to recruit other distributors this is where we get into the whole multi-level marketing component i will refer to multi-level marketing as mlm lularoe offered an arrangement that was appealing to women who wanted to earn full-time income working part-time most of the retailers were white women with families the company viewed itself as empowering women lularoe started growing rapidly adding thousands of retailers during their first few years in operation in 2015 the company earned 70 million dollars in revenue by the end of 2016 they had generated 1.3 billion dollars and had 60 000 consultants according to mark they were growing 25 month over month as far as the value to the end user lularoe offered myriad different patterns this was kind of their brand a lot of variety was offered they were continuously generating new prints usually they would only release five thousand copies of any given pattern the more desirable patterns would be referred to by retailers and customers as unicorns as far as the multi-level marketing piece recruiting was how the fashion consultants could make real money selling directly could generate some money but it was challenging recruiting was the way to go and something lularoe encouraged initially the company offered an attractive bonus structure for consultants to make money by adding more consultants under them this gets into the area of upline and downline when a consultant recruits another the recruiting consultant is the upline and the person they recruited is the down line this would continue for several levels just like a pyramid which is one of the reasons that multi-level marketing companies get accused of being pyramid schemes the way that lularoe was structured when a consultant recruited somebody the consultant became a sponsor when they had 10 people under them they were promoted to a trainer when they had three trainers under them they moved to a coach and then finally they could reach the level of mentor by getting three coaches under them so again it's easy to picture a pyramid structure here some of the retailers were making a lot of money and bonuses tens of thousands of dollars a month the company was adding retailers at a rate of 500 a day the competition among the consultants increased dramatically retailers were frequently fighting with one another for the same customers there were simply too many they had saturated many areas with consultants rapid growth also led to problems with the quality of the product including clothing that had holes in it and patterns that it would appear no one really checked before shipping them like there would be weird objects on the crotch area of the close in 2017 when luluro had about 80 000 consultants they modified their bonus structure to be based on actual sales this cut bonuses by about 50 percent they also initiated a temporary 100 percent buyback policy although it was not represented as temporary this led to a lot of new consultants joining but also about 100 million dollars in refunds as many distributors left when little row reversed the buyback policy a number of lawsuits started coming in eventually they would be facing about 50 lawsuits lawsuits allege that the company incorrectly calculated sales tax misled with their advertising and engaged in unfair business practices the state of washington sued them for being a pyramid scheme lularoe settled this case for 4.75 million dollars and made some changes to policies at the time making this video lularoe continues to operate with about eighteen thousand distributors when at one time they had about eighty thousand now moving to my analysis the docu-series on amazon prime covered the story pretty well and i think overall did a good job at capturing many of the feelings and dynamics at work in the lularoe adventure much of this applies to other mlm companies as well i will go through a few of the items that really stood out to me item number one is the empowering women message of lularoe i think that this is what really made the company special at first it's why so many women wanted to sell the product the vision was particularly effective in recruiting stay-at-home moms who like the idea of working part-time for full-time money and doing something enjoyable it appears as though the values of lds became wrapped up in this as expressed by diane and mark which some of the distributors found to be unsettling even still the empowering women piece was a major part of the appeal of lularoe and many other mlm companies it was not just about money it was about a lifestyle and a sense of accomplishment item number two is the incorporation of the family members at a leadership level in lularoe we also see this with again other mlms this is an expensive mistake i've seen many times it's a bad idea for a few reasons one relatives are often less qualified than someone who can be found by posting the position and interviewing many people two it demoralizes employees making them feel as though there's no real chance to be promoted because higher level jobs are reserved for incompetent family members three it makes people question the judgment of the owners of the company do they really know what they're doing if they can't figure out how to avoid overvaluing relatives item number three is the lack of quality advice apparent in mlms this is one of those elements that stands out in the larger mlm culture one of the distinctive features there are many attempts to motivate and inspire without actually providing anything helpful it's a lot of noise and very little signal you hear phrases like build your business think success into existence all you need to do is believe in yourself in order to achieve success you have to picture it if you're failing in your business it's your fault winners make money losers make excuses you must choose to follow your dreams we're not in the clothing business we're in the people business this one is actually from lularoe mark said it during the docu-series in an effort to motivate mlms actually end up discouraging people they don't actually provide concrete steps to success rather just these catchy meaningless phrases that don't actually make any difference motivational speakers success stories and overly positive self-help style books are brought in when there is no substance to accompany when there's no logical and rational message about how to be successful item number four is the special significance of top earners the way to be successful in an mlm is simply to be in early those are the people who make the real money there's usually no actual skill differential between the top earners and people who don't make as much money the mlms exalt the top earners as if there's something amazing about them they are formed into idols people hang on their every word they become like rock stars they claim to possess special knowledge which somehow they always fail to communicate in any clear way it's like they're being cryptic when they try to offer advice item number five is the importance of image to lularoe and similar companies this is related to item number four bit without any actual skill or substance the focus becomes image looking the right way flaunting real or imagined wealth in the docu-series they talked about how key people associated with lularoe will go down to mexico to have weight loss surgery they called themselves the tijuana skinnies it's all about looking the part lulu brought in celebrities for their key special events like katy perry kelly clarkson and mario lopez in the docu-series the guy who handled the events said that he booked mario lopez for way under budget he was stunned at how cheap he was that seemed like an unnecessary yet somehow accurate jab at mario lopez item number six is the pressure the company puts on consultants to give more lulu encouraged people to take extraordinary means to find the money to join as a distributor according to some of the distributors they were told to do things like borrow money sell cookies and sell breast milk lularoe would tell distributors to order more products invest more time and put in more effort this was supposed to be a part-time opportunity to make money but in reality selling products is a lot of work item number seven is how many of the mlms are similar to religions and some function like cults the evidence that supports this actually connects to several of the items i mentioned celebrating the significance of the top earners they are like cult leaders this reminds me of people like jim jones and david koresh if they were wearing leggings from lularoe they would be even scarier and tackier cult leaders they have nothing to offer but they pretend to be amazing like they were just somehow chosen they just keep promoting positivity without evidence to back up their optimism mark apparently read passages from the book of mormon during one of his talks and said that he was misunderstood like joseph smith a key figure in lds deanne admitted that she's not good with numbers yet people were supposed to have faith that she could run a company mlm companies emphasize how they are a family a community of believers that's what's necessary simply to believe things like magic money will fall from the sky the laws of competition do not exist and the pyramid structure can keep extending to infinity they possess unbridled confidence people deemed to be negative are labeled as non-believers even if they still actually believe in the company vision dissenting opinions are never allowed the emphasis on image fits in with this cult mentality i find it interesting that the top people lularoe traveled to mexico for surgery members of the heavens gate cult did the same thing now of course the heavens gate cult people didn't go for weight loss like the lularoe people did rather they went to get castrated which i guess technically is a small amount of weight loss but that wasn't the goal image is crucial to cults they all have a specific look to them an aesthetic that must be maintained it represents conformity and unity like they're all in this together their belief in nonsense is okay because they're not alone people are becoming indoctrinated into a belief system more so than actually learning a sales process they're not learning about business they're learning about believing the same thing as other people based on faith the last element that makes mlms look like a cult is how they label people who complain as playing the victim the company is never the problem rather the distributors are to blame the company engages in gas lighting in a sense the company is widely affected by narcissism they believe in the perfection of what they have designed moving to my final thoughts and lessons learned for the vast majority of people being involved with multi-level marketing companies of any type is a bad idea financially a very small number of people make a decent amount of money and everyone else does not other than the cult-like aspects and shallowness of so many of these mlm companies much of the problem comes down to competition many traditional companies have protected territories so that a distributor does not compete with their own company business success is subject to the laws of supply and demand direct selling is a skill that definitely has value but not so much that someone who does it should expect full-time income from part-time work something else to keep in mind which i think is evident somewhat in the docu-series when someone in business for themselves does start making money they should not run out and buy new vehicles a new home expensive clothes or go out to expensive dinners no matter how much money somebody's making managing money responsibly is always indicated those are my thoughts on the company lulu row please put any opinions and thoughts in the comments section they always generate an interesting dialogue as always i hope you found my analysis to be as inspiring as a multi-level marketing motivational speaker thanks for watching

Channel: Dr. Todd Grande

Views: 121,573

Rating: 4.9439602 out of 5

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Id: dP86akC9lEY

Length: 14min 45sec (885 seconds)

Published: Fri Sep 24 2021

Reddit Comments

[u/tenthousandgalaxies]

Dr Grande is the best and has so much content!! Love his dry sense of humor too

[u/TheLazyLizard2]

It's a hivemind mindset around items and the promise of "being better and making lots of money."

LLR is in fact a cult, same as the founder's religion. It's based on lies, whitewashing and scandal.