The buttery-soft leggings and the multi-color, casual-yet-sassy dresses, skirts, and tops have become all the rage among America’s moms – so much so that it’s hard not to spot a trademark LulaRoe piece on a trip to the grocery store. And though those coveted black leggings are seemingly impossible to get your hands on (trust me, I’ve tried), finding a LulaRoe consultant isn’t nearly as hard.
Since 2016, the fairly young company has seen a big bump in consultant numbers, from 8,277 in September 2016, to a whopping 77,491 in February 2017. That’s a significant increase. With numbers like that, you’re likely thinking, “how much money can a consultant make?”
It’s a question that’s been in the news recently, with a class-action lawsuit filed in October of last year by LulaRoe consultants alleging that the company is not a multi-level marketing (MLM) organization, but a pyramid scheme and consultants are the ones who lose out. Multi-level marketing companies file specific disclosures that can help potential sales reps and consultants determine whether the upfront cost and effort are worth the benefit of signing on. We take a look at how LulaRoe consultants make their money and how much you could realistically expect to make if you signed on to start a business with LulaRoe before you sign up.
Every business requires an investment of time and money, and LulaRoe is no different. The path to becoming a “fashion consultant” starts with an inventory investment. All new representatives must purchase one of three “Onboarding Packages.” Though “official” onboarding prices are hard to come by (LulaRoe isn’t very transparent on that front, at least not right out of the gate), general agreement among reps and those looking to become reps is that the packages range in price from about $5,000 to $9,000. Many representatives also seem to indicate an additional expense of a few hundred dollars ($500, on average) to invest in things like racks, hangers, business cards, size markers, etc.
Long story short, most past and current LulaRoe fashion consults seem to peg the initial startup costs at a minimum of about $5,500. That’s a fairly high buy-in for a multilevel marketing company compared to other companies like Rodan + Fields.
Once a fashion consultant is onboarded, they can start selling products at pop-up sales, in-home events and online. Inventory, which is purchased at wholesale, can then be sold for a profit by marking items up anywhere between 35–50% (though LulaRoe is very strict about using a minimum advertised price for online sales). This places most products in the $35–$65 range, with many falling closer to $35. The exception, of course, is the signature legging, which typically sells for $25.
When it comes to turning a profit, LulaRoe does not release any concrete numbers, but a recent Business Insider article suggests that consultants would need to sell $15,000 worth of products at a 40% markup if they want to make up their initial investment and start to earn a profit, a statement that thus far does not seem to have a rebuttal.
Other Ways to Earn
The hustle (and investment) required to turn a profit doesn’t venture far from many modern MLMs, especially as social media makes product availability, and therefore market saturation, a real competition issue. But, as with many MLMs, many consultants focus on recruiting others to sell LulaRoe products for them. For LulaRoe, that recruitment (aka “leader”) hierarchy is based on sales/points, starting with Sponsor status, and then moving on to Trainer, Coach and finally capping off with Mentor status.
Each of these groups earns 5% of retail sales from their direct recruits, and as their direct recruits becomes leaders, the original recruiter will receive a percentage of those sales (anywhere from 1% to 5%). The problem that some seem to face is, as I mentioned above, over-saturation. In other words, if you build your network too closely, your consultants are forced into close competition.
How Much Can You Earn
MLMs have a nifty document they must file in the U.S. that can paint a picture of how much consultants or sales representatives can expect to earn. LulaRoe only tracks bonus payments for this document, which means that 72.63% of their independent retailers in the U.S. were not included in their Income Disclosure Statement. Only retailers who sponsored at least one other independent retailer and met personal production requirements are considered eligible for bonuses from LulaRoe. That means that the majority of the U.S. independent retailers made only the profits from their retail sales to customers, if they made a profit at all.
If you’ve cultivated a high-performing team, however, LulaRoe will extend “bonus payments” to those leaders. According to LulaRoe’s 2016 Income Disclosure Statement, the average annual bonus payment was $2,064.77 (about $172 a month).
[Editor’s note: This information is no longer available on the LulaRoe website].
Those numbers are “averages,” but what is the max potential? According to the same disclosure statement, the highest bonus payments are as follows:
- Sponsor: $44,542.23
- Trainer: $231,132.95
- Coach: $888,005.01
- Mentor: $2,472,957.68
To put it into perspective, 66.9% of those receiving monthly bonuses receive less than $1,000, with the bulk of those receiving somewhere between $250.01 and $500. In other words, getting to those max numbers is far from typical.
As with any MLM, the amount you reap is directly tied to what you sow and how hard you work the land. If you’re looking to leverage a MLM company to replace your current job, be sure to do your homework. Entrepreneurship takes hard work, sweat and savvy no matter how you approach it — whether you found a startup, buy a franchise, launch a side hustle or tap into an MLM. And there’s always risk involved. Many businesses need financing to get started and rely on personal credit to foot the bill before they have a chance to establish business credit.
If you’re thinking of starting a business and want to understand your financing options, you can get your personal and business credit data for free on Nav to see where you stand and make a plan.