LuLaRoe

LuLaRoe

File:LuLaRoe logo.png
Company type	Privately held
Industry	Fashion (Pyramid Scheme)
Founded	2012
Founders	DeAnne Brady Mark Stidham
Headquarters	Corona, California, U.S.
Area served	United States
Key people	Mark Stidham (CEO)
Products	Women's apparel
Revenue	US$2.3 billion (2017)
Website	lularoe.com

LuLaRoe is a U.S.-based multi-level marketing enterprise focused on women's clothing. Established in 2012 by entrepreneurs DeAnne Brady and Mark Stidham, the company’s headquarters are located in Corona, California.

The business operates through independent representatives known as "fashion consultants," who must initially purchase inventory valued at $499.00. Their income stems from both product sales and recruitment incentives. In 2022, the initial investment requirement was lowered by 90%. By 2016, LuLaRoe reported sales near US$1 billion, positioning it among the top firms in the multi-level marketing sector, with approximately 80,000 active consultants by 2017.

Although LuLaRoe experienced swift expansion and secured a significant share of the women's apparel market, it has encountered criticism and legal scrutiny related to its business practices and product standards. A notable class-action lawsuit filed in California in 2017, along with a 2019 complaint from the Washington State Attorney General, accused LuLaRoe of functioning as a pyramid scheme.

History

Incorporated on May 1, 2013, LuLaRoe was named after founder Mark Stidham’s first three granddaughters: Lucy, Lola, and Monroe. The company broadened its offerings in 2014 to include skirts and dresses, subsequently adding leggings which became its signature product. That year, with a workforce of 23 employees and a distributor network of 750, LuLaRoe achieved $9.8 million in revenue. By mid-2015, the number of distributors expanded to 2,000 and surged to 26,000 by August 2016, with sales forecasts surpassing $1 billion. By April 2017, the distributor count exceeded 80,000.

Legal issues

At the beginning of 2017, consumers initiated a class-action lawsuit claiming that LuLaRoe’s exclusive point-of-sale software inaccurately calculated sales tax on interstate and exempt apparel transactions. Alongside quality concerns, this contributed to an "F" grade from the Better Business Bureau (BBB).

In October 2017, a California class-action suit charged LuLaRoe with running a pyramid scheme characterized by unethical business methods and deceptive advertising. The $1 billion lawsuit alleged that distributors were pressured into incurring debt to acquire inventory. The company denied all allegations.

In January 2018, following an incident where a distributor ridiculed individuals with disabilities during a live sale event, the National Down Syndrome Society severed its partnership with LuLaRoe amid widespread public backlash against the company's handling of the situation.

By December 2018, burdened by growing debt and distributor attrition, LuLaRoe faced litigation from its primary supplier Providence Industries for nearly $49 million in unpaid invoices and accusations that founders Mark and DeAnne Stidham concealed assets.

In January 2019, the Washington State Attorney General filed suit against LuLaRoe and its leadership for allegedly operating an unlawful pyramid scheme prioritizing recruitment over actual sales. Providence Industries also sought asset seizure. The BBB maintained an "F" rating for LuLaRoe amid hundreds of new complaints. Later that year in October, the company shut down its distribution center in Corona, California, transferring operations to South Carolina and terminating 167 employees.

In November 2019, LuLaRoe countered with a $1 billion lawsuit against Providence Industries alleging fraud and defamatory personal attacks.

By February 2021, LuLaRoe agreed to a $4.74 million settlement resolving the Washington case without admitting liability. The agreement prohibits pyramid scheme activities and requires transparent income disclosures to enhance clarity for distributors.

Business model

LuLaRoe functions solely through a multi-level marketing (MLM) approach, distributing clothing via independent sellers who buy inventory at wholesale prices for resale. As of 2017, new distributors were required to make an initial investment ranging from $4,925 to $9,000 and were encouraged to keep approximately $20,000 worth of stock on hand. Earnings are generated both from direct product sales and commissions earned from the sales made by recruited "downline" distributors. In 2015, the typical yearly commission earned from downline sales was $85.

Product promotion is conducted through various channels such as party plans, temporary boutiques, or online platforms like private Facebook groups. Distributors often utilize live-stream video during scheduled events to display their merchandise, personally presenting and describing items on camera.

The distribution network is heavily centered in economically disadvantaged rural regions rather than metropolitan areas, reflecting a deliberate focus on markets that experienced slower economic recovery following the 2008 recession.

Products

LuLaRoe’s main offerings consist of vividly patterned leggings, dresses, and tops characterized by a modest style influenced by the founders’ ties to The Church of Jesus Christ of Latter-day Saints. Each pattern is capped at 5,000 units and generally not reproduced once sold out. While distributors can choose specific styles and sizes, the patterns they receive are randomized; certain rare designs known as "unicorns" attract higher demand.

Manufacturing is outsourced to factories located in Asia and Central America through MyDyer, a Los Angeles-based apparel supplier catering to multiple retail brands.

Product quality and return policy complaints

By late 2016, numerous customers began reporting issues with leggings tearing or developing holes shortly after initial wear. This led the Better Business Bureau (BBB) in January 2017 to downgrade LuLaRoe’s rating to an "F" due to unresolved consumer complaints and concerns over sales tax being charged on clothing sold in tax-exempt jurisdictions.

Throughout 2017, customers posted photos of faulty leggings on social media and organized complaint groups. That same year, a class-action lawsuit was initiated. LuLaRoe’s head of production explained that fabric damage resulted from a manufacturing technique intended to soften fibers but which inadvertently weakened them. Initially, the CEO downplayed the extent of defects; however, by April 2017, the company implemented more lenient refund policies for both customers and distributors.

Despite these changes, by August 2017 many distributors reported delays in receiving refunds owed to them. In September, LuLaRoe reversed its earlier refund policy adjustments by capping refunds at 90% of the purchase price and adding shipping costs along with stricter return conditions. This policy shift provoked backlash on social media and led distributors to petition for reinstatement of the original refund terms as they considered exiting the business.

As of 2021, LuLaRoe continued to hold an F rating from the BBB; by May 2022, this had improved to a C rating. These ongoing difficulties have negatively affected the company’s reputation and underscore persistent challenges in maintaining product quality control and customer service within its operational framework.

In popular media

• The Rise and Fall of LuLaRoe, aired November 2021 on Discovery
• LuLaRich, a documentary miniseries about LuLaRoe released on Amazon Prime in September 2021
• The American Dad! episode S18E05 parodies the company under the fictional name "Stretcharoos"

See also

• List of multi-level marketing organizations

External links

• Why Women Are Quitting Their Side Hustle: Leaving LuLaRoe Vice Media