LuLaRoe or LuLaNo: Calculation Flaw, But Still LuLaNo
November 2, 2016
I’ve received thousands of comments from many, many readers about my original piece: LuLaRoe or LuLaNo: Will Your Investment Pay Off? Quite a few commenters pointed out that the math I used in my article was not accurate. I read their comments, I evaluated my post, and I’m providing an updated article in response. I’ll cut to the chase: I made a mistake in my original calculation. I deducted the initial investment of $5,500 twice. But, the cautionary advice I gave still holds true. And I hope you can understand that in my effort to be completely transparent, I am providing this revised article.
What Happened With Original Calculation
Here’s where the confusion began: I posted a link to a LuLa in Love article. That article had a graph illustrating how you could repay your LuLaRoe investment in one month. The graph indicates that if you sell 70 products a week in the first month, you can pay back your $5,500 investment in LuLaRoe.
Assuming there’s 4 weeks in a month, you need to sell 280 LuLaRoe products in that month. The LuLa in Love article indicates that the gross sales will be equal to $9,240 if you sell 70 products a week, or 280 products in one month (70 * 4 = 280). The graph also states that your net profit will be $5,040.
If you’re following, here’s what we have so far:
$5,500 initial investment in LuLaRoe (this is the money you put up front to become a LuLaRoe fashion consultant)
$9,240 gross sales from selling 280 LuLaRoe pieces
$5,040 net profit from sale of 280 LuLaRoe pieces
What does that give you?
I have no problem admitting it.
There was a mistake in the original calculation. The initial investment was deducted twice. Theoretically, you can make back your money in one month from selling LuLaRoe products. You have to sell 280 at a 54% profit, with an average sell price of $33 per item in order to earn $8,780. But, in theory, yes, it is possible. If you sell the remaining 181 pieces for a 54% profit (or approximately $18 profit per piece), you can theoretically earn $12,038.
So if the basis of my initial calculation was wrong, what about it was right? Here’s where your head will start to spin:
For the above to be true, you still need to be selling each product for an average of $33 per piece.
You’ll still need to make an average profit of $18 per item, or at a 54% profit.
But wait a second: $33 * 381 items in your original investment kit = $12,573 in gross sales (or approximately the $12,500 retail value LuLaRoe boasts your investment kit is worth). A 54% markup on $12,573 is $6,789.42. ($12.573 * 0.54). We’ll call it $6,750, as $12,500 retail value * 54% markup is $6,750.
So, from your $5,500 you could potentially earn $13,750 profit.
Stipulations for LuLaRoe Profit
The stipulations, again, are that you must:
- Sell each product for an average of $33 per piece
- Earn approximately $18 or (or 54% of $33) in profit per item sold
- Sell all 381 pieces from your initial investment kit for the above price and profit
Here’s some food for thought: is 54% profit per item sold realistic? According to the Houston Chronicle, “Profit margins for retail clothes are generally within a range of 4 percent to 13 percent according to industry analysts.” (Source)
That means LuLaRoe’s expectation that you will be able to sell a product with a 54% profit margin is not on par with the industry average. (For the record, if you sold all your LuLaRoe for 4% profit margin, you’d make $228.60, or an average of 60 cents profit per piece sold).
despite calculation error, The truth about lularoe still hurts
Let’s get real. The wholesale cost of a LuLaRoe product selling for $33 retail is just $15. You get a 54% profit margin, giving you $18 per piece. That means you’re earning more than the product is even worth. 120% more. That is a 120% markup on LuLaRoe’s cost. LuLaRoe doesn’t get anything if you sell your inventory or if you lose it. Because, as with any wholesaler, the customer is the retailer. In this scenario, you are the retailer. LuLaRoe wins no matter what happens to your LuLaRoe “business”.
Now, many people have told me that LuLaRoe will buy back your inventory at 85%, minimizing the risk involved. You know what’s fascinating about that? Theoretically, you sell 10 pieces, you make $180 bucks, and you have 371 pieces left you decide to sell back to LuLaRoe. They’ll buy them back for you at 85% of the wholesale cost. Not the retail cost. So, $15 * 371 = $5,576 wholesale value of your leftovers. $5,576 * .85 = $4,730.25. That $4,730.25 is what LuLaRoe will buy your 371 pieces back for.
Here’s what that looks like:
So, you’ve lost $590 attempting to sell LuLaRoe. You may be asking, why isn’t the wholesale value added to this? Well, because you are not going to get the wholesale value back. You’re getting 85% of the wholesale value. Also, is this math looking funky to you? It’s because you won’t earn a 54% profit margin or $18 per item. If the wholesale value was $15 per item, the $5,500 initial investment would be worth more than that (381items * $15 = $5,715). But it’s not.
How You Know LuLaRoe is Not Worth It
Here’s how you know this is a bad investment: the company won’t even buy their own product back for 100%. They won’t take a return. If the product was any good, they would happily take it back. You can take your Macbook back after 14 days, even if you opened it up and used it. But you can’t get a refund for unused, tagged clothing? Get real.
I hope you understand that although my initial calculation had an error, the math just doesn’t add up in my opinion for LuLaRoe. It’s incredibly difficult to sell one thing to one friend. Imagine selling 381 things at $33 each. Does it mean you can’t do it? No. But I stand by my initial stance: LuLaRoe is not the way to go. You don’t have control of your LuLaRoe “business”. There’s no negotiation with the wholesaler. There’s no diversification of inventory. You have one brand. That’s it. Start your own online retail shop. Think that sounds impossible? Babywearing supermom Frogmama did it. You can hear her story here.