LuLaRoe or LuLaNo: Calculation Flaw, But Still LuLaNo

leggins

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?

screen-shot-2016-11-02-at-6-48-19-pm

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.

screen-shot-2016-11-02-at-6-56-23-pm

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.

screen-shot-2016-11-02-at-7-18-43-pm

 

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:

screen-shot-2016-11-02-at-7-34-48-pm

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.

Ebates Coupons and Cash Back

33 thoughts on “LuLaRoe or LuLaNo: Calculation Flaw, But Still LuLaNo

  1. Pingback: LuLaRoe or LuLaNo: Will Your Investment Pay Off? | BOTTLESOUP

  2. KevinG

    Hurray! You fixed your math yet still decide to be completely biased and make out like you understand margins and how there is no possible way to make 54% margin. Wow. Have you done any research besides reading LuLaRoe propaganda, maybe spoken to actual consultants to find out their real numbers? 13% would make it not worth it without a ton of volume. However, many large companies do operate on those kind of margins. They also operate on higher margins, I work at a place who’s main product that has sold at a %63.3 margin for the last 25 years and that margin continues to this day. Anyway, since your prior error filled article my wife and I have started selling LuLaRoe, we are exactly one week in. Now as stated above $18 per item is a bit high. While on most items that actually is the profit value, their estimated time of return on investment is a bit skewed as it doesn’t take into account the amount of party rewards and promotional giveaways that occur with pop ups. In one week we have thus far averaged ~$14 profit per item, $3600 in sales, $1750 of which has been profit. 48.6% profit in 6 pop ups. One of the main reasons LuLaRoe has started seeing success is due to their marketing genius of short run patterns, this enables consultants to sell at a premium price due to scarcity which increases demand. One rule that LuLaRoe has, essentially prevents your above scenario from crashing the business. In your previous article you stated having to follow someone else’s rules was a major con, however I disagree unless you’ve got some great new idea and or special connection circumstances, doing everything yourself is kinda the pits. LuLaRoe has a policy that items cannot be sold publicly at a price below their set minimum average price. This, along with the value of the clothing scarcity, keeps the price high as well as the margin. Not to say they can’t sell for less, but if someone is jumping into this and selling at less than a 30%margin they are leaving a ton of money on the table. The demand in the market is currently very strong allowing for higher pricing. The only reasoning I can see for your quote lower margins on clothes, would possibly be due to the size of a retail store inventory which in turn translates to tons of stale inventory which only sells once discounted. LuLaRoe does not have that problem as of yet due to the fact that many individuals inventories never get to an unmanageable point as they would volume-wise in a big retail environment and also that many teams of consultants will actually trade around their stale inventory. Also, since marketing has done such a great job to keep demand up, even discounting down to %30 margin is still good money and the customer feels like they’re getting a great deal. This can help churn if it’s needed, but still making money and gaining a loyal customer.

    Tidr: Author thinks good business ventures apparently don’t exist. While LuLaRoe markets profit margins as pie in the sky 54%, overall in a weeks worth of experience with it, it’s closer to %49 at least with the starting inventory package. There are higher end clothing styles which have a margin closer to %80 which would definitely boost your overall margin.

    *Reminder, it takes a lot of hard work, as well as sales and management skill to be successful. It’s not a get rich quick scheme, it takes time to grow a customer base and maintain it. But it is possible, and I now personally know over a dozen women who’s lula business take home pay has far exceed the careers and jobs they previously had, and it has allowed them the flexibility to spend more time with their families.

     
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    1. Mrs. Bottlesoup

      Author, here. I clearly state I do think good business ventures exist, and people should be empowered to do it themselves and diversify their inventory. You clearly have skin in the LulaRoe game, so I hope my readers take your bias into account.

       
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      1. melissa

        I certainly have. I think it is pathetic you cannot post the realistic side to this story without getting attacked by lularoe folks. I will say it sounds like one of the better MLM opportunities out there but still… it is what it is. i am here because i was curious to learn about it and how much it would cost me, if it was less i might consider it since i do see a lot of enthusiasm for the product, and i have a few pairs of leggings i really do like. the material is lovely. I do not have 5k to play around with or the time. Anyway when I see a group of people angrily disputing common sense that raises a giant red flag for me.

         
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      1. Mrs. Bottlesoup

        I have never been a LulaRoe consultant, or a member of any direct sales or MLM company. I’m not bitter. My goal is to be informative and transparent, as most information about direct sales and MLMs is propaganda. I’m not selling anything here but the truth (or the search for the truth). I have always been transparent and made corrections to my posts when I’m wrong. Happy to have different people sharing opinions on my blog. Thanks for stopping by.

         
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  3. CommonSense

    I’m not seeing the downside to this, even selling all 381 items from the $5,500 investment at $20 a pop, you’re still making a $2,120 profit. No it doesn’t include labor hours or shipping costs and things such as those but clothes don’t really go bad, at least not like food.

    I’d love to hear your clarification on this, because you’re making no sense.

     
    Reply
    1. Mrs. Bottlesoup

      The issue is oversimplification. It’s difficult to sell 381 of anything. The time and energy it takes to sell 381 pieces, when divided by your profit, is likely to be less than minimum wage. Also, the fact is most people do not ever turn a profit with direct sales and MLMs. It’s easy to see why people are seduced, because it sounds like a great opportunity. But the bottom line is most people lose money – a substantial amount of money – while the parent company continues to turn a profit without paying consultants. It’s a pyramid scheme, and consultants are the customers.

       
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      1. Jen

        Actually true pyramid schemes are illegal and are defined by the necessity of people recruiting others in order to make money. That is NOT the case here. I really hope people are not taking your advice as truth. Where do you get the statistic that most people do not turn a profit with direct sales? And just for the record…it is not hard to sell 381 pieces of LuLaRoe. Yes…it requires work, but making money requires work. Please, before you put yourself out there as having any expertise in a given matter…actually know what you are talking about!

         
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        1. Mrs. Bottlesoup

          The statistics are sourced in the article. I actually *do* know what I’m talking about. Direct sales and MLM companies are not a good investment and they are not true business ownership.

           
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      2. Jason

        I know a consultant that sold 1200 items in a 24 hour period. At a $19 profit that after subtracting the inventory price from selling price.

         
        Reply
        1. Mrs. Bottlesoup

          If that’s true good for her/him. However, that is not the norm or a sustainable form of income. You have no ownership when you are a consultant. Also, if this is true, why wouldn’t you say “I know a consultant who made $22k in profit in 24 hours?”

          Because it’s a ridiculous lie, that’s why.

           
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  4. JLF

    Yep, just keep on screening any critical responses to your idiotic post. I will say you are doing a great job trolling the internet for hits. Keep it up, way to make money in your own skeazy way. LLR is one of the few companies that really isn’t a scam, has an easy out, doesn’t rely at all on having a “downline” to be highly successful. You are biased, and your full of crap. But hey, you get to make all that advertising money by annoying the snot out of people, but its sad because you may have let someone not have their lives changed by something that really does work.

     
    Reply
    1. Mrs. Bottlesoup

      I’m not screening critical responses. I just have not had the time to moderate all of the comments. I produce all the content for this blog, and, yes, I have ads on the blog to sustain the cost of running the blog. I’ve only made a few hundred dollars off my blog in the nearly 4 years I’ve been publishing it. It’s a hobby and a passion project for me. My goal is to always be honest and transparent in my pieces. That’s why when I understood my mistake, I published a follow up explaining what I miscalculated. Thanks for stopping by.

       
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  5. Jen

    Actually the profit margin based on the expected retail pricing IS in the range of 48%-52% per piece. Your extremely low percentages listed are may be some estimate from some random source but are not accurate here. Lots of misinformation given from a person who is NOT a LuLaRoe consultant should give people some serious pausecredibility to your “advice”. Speaking first hand, I can say that making the investment to become a LuLaRoe consultant has been one of the best investments I’ve made. The payoff, both financial and personal, have been tremendous. It always astounds me when people who truly don’t know what they are talking about advise others in their decision making. To those reading this article, please not that the initial article was laced with error and the author had to back-pedal. Please be sure you are collecting information from viable sources before making any decision!

     
    Reply
    1. Mrs. Bottlesoup

      No, actually it’s not. The low percentages are fact-based and sourced in the article. Please, if you think I am wrong, provide legitimate sources for your “facts”, because trusting a LLR consultant at their word is the definition of bias.

       
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  6. Allie

    Thanks for the alternate opinion. It is refreshing as someone considering trying it out to see the not so sunny part. I really enjoyed your blog post and your breakdown of the costs. The only way to succeed is to have your eyes wide open and taking considerations on all aspects of the business. I’ve only seen super positive posts about it and have been looking for the other opinions. Great writing.

     
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  7. Tax Preparer

    Thank you for posting this. I’ve done taxes for years and have never seen a woman (and MLMs always target women – a red flag!) make a significant amount of money in an MLM. Most work a ton of hours and make less than minimum wage once it’s all averaged out. A LLR consultant on this comment thread should show us a Schedule C (blur your name and SSN) if a profit was made!

     
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  8. ladyweaver

    As someone who found themselves desperate to make a little bit of money for her family, and ended up doing another MLM (thankfully not one that cost so much, and I broke even but nothing beyond that) thank you SO MUCH for telling the truth about this crap. It’s insane. I’m sure it does work for SOME people. But for the vast majority it doesn’t, and you risk your friendships when you become that person who’s always selling something.

     
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  9. Alinka G

    As an accountant it bothers me your math is wrong again on the buy back part. You can’t just subtract profit only on 10 pieces from your initial investment- you need to take out the inventory from that number before you calculate 85% of the whole sale investment you have left. Come on! Not everyone reading this can catch things like that!

     
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  10. Christine R.

    Lularoe is a fad that will hopefully go away because those prints are super ugly and adults should never ever wear them. Leggings are not pants. Lularoe prints will make you look twice the size you really are.

     
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  11. NICHOLAS

    I REALLY DONT KNOW WHERE YOU ARE GETTING YOUR INFO FROM. MY WIFE JUST STARTED DOING THIS AFTER SOME LENGTHY RESEARCH AND PERSONAL FRIENDS WHO ALREADY DO IT, AND QUITE SUCCESSFULLY. LETS JUST SAY THAT SHE WAS ABLE TO SELL ENOUGH MERCHANDISE IN 4 HOURS TO RECOUP HALF OF OUR INITIAL INVESTMENT. IT ALL COMES DOWN TO BUILDING AND MAINTAINING A CUSTOMER BASE AND RELATIONSHIPS WITH THOSE CUSTOMERS. MARKETING YOURSELF, AND YOUR BUSINESS PAGE, BUSINESS CARDS AND DECALS FOR MOBILE ADVERTISING, ETC IS WHAT REALLY DETERMINES IF YOU WILL BE SUCCESSFUL OR NOT. FACEBOOK AND ITS USERS ARE THE MARKET. PEOPLE WILL BUY CLOTHES NO MATTER WHAT, SO ITS REALLY UP TO THE CONSULTANT TO GET THEM TO BUY HER/HIS CLOTHES. NO BUSINESS IS PERFECT AND NO CONSULTANT IS PERFECT. HARD WORK AND DEDICATION TO YOUR CUSTOMERS IS WHAT IT TAKES TO MAKE IT WORK.

     
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    1. Mrs. Bottlesoup

      Ok, but why are you yelling?

      Seriously, though, this is the exact line of bullshit they sell consultants. Even with hard work and dedication, the product is crap, consultants do not have ownership or authority over the brand, and they are essentially commission only salespeople.

       
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  12. Marie

    The thing that gets my mind spinning about this is that from what I’ve read (and I could be wrong)…. You pay a min of $8.50 wholesale, assuming that is for their lowest priced item of kids leggings? Those sell for $22. When a customer buys from a consultant they are directed to LLR to pay so now LLR has collected a total of, 8.50+22= $30.50 in their pocket for those leggings. They supposedly start their consultants at 35% commission, so 35% of $22 is $7.70? $30.5 – $7.7= $22.8. ….. So essentially, they are getting full retail value for those leggings, while all these consultants run around selling for them… Essentially they are #1. getting free labor and #2. guaranteeing that free labor buys all their crap because they are convinced into this revolving door of constantly purchasing “their” inventory… You know, to make money? But for that 7.70 in “commission” they need to buy another pair of leggings to sell? Wow, I can never figure out how people get roped into this stuff.

     
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    1. Mrs. Bottlesoup

      I think I understand why people “get roped into” direct sales and MLMs – it’s because these companies really sell people on the dream. People are optimistic about their futures and what they can do to make their lives better. In my opinion, these companies prey on people’s best intentions.

       
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  13. Sasha W

    You wrote “The graph indicates that if you sell 70 products a month in the first month, you can pay back your $5,500 investment in LuLaRoe.” A but it should read 70 products a week in the first month because later in the article you state you have to sell 280 products a month.

     
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