Why women are targeted for these “get rich at home” scams.
Amazon’s newest documentary “LuLaRich” examines the rise and fall of one of America’s most famous “Multi-Level Marketing” schemes: LuLaRoe.
In case you were living in an underground bunker without internet for the last ten years, LuLaRoe is a women’s clothing company specializing in leggings that took the country by storm in the mid-2010s. Their mission is: “Creating freedom through fashion”.
“We believe every individual is beautiful, unique, and most of all — powerful. And through these attributes, we believe anyone can create and live a life of purpose and gratitude. These beliefs are why LuLaRoe was created; they bind us together like threads, sewing us into a community of lasting love and fellowship. “— LuLaRoe website
The company, which was started in 2012 by DeAnne Brady and her husband Mark Stidham, began when DeAnne started making colorful maxi skirts and selling them out of her trunk. She eventually graduated to selling the skirts at “house parties”.
As customers became excited about the hard-to-find maxi skirts, LuLaRose branched out to sell through individual distributors and added the patterned leggings for which they became famous. All items were released in very limited quantities, which created a buying frenzy for in-demand designs.
One of the best ways to get your favorite designs was to become a distributor. At the height of their success in 2017, they had over 80,000 distributors who sold over $1.8 billion (yes billion) in products.
LuLaRoe’s distributor base was solely targeted at women, particularly stay-at-home moms who were looking to financially contribute to their households and feel like they were making a difference.
LuLaRoe branched into a “multilevel marketing” system, or MLM, where the women at the top made money from sales of the new distributors they recruited. This means that if you as a distributor bring a friend or family member in as a distributor, you not only earn a profit on your own sales but also get a percentage of the sales of your “downline”, i.e. the people you recruited.
In many cases, MLMs are a legitimate way to make money, but they often cross over into the realm of a “pyramid scheme” where only the early adopters make money. For more on how to tell a pyramid scheme from a legitimate MLM, check out this guide from the Federal Trade Commission.
Multiple lawsuits filed around the country alleged that LuLaRoe was not a legitimate MLM, but rather a pyramid scheme. LuLaRoe denies these allegations.
The Amazon documentary does a great job of telling the history of the company, how their limited quantity patterns created an internet frenzy, and how individual distributors gained — and lost — from selling leggings as the downlines collapsed and product quality went downhill.
In the end, many women report that they lost their reputations, their life savings, and even their relationships due to their decision to work with LuLaRoe.
But LuLaRoe isn’t the only MLM that targets women. A quick perusal of social media shows a plethora of “home-based businesses” that are primarily targeted towards women entrepreneurs. These include companies like Avon, Mary Kay, Amway, Herbalife, Tupperware, Pampered Chef, and Natura.
Like LuLaRoe, they often use quasi-feminist slogans and promises to make money while staying home with the kids. These MLMs rarely result in any substantial increase in income, yet the promise of financial independence with only a few hours per day of work is particularly appealing to women. As an article in Career Contessa noted:
“MLMs have relatively low-cost opt-ins for representatives. Because the startup fees of an MLM are much smaller than starting a small business or a franchise, it is easier to invest in and walk away from these “sunk costs.” A “sunk cost” is a cost that has already been incurred and cannot be recovered. It is easier to walk away from $500 dollars lost than it is $20,000 funneled into a small business. Additionally, MLMs have recently adopted a more “entrepreneurial” language to recruit representatives. They target stay-at-home moms, military spouses, and other young women to become their own #girlboss or to start their very own “side hustle.” According to a report by the Federal Trade Commission, 99 percent (99 PERCENT) of representatives lose money from MLM companies.”
For people who are thinking about buying into an MLM, going in with “eyes wide open” is important. Here are some things to consider:
- The larger the buy-in investment, the larger the financial risk.
- If it sounds too good to be true, it probably is.
- How large is your network? You can only sell to your friends and family for so long before they get sick of hearing from you.
- Is the quality of the product something you can stand behind?
- How much potential do you have to develop the “downline” necessary to make real money?
Whatever your thoughts on MLMs, be sure to do your research. And in the meantime, check out “LuLaRich”, it’s a fascinating glimpse into not only the world of MLMs but also “fast fashion” and the leggings craze.
Have you seen “LuLaRich”? What did you think of it? Let me know in the comments.