Just six short months ago, the train began to derail for a business that once seemed too big to fail. Now it seems like this gigantic multi-level marketing scheme (MLM) might actually be toppling! Today, Lord Snow Presides over a terrible lesson in the School of Hard Knocks–one that its pupils are unlikely to heed.
A multi-level marketing scheme (MLM) is a murky business strategy that many consider to be a type of pyramid scheme. An upline recruits an unsuspecting person with promises of vast wealth obtained for next to no effort. That unsuspecting person becomes their downline. They both earn ranks in their company according to the sales they make–whether they’re made to themselves or to people outside of the MLM.
That upline, in turn, functions as the downline to someone else. Each level of upline earns commissions on whatever their downlines spend, according to their rank. At the top of the
pyramid reverse funnel, a few rarified aristocrats recline in luxury, earning millions of dollars on the backs of many thousands of desperate downlines. (One MLM casualty featured in the documentary Betting on Zero compared joining MLMs to buying a lottery ticket after the lottery has ended.)
Uplines and downlines alike must maintain a certain amount of sales to receive commissions. If they can’t make that amount through retail sales to customers outside the MLM, then they must buy the product themselves. (They call this method becoming garage qualified.)
The people inhabiting these schemes become, in effect, the MLM’s primary customers. They think they’re business owners, but they share nothing in common with real business owners. They’re not even real salespeople. In truth, they’re simply customers trying to resell their purchases to others, and they see no way for that idea to go hideously wrong.
Amazingly, these predatory business models are legal in the United States. Sorta kinda. They’re wildly popular–about 18 million Americans shill for them in any given year. And our current government is thick as thieves with them–all the way to the Oval Office.
Very watchable summation of MLMs. The last half covers our government’s collusion with MLMs. It’s
a little scary. Registered to vote next month?
The Problem With MLMs.
MLMs tend to share the same serious (and non-accidental) flaws.
First and foremost, almost every single person who buys into an MLM loses their money. Period. The stats vary only a little. Some 95-99% of an MLM’s signups lose their money. (Compare to the survival/profitability rates of real businesses.) Washington Post did a story just last month about how MLM participants earn less than 70 cents an hour–and that’s probably before expenditures.
Fourth and worst of all, MLMs operate like cults. Members join up after getting love-bombed and dazzled. They experience draconian indoctrinations that result in the adoption of a delusional worldview. Their leaders teach them to aggressively evangelize their loved ones, families, and social media contacts. Participants learn to lie through their teeth about their success. And then, when recruits have nothing left to give their cult, they drop out–and get shunned and gossiped about by their onetime best friends. Ultimately, they slink away with nothing to show for their time and money.
In a very real way, MLMs condense and distill all the worst parts of Christianity. No wonder I find them so fascinating!
LuLaRoe is one of the bigger MLMs. This billion-dollar company’s main product is shapeless, drapey, layered women’s clothes in short-run prints–and stretchy leggings that they bill as “buttery soft.” (Hey, if you like that style, that’s fine. I live in yoga clothes. YMMV.)
If you spend any time at all on Facebook, you probably know all this already.
Like a lot of MLMs, LuLaRoe appeals to fundagelical Christians and fosters in its ranks a certain fundagelical culture. Remember, always, that the Venn diagram circles of MLM sellers and fundagelicals very nearly coincide. When you see those funny MLM posts about dishonest or wackadoodle “hunbots” (MLM sellers get called that because they use the forced endearment “hun” a lot and behave, well, robotically), remember always that almost all of them are fundagelicals.
LuLaRoe sellers tend to be young-to-middle-aged stay-at-home mothers, as well. They super-duper-want to stay home with their kids. Often their churches are filled with MLM sellers, in an environment that normalizes the fly-by-night promises and irrational reasoning behind MLMs, so they never learn the serious shortcomings of such businesses. And people in such environments tend to have a high opinion of both entrepreneurs and business owners.
All of these factors combine to lead these women to mistake MLMs for a fast, easy way to achieve their financial dreams and become a #BossBabe with their very own business.
A Different Kind of MLM, Meaning A Worse One.
Deanne Stidham began LuLaRoe in 2013. She early on made some business decisions that mark LuLaRoe as a breed apart from other MLMs. Yes, she actually managed to make MLMs even more predatory than usual!
First of all, buying a LuLaRoe membership costs considerably more than almost any other MLM. Most of these companies cost between USD$50-200 to join. However, a new seller with LuLaRoe lays out at least $5k to join up. Many spend considerably more than that. The money purchases them packaged lots of clothes that they will then resell.
Second, sellers have no control whatsoever over what prints or colors they get within the style package. Obviously, solid colors (especially black) sell the best, but sellers don’t get to pick and choose anything themselves. (But I’ve seen a video wherein an ex-LuLaRoe seller alleged that uplines’ favorites get the run of the warehouse to pick individual items.) So buyers gamble on the packages like collectible-card-game players do on card booster packs. They expect to get a couple of items they really like, a bunch of items they’re meh about, and a lot of items that simply won’t ever sell.
LuLaRoe now no longer seems as concerned about oversaturation of their market. That’s always been a complaint about MLMs: sellers recruit their own competition.
As the number of sellers increased, LuLaRoe seemed to run into significant problems with quality control. Those “buttery soft leggings” disintegrated in the wash and often tore on their first wear. Other clothing items suffered from defective, dramatically-mismatched armholes or weird necklines. Other items arrived mildewed.
A big part of the reason why those prints suck so bad is LuLaRoe’s design philosophy. To meet the short-run requirement, designers operate on a serious time crunch. Some recent designs seem ripped right off of clip art available online–or, as one legitimate designer alleges, are simply swiped. LuLaRoe hired their head designer, Patrick Winget, on the recommendation of one of the company’s leaders’ sons-in-law. The sellers idolize him. He even made a print of his own face, which turned out to be surprisingly popular.
The Latest Developments.
The quality-control issues threatened to engulf LuLaRoe and sparked huge upsets among sellers.
In response, the company swung into action by making their refund policy trickier and more difficult. Instead of their previous 100% refund policy, they changed it to 90%. Moreover, the sellers pay for return shipping. Of course, after all that effort the head office might well decide to reject any returns. That means that sellers would be out their merchandise and any hope of recouping their losses, plus the shipping money, plus the time spent waiting.
One hapless seller discovered that shipping alone would run her about two grand. Others tried that route anyway and have now waited for many months to get their refunds. Others get their refunds but the amounts are way less than expected. Hopefully the checks clear; a few months ago, I spotted a post about a small commission check from them that bounced.
As you might expect, lawsuits are starting to pile up at LuLaRoe’s door. The latest two involve the company’s charging of sales taxes to customers living in states that don’t charge sales taxes. These lawsuits join a constellation of others, including a class-action lawsuit initiated last year over the company’s misrepresentation of income potential.
The signs all point to a big dust-up coming this company’s way.
Out of the Frying Pan.
Many LuLaRoe sellers seem already to be planning their escape from the MLM. Rather than count on uncertain refunds, they take to Etsy, eBay, and other such sales sites. And others still lurk in secret (and not so secret) Facebook groups, trading and selling their unsellable merchandise.
Instead of going home and rethinking their lives, though, they’ve joined other MLMs.
One favorite destination? Piphany, which is another clothing MLM started by the LuLaRoe founder’s twin sister, Dianne Ingram. (In fact, Deanne’s daughter started a third clothes-based MLM!) Its sales model, a carousel, sounds even more confusing than that of LuLaRoe. We could consider that an accomplishment.
When I look at what’s happening with LuLaRoe, it reminds me so powerfully that when we make mistakes in life, we eventually have got to seriously examine what got us into that mess. If we don’t identify and fix the problem, we’ll just plunge anew into some other bad group.
Most of the women involved in LuLaRoe have been through other MLMs before this one. And they will be heading into new MLMs after this one.
A Lesson, Avoided.
These burned hunbots don’t–indeed, they can’t–connect their failure to the way the MLM model itself works.
Instead, they all appear to think that the Big Problem Here was that this particular MLM had some flaw that made it fail. MLMs themselves, as a system, survive in these folks’ minds as a viable way to earn a living. They just need to find the ANGLE, the MLM with the right product in the right location that they can slide into at the right time. If they can only do that, they will finally achieve all of their dreams. It all sounds so eerily familiar.
This whole situation offers up some hard lessons to be observed and heeded.
Today, Lord Snow Presides over a sales model begun by fundagelicals, idolized by fundagelicals, and failing fundagelicals, all exactly like their religion itself.
NEXT UP: Apparently this is Cult Week at Roll to Disbelieve. Join me next time for a look at how J.D. Greear wants Southern Baptists to destroy their relationships. See you soon!
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Lord Snow Presides is our off-topic weekly chat series. I’ve started us off on a topic, but feel free to chime in with anything on your mind. Pet pictures especially welcome! The series was named for Lord Snow, my recently departed white cat. He knew a lot more than he ever let on.
PS: Here’s a list of way more legitimate work-from-home opportunities. I can vouch for several of them myself. In the SCA, I also personally knew a mom of five who started a medical transcription business–and made very good money at it.