Photo courtesy of lularoe.com.
Companies such as Lularoe appeal to the busy-bodies: people trying to make some extra cash on the side who may not have heaps of extra time to dedicate to more traditional employment options. Now, that sounds like a legitimate avenue to pursue for the hustlers out there, but there’s more to these companies than meets the eye.
Lularoe is now the target of two new class-action lawsuits that suggest the company is running a pyramid scheme that manipulates their consultants into buying an exorbitant amount of product they could never actually sell.
“Consultants are instructed to keep around $20,000 worth of inventory on hand, and are inundated with the phrase ‘buy more, sell more,’” the lawsuit filed on Oct. 23 said. Lularoe often tries to motivate their consultants by awarding prizes such as designer purses and cruises to those who, interestingly, buy – not sell – the most product.
Many consultants are often unable to sell the products, and as a result, are left with a house full of leggings and maxed-out credit cards.
This, understandably, has left many consultants upset. The lawsuits filed blame the company for manipulating potential sellers and suggest that Lularoe took unfair advantage of those who were susceptible to marketing schemes.
“The plaintiffs in each lawsuit describe a company that lures in women, especially mothers, with promises of being able to make money while staying home with their children. When their new ‘business’ eventually fails, the plaintiffs claim the company then refuses to refund them for the thousands of dollars of merchandise they have been unable to unload,” said Stephanie McNeal, a Buzzfeed news reporter.
While the situation many consultants are now in is unfortunate, Lularoe does not solely carry the blame. The questionable reward procedures alone should have been enough to scare people away.
In 2008, many individuals lashed out at banks for predatory lending, where unqualified borrowers were given large loans well beyond their repayment capacities. Sure, while the banks shoulder some blame for playing a key role in the foreclosure crisis by participating in risky lending procedures, it is hard to believe that the individuals who agreed to the terms of the loans were completely unaware of their own financial situations.
Similarly, it would seem logical to assume that the Lularoe consultants who continued to buy products they were already struggling to sell were well aware of their situations.
If Lularoe is found guilty of fraud, the company and its leadership should be held accountable. However, for those who feel taken by the company, they too must shoulder some of the blame for participating in a considerably questionable business model.