Friday, September 22, 2017

Commentary: Is LuLaRoe eating its own tail?

Recently, multiple news outlets reported several disturbing reports that LuLaRoe is not only rescinding money back policies, but also threatening to sue a blogger critical of its operations to obtain information that it claimed were "proprietary".  This has raised questions about why would a company with claimed 80000 reps would turn on its reps like this.

First, multiple TV stations reported that local reps are worried when LuLaRoe rescinded its no-fee 100% money back and free return shipping policy, which has only been in effect for a month. Instead, reps are to use the regular return channel, which only return 90% of price, but also have to pay shipping.

According to reps, the inventory you get from LuLaRoe is like hitting a lottery, as you cannot specify designs, merely quantity and size. Similar to collectible card games. Certain rare patterns sell quickly at inflated prices on eBay or such, while the rest languish in rep's stock, until the rep either liquidate them on eBay and give up, or try to go through the buyback process. There are rumors that up to 4000 cases of refunds are pending, and people have been waiting for months

And unlike other MLMs, LuLaRoe's startup costs are extremely high, as much as 5500 dollars to start, and if rep can't sell them, often the advice one gets from rep's upline is "order more!"  Some reps claimed you need about 15000 in inventory and markup of over 40% to earn a profit. And if you get a bunch of duds from the factory order (remember, it's random), you will have to arrange a trade with a different rep... if you can find someone who wanted your duds and trade you something they considered duds.

One blog that exposed such practices, and other complaints about LuLaRoe from disgruntled customers and reps was Christina Hinks, better known as MommyGyver online. And after publishing many such complaints, including documents shared online by such, Hinks has been served with a "discovery petition" from LuLaRoe demanding that she...

...disclose the identity and contact information of potential defendants who have damaged LLR and its goodwill by providing Respondent with LLR's confidential and proprietary business information, information about LLR and its merchandise, and false, derogatory information regarding LLR, much of which respondent has posted on her blog,
The interesting thing is much of the information had already been shared online via various social media platforms.

LuLaRoe so far has yet to comment about this potential SLAPP suit, though they did respond to the change in return policy (which is technically against their own company policy that changes in return policy must be announced for 30 days before it can go into effect). LuLaRoe's statement claimed the policy was always 90% buyback. The "improved" 100% buyback and free shipping was merely a temporary "waiver".

There are reports that LLR reps who decided to quit are not getting those refunds, and it's easily viewable on Facebook and other social media sites.

LuLaRoe was in hot waters earlier when a watermarked design of Micklyn LeFeuvre ended up on LuLaRoe's leggings... and LuLaRoe did not license the design.  Back in January 2017, a Hungarian artist also accused LuLaRoe of unauthorized use of her work on its leggings.  As there is no definitive catalog of LuLaRoe designs (it's stated that the company adds up to 400 designs a day), there is no way for artists to know if their work had been used without their permission by LuLaRoe until someone spotted the pattern on an existing LuLaRoe product.

These are indeed, troubling developments.

LuLaRoe claimed 1 billion in annual revenue earlier and had more than doubled its rep numbers in 2017 to over 80000.  However, this also lead to local saturation, as the market size had not increased.

Instead, what seem to have happened is some abusive uplines started urging irresponsible practices to gain more operating capital. According to stories told to Quartz, and reported by BusinessInsider, some uplines urged their downlines to "stop paying bills", "pawn your vehicle", "open more credit cards",  all in order to free up more capital to order more inventory from LLR.  One was quoted saying "... I had $8000 worth of inventory sitting in my home while I was running up to food banks to feed my family".

All these downlines refused to give their name for fear of retaliation.

LuLaRoe does indeed encourage its reps to bulk up on inventory to achieve greater success. However, its CMO stated "[we do not support] retailers... put their personal financial situation at unreasonable risk to operate their retailer business."

When you combine this "overzealous ordering" (let's assume the company is NOT instigating such) with the inability to obtain refunds, it can seem to be the perfect storm.

But is the answer to such wave of negative publicity a SLAPP lawsuit? Really?

SLAPP, or strategic lawsuit against public participation, is basically a threat to shut someone up by threatening to sue him/her. Just the lawyer costs would give people pause. Often, it's easier to just roll-over... Unless you live in a state with anti-SLAPP laws and can find some pro-bono lawyers to help you.

But in the age of Twitter and Facebook, such news will leak out immediately, then whatever you're trying to hide is actually thrust into the light. The Streisand effect was named after Barbra Streisand, who tried to sue a photographer to keep photos of her estate private. When the news of the lawsuit broke, the downloads of photos of her estate skyrocketed from 6 (2 of which by Streisand's attorneys) to 420000+ in the next month alone.  Not to mention the lawsuit was tossed out and Streisand ordered to pay the photographer's legal fees (over $150000).

So why is LuLaRoe trying to attract attention to its own woes by mistreating is own reps?

It's like a snake trying to eat its own tail.

It ain't pretty.

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