CHESTER, Va. (WRIC) — You’ve heard the pitch: Work from home and make big money. But buying into a home-based business doesn’t always pay off.
8News investigated a popular multi-level marketing company called LuLaRoe. It sells colorful leggings, dresses and tops through Independent Fashion Retailers.
Amy Reece and her daughters bought into the company hoping to make some extra money. Instead, the Culpeper women are now left with $14,000 worth of clothing they just can’t sell.
“This is just ugly,” declares Reece as she rummages through the boxes of leftover merchandise sitting in her basement.
She explains that LuLaRoe chooses which patterns consultants receive and if you get stuck with less than popular prints, it’s tough to sell them.
“You get a box and you’re excited,” recalls Reece, “You ordered Irmas for the first time in however long and you order 5 of one size and all 5 are of the exact same ugly pattern that you still have 5 of sitting in the basement because nobody wants them.”
Even so, Reece says she felt pressured by LuLaRoe leadership to continue buying inventory. She explains at the time, the company paid out bonuses based on what consultants bought, not what they sold.
“Even though we weren’t selling, we were ordering like every week,” she adds.
Jeannette Mortimer is another former fashion retailer who says she felt pressure from LuLaRoe to invest more money on merchandise even though she was swimming in clothing no one wanted to buy.
“The Dorito print. The worma we called it. It looked like it had worms on it. I mean it looked like you handed a 3-year-old a coloring book and said here make our next 50 designs. It was awful,” says Mortimer.
The Chester mother of three, who works a 9 to 5 job claims LuLaRoe’s promise of part-time work with a full-time income fell short for her.
She says this is despite spending hours every night working her business and never going to bed until at least one in the morning.
“I’m like I didn’t start this so I didn’t have a life,” explains Mortimer. “I have a 12-year-old who was telling me, ‘Mom you’re here but you’re not really here because you’re always on your phone doing LuLaRoe.’ And I was like, you know what? I’m done.”
Reece felt the same way. “Done fighting to sell. Done fighting to order my inventory. Just done. I just wanted my house back. I wanted my life back. I wanted the craziness to go away,” she adds.
Going out of business only brought the women more anxiety.
While waiting for LuLaRoe to send them shipping labels to return unsold merchandise, they say the company changed its refund policy from 100% of their money back to 90%. Consultants would also now have to pay the postage to ship those heavy boxes back. In addition to that, the company could refuse to pay for some of the returned merchandise.
“If you got your shipping papers, you’re good. If you don’t screw you is pretty much what they said,” explains Reece, “And I was under the screw you part of that amendment because I have yet to receive my return authorization forms to send back that inventory.”
So her $14,000 investment sits in the basement. Reece isn’t sure if she’ll ever be reimbursed.
“Now my concern’s begin to be are they going to go belly up? If I send my inventory next week, will I ever really see my money,” she says.
Reece is part of a class action lawsuit demanding LuLaRoe honor that 100% refund policy.
The company is also being sued for $1 billion dollars by former retailers who claim LuLaRoe is a giant pyramid scheme.
8News reached out to the company which pointed out that it had more than 2 billion dollars in sales last year explaining “This is a testament to consumer confidence in our apparel.”
It added “Independent Fashion Retailers who are leaving the business have clear and established processes for contacting LuLaRoe to manage their cancellation process. As a policy, we do not respond to inquiries about the private and confidential business information of Independent Fashion Retailers.”
It’s always a good idea to do your research before buying into any business opportunity. Here is some advice from the Federal Trade Commission.