LuLa Roe consultants have filed a class action lawsuit against the company alleging it ran a pyramid scheme. LuLa Roe’s business model was for consultants to buy the company’s merchandise then re-sell it to consumers out of their homes. The company was founded by single mother of seven, DeAnne Stidham, in 2012. Stidham was inspired by dress wholesalers and used network-based marketing (using existing customers to sell the product) as part of her business model.
The former consultants allege they were misinformed and lured into an unprofitable business model. The consultants were led to believe they could manage their own profitable businesses independently from their homes, and it only entailed “part-time work for full-time pay.” However, the consultants had to buy the clothing up-front and were pressured into buying more, regardless of whether they were able to sell their existing inventory. LuLa Roe’s slogan for consultants was “buy more sell more” and consultants were led to believe they would recoup their investments through sales. The company paid consultants based on how much merchandise they purchased on a regular basis. Many consultants never made a profit.
In addition, LuLa Roe allowed so many women to become consultants for the company that the market became saturated, making it even harder to re-sell the merchandise to consumers. When consultants talked to the company about their inability to sell, they were told they couldn’t sell because they needed to acquire more inventory – by ordering more from LuLa Roe. Thus, creating an endless cycle and even more revenue for LuLa Roe.
The lawsuit seeks $1 billion in damages.
LuLa Roe is best known for printed leggings but also sold various other items of women’s clothing.