LulaRoe - Latest Pyramid Scheme/Scam

[ronb]

A lady I've been seeing mentioned she was going to a LuLaRoe party next week, so I got the web and checked it out - its just the latest pyramid scheme that's going around. You sell clothes and recruit other people to sell clothes...its just like Mary Kay or Avon..what a rip off.

This stuff is like Herpes...it keeps coming back. I hope the government shuts down pyramid schemes once and for all.

[disneysteve]

There is a difference between a pyramid scheme and a legit multi-level marketing company. For example, Tupperware is a MLM brand but I would hardly call it a pyramid scheme.

That said, most of these fads die out fairly quickly because once you have had a few parties with everyone you know and gotten some of them to have parties, the supply chain ends.

I always encourage DW to politely decline the party invites she gets because we know if she goes, she'll feel obligated to buy something whether she wants to or not.

[bjl584]

My aunt was doing something similar with candles. Not sure if she still does it anymore. As Steve said, how many people does the average person really know? And how many candles does someone really need?

[DaveInPgh]

I got annoyed when I saw this thread last night but decided not to respond at the time.

Avon is not a pyramid scheme. My mother helped put food on the table by selling Avon when I was a child. When my father was forced into early retirement due to health issues, my mother got a full time job as a cashier and my father took over some of the Avon responsibilities (placing order, filling bags and writing slips, etc.)

Also, I shop at church flea markets whenever my schedule allows. It is not uncommon to find an Avon sales rep set up and her table is always busy.

Don't lump Avon in with the pressure friends to buy because you invited them to a lame party thing

[disneysteve]

Don't lump Avon in with the pressure friends to buy because you invited them to a lame party thing

As I said, there are some MLMs that have staying power. Avon and Tupperware are probably the two biggest. They are pyramid organizations in the sense that you make more by getting more people below you to sign on, have parties, sell products, and recruit even more people.

I think the reason those two have hung around is because they sell quality and useful products. And in the case of Avon, a consumable product line that needs to be regularly replenished. If you really like their moisturizer, for example, you're going to buy more when you run out.

My wife sold Tupperware for a while. The person who recruited her was big into the business to the point that she had a company van fully paid for by Tupperware based on her sales. My wife did it for a bit, until she had bugged everyone to come to a party or have a party, and then it naturally died out. We still have and regularly use a bunch of Tupperware products, though.

[DaveInPgh]

I am not a fan of home parties. I know my mother never had one for Avon. Back then it was a door to door thing. She would put a book in the door and those interested would call with an order. Books cost money so she would order enough to cover her known customers and some extras to try some new houses each campaign.

And yes, I delivered both books and orders whenever she needed me to.

Tupperware is expensive but durable. My wife gave it a try without doing the parties. Made a small amount of money and loaded our cabinets with some great containers.

[Nika]

Selling Tupperware is not a rational use of one's time I think. It is similar to hand-crocheting blankets on etsy. If you look at your per hour rate (and that would include all the prep, answering emails, follow up) you are probably better off with a regular job.

If you are going to sell something, it should be something like pharmaceuticals, insurance, securities...

[disneysteve]

Selling Tupperware is not a rational use of one's time I think. It is similar to hand-crocheting blankets on etsy. If you look at your per hour rate (and that would include all the prep, answering emails, follow up) you are probably better off with a regular job.

You are correct, but you're missing the point. People who do these things don't want, or can't get, a "regular" job. I know a lot of people who knit and crochet. They can do it while they're watching TV at night. They can do it while they're sitting in the car waiting for their kid to get out of school. They can do it in the waiting room at the doctor's office. Then they can sell what they've made on etsy or at a craft fair. They're monetizing time when they would otherwise be idle.

[DaveInPgh]

You are correct, but you're missing the point. People who do these things don't want, or can't get, a "regular" job. I know a lot of people who knit and crochet. They can do it while they're watching TV at night. They can do it while they're sitting in the car waiting for their kid to get out of school. They can do it in the waiting room at the doctor's office. Then they can sell what they've made on etsy or at a craft fair. They're monetizing time when they would otherwise be idle.

To add one to this, my wife crochets because she enjoys it. It isn't work to her. The majority of her creations are gifted or donated. She does sell some. But even with a labor cost around or below minimum wage, most people do not want to spend that when they can get a non hand made equivalent (or imported hand made equivalent) at Walmart for pennies on the dollar.

Whatever she gets out of it is worth it to her because it is a stress relieving hobby for her.

[GoodSteward]

One of the best ways to know if something is intended to work more like a pyramid scheme rather than MLM is to know where the money is coming from. Do you make money on recruiting, or do you make money selling products? If you make money on recruiting, you could argue it is a pyramid scheme. If you make money only on selling products, it is simply MLM. MLMs are designed to be Multi level businesses, because that is basically what you are building. You are giving people the opportunity to create a business. As you bring on(recruit) new people and they sell products, you make money off their sells. As this chain effect grows eventually you don’t have to do anything but oversee things, just like a VP of a business. Some MLM do give bonuses for recruiting as well as selling a product, but those I still lump more into a pyramid scheme due to the ability to only ever recruit to make money.

As I have stated I really enjoy finances, and watching other people win with money. I joined Primerica (a MLM financial services company) a while back because I wanted to be able to do just that face to face with the power of a strong financial company backing me. However, they get a TON of flak for being a pyramid scheme or having bad products. Neither is true. The biggest drawback to them is that it is too easy to let completely stupid people loose to sell and advertise for them. This makes them appear to be a bad company, but IMO they just have too few of regulations for new people.

I made 600$ in two months, and only had 100$ in it. I profited from it. The other reason they get flak is because it takes work. People are made to believe it is super easy to make money, but the problem is that it is NOT. The process is simple, but it isn’t “easy.” You have to be prepared for a very high failure rate and turnover rate. Just like a fast food business usually over hires in groups knowing a certain percent will quit/get fired. You have to be prepared to get rejected a lot, and put in more hours than it is worth to get rolling. It is just like starting a business. I find I do not have the time to do it since I work two jobs already, and I also get tired of putting in time showing people how they can improve just to watch them go backwards. I also have a hard time working under them because they do have this general impression of being a bad company, and it gets old having to defend them.

The success of a MLM attempt I believe is 1 part luck to 2 parts work. At least that is what I’ve seen firsthand with Primerica and those who make a living with it vs those who can’t. I have friends who are in other MLM and I see the same things.

[disneysteve]

But even with a labor cost around or below minimum wage, most people do not want to spend that when they can get a non hand made equivalent (or imported hand made equivalent) at Walmart for pennies on the dollar.

That's true. The key is to make something unique that isn't available commercially. For example, my wife makes t-shirt quilts. She gets $200-250 for them. There are places online where you can send in your shirts and they'll make it for you but they are not cheap and folks prefer working with someone they know and trust.

[ronb]

What I don't want is for my friend to get sucked into a scam...if she pays the LuLaRoue fees she could loose like 5 or 6 grand.

[disneysteve]

What I don't want is for my friend to get sucked into a scam...if she pays the LuLaRoue fees she could loose like 5 or 6 grand.

That's insane. You sometimes need to spend money to make money, buy some display products and such, but no way would I spend thousands.

[GoodSteward]

What I don't want is for my friend to get sucked into a scam...if she pays the LuLaRoue fees she could loose like 5 or 6 grand.

Wow, That sounds outrageous. I only invested 100$.

That sounds like MLM for 1%ers lol!