Film Corner: LuLaRich (Eps 1-2)

LuLaRich

LuLaRich is a documentary on the rise and semi-fall of the LuLaRoe brand, a multi-level marketing company that has been accused of being a cultish pyramid scheme. I'm a cult survivor. I have thoughts.

Right off the bat, I will say: this is a well-made and gorgeous documentary series. Little touches like using the LuLaRoe logo (the rainbow square) to illustrate multi-level marketing and how it works is just genius. The founders, a married Mormon couple named DeAnne and Mark, come on screen. They're very carefully dressed to be aspirational: he's in a well-tailored suit, she's in a beautiful dress and eye-catching but tasteful strappy sandals. (Editor's Note: I'm informed these are designer shoes which are very expensive and the fashion set would recognize them and know the name-brand.)

The basic outline of the business is given: "retailers" (regular women like you or someone you know) buy $5000 worth of LLR merchandise straight from the company, and are then expected to sell the merch at a markup that they pocket. Mark opens with a story about an ancient Greek philosopher that feels like something out of a church sermon. There's definitely a preacher vibe to his communication style, and we've seen clips already (in the opening) of him bringing down brimstone on the retailers.

DeAnne gives us the brief rundown of their 14 children, 3 of them "adopted from Romania", and 2 of the children are married to each other (no blood relation). If you know about quiverfull and adoption in the Christian community, these are familiar red flags. (Editor's Note: I'm informed that 3 of the "children", including the married couple, were met by Mark and DeAnne as adults and became close friends of the family, but were never formally adopted.)

Mark gives me whiplash by saying he grew up in an ideal typical "middle class childhood" and/but "never considered having a job. That wasn't for me." He means that he wants to work for himself as a salesman / entrepreneur, but what a way to put it. Even in the halcyon days when one paycheck could cover 11-children families, for a kid to never consider a job is...not typical of a middle class upbringing. Like, I considered myself typically middle class and I had a wage job at 16--hired the week before my 16th birthday, actually--because that was just what you did. You got a job. The fact that Mark was raised believing he didn't need to do that is interesting.

I should point out that, hmm, some members of the cultier Christian sub-communities have a lot of rationalizations about why they're special and don't have to follow secular rules about taxes, welfare, etc. Google "bleeding the beast" for deeper discussion.

Mark tells a story about how when he was 16yo they had some financial crises. A neighbor offered to Mark's dad that he knew an open job. Dad: "There's only one thing worse than being flat-broke and that's knowing I'm going to make $412 a week for the rest of my life." Even in a financial crisis, Mark's family taught him that wage work was anathema. He explains that there's no "upper limit" in entrepreneurial work and that how much money you bring in is "entirely up to you".

Mmm. I should also note that there's been a rise of a "prosperity gospel" theology in America, with the belief that God rewards good people with money and success. (And that if you don't have those things, you're not trying hard enough and it's your fault.) This is reminding me very much of that; the idea that how much you make is dependent entirely on you, and that the sky is the limit. It's a very white American privileged viewpoint.

DeAnne talks about how when she was a young wife and mother she longed for designer clothes she couldn't afford. At a swap meet she met a man with dozens of kids' dresses: $80 brand name dresses at $10 prices. Counterfeits, stolen, or overstock? Not explained. DeAnne arranges house parties to sell these dresses.

This is interesting, because what she (apparently) doesn't do is BUY the dresses and sell them at a profit. You know, the entire LuLaRoe business model for their "retailers"? She didn't get rich doing it that way. Instead, it seems like she's getting some kind of commission for arranging and hosting the parties. Which of course is a much less risky investment for her; she doesn't have to worry about getting stuck with stock that doesn't sell and taking a loss. Since that IS what plagued the LLR sellers, it's an interesting contrast. Her suppliers make money because the dresses cost them little/nothing, she makes money as an event coordinator, and nobody has any real financial risk involved.

The shady possible-not-totally-legal implications of this first business of hers are not lost on me. See again above, re: bleeding the beast and not worrying overly much about laws. Particularly laws regarding copyright and trademark. (We'll see more on this later.)

@LouisatheLast. So… his dad thought getting well above the federal minimum wage NOW, but in 1960s dollars worth a hell of a lot more, was beneath him? So I ran a money conversion to see how much $412 in, say, 1965 would be worth today. Y'all. It’s $3,439.59. Per week.

Oh. So I think we file this under the well-documented phenomena wherein rich Americans insist they're middle class? My unresearched gut feeling is that wages like these would put him well above middle class.

DeAnne talks about how she sold dresses around the state, and brought $40,000. This sounds rehearsed, part of the story she probably tells about how LLR started. It's still very unclear what she's being paid for (dresses? or parties?) and where her stock comes from. DeAnne began making maxi skirts at home and selling them. Maxi skirts are...complicated. They're very much a part of conservative Christian culture. They're simple to make. They can have a lot of fabric or very little.

Mark was being sent out daily for fabric and says some of it was $1 a yard, some $4. As a quilter AND a business person, I'm very alarmed. It doesn't sound like they're tracking costs and adjusting prices accordingly, if all the prices for the skirts are the same. DeAnne was approached by a buyer who wanted 20 skirts for her friends, and DeAnne sold them at a bulk discount so that the buyer could resell them at retail amount and pocket the difference as a finder fee. This is their first "retailer" and LuLaRoe begins.

An expert on multi-level marketing explains that after 13 levels of recruitment, you pass the number of people on earth. So you either get in early and be one of the 20% or so who make money, or you suffer as the 80% underclass who don't.

@DefectiveBecca. Initially, she had a bunch of family members sewing the maxi skirts. They were very simple, unhemmed, and they never lined up the stripes. They quickly outsourced it.

THEY WEREN'T HEMMED?! I really think it's something people might not understand; the appeal of cheap "modern" looking (in terms of fun fabric) clothes for your litter of 7+ teenage daughters. It's a lot of kids and young women needing a lot of clothes. But, Jesus, the fact that they weren't even bothering to hem the skirts... no wonder they were able to pump out product fast and fill the house with bags of skirts. I would love to hear how many of DeAnne's daughters and granddaughters she put to work pumping out dresses, but she doesn't go into that.

The documentary does occasional cuts to a Washington deposition of Mark and DeAnne and it's really interesting how closed and hostile they are in that situation. They "don't know", they "can't recall", they "aren't sure" the answers to basic questions. We get to our first retailer commentary, and as several of you guessed: she was a stay at home mom / army wife. Several of you have talked about the sapping boredom in that situation. She would drive dresses around town in her free time and sell them and chat.

DeAnne talks about how many retailers they were getting, and the "simple" pricing scheme: they pay $10 a skirt, sell for $25, and profit $15. I wish the documentary had gone more into the supplier side because these skirts had to be made for pennies to profit. The LuLaRich documentary doesn't document when they switched from homemade to supplier-made, nor who the supplier was, and I wish they had. I do know that the clothing industry has a huge sweatshop problem.

@DefectiveBecca. The homemade skirts were when she ran the Fitted Maxi business with her twin sister Dianne. They started outsourcing within a few months. Then DeAnne cut Dianne out of the business and created LuLaRoe.

The infamous leggings enter the picture: the "buttery soft" leggings that fit everyone, including fat women. Fat women were a big part of their buyers, which is why it's so interesting that later we'll see the company was fat-shaming. One of the retailers explains that with other MLMs, everyone is flogging the same colors and flavors. With LLR, because of the limited runs of fabric, 2 retailers in the same area would have completely different inventory. This is crucial to their early success, because it made the process of signing up a bunch of friends to also be retailers something that felt cooperative. They weren't taking from your piece of the pie, weren't taking your customers. Customers would buy from you both.

LLR is at this point marketing themselves as an empowering opportunity for women to work from home with their children. Full time pay for part time work. To buy in? $5000. The business grows and DeAnne and Mark bring in their family to fill the needs of the business. Their children become the chiefs of various departments. Red Flag: Family members may not tell you honestly when things are wrong. A lot of cults keep leadership positions reserved for family members, because they're going to be the most loyal to the head: to leave, you have to sever your business ties, friend ties, AND family ties. That's hard, and very few can get away or even try.

We're in Episode 2 now. A lot of the women talk about how they just needed a little extra money as a mom. I think about the child tax credit. DeAnne insists that they never tell anyone to go into debt to join, but the retailers relate otherwise. They're encouraged to get a credit card, to borrow from family, to make and sell things. One woman sells her breast milk in order to afford the sign-up costs.

LLR employees talk about how they were made to wear LLR pieces at work. I know this isn't uncommon at some companies, but it's always very troubling to hear. A designer doesn't need to wear her own pieces in order to design. A wonderful guy from the tech side of things talks about how his job in the email dept was to insulate upper management from customers. ...and the data entry was 500 people inputting into the same Google Doc sheet. Lag and errors were endemic.

Mark brags that they've spent money on software they bought, planned to implement, and then abandoned as obsolete. They're 24yo "excel wizard" son was making compensation plans on the fly. Stuff like that. People will say that this is a predictable effect of too much growth too quickly, but I disagree. I see a stubborn unwillingness to hire experts outside the family. They would rather keep the chosen loyal family in charge than do things right. That's a huge red flag.

New retailers were put through an onboarding process which is really sinister and I need to pause and explain this. Women would sign up to indicate their interest in joining LLR. They would go on a waiting list of 3 months or more. They would then be called and told they were clear to "join the family" and order their first $5,000-$10,000 box of merchandise.

The waiting period may have had legitimate business reasons (running a credit check, perhaps?), BUT it also functions as a power play. YOU are asking permission to join THEM, YOU are being made to wait for THEIR approval. It makes the retailer feel chosen, special, lucky to get in the door. If you're lucky and grateful to get in the door, you're less likely to complain. There's a power imbalance early on, and it's very different from the usual Retailer-Supplier relationship, where the retailer decides whether or not to buy from the supplier.

As much as LLR leadership likes to call these women "small business owners" and "retailers", they aren't really retailers in the normal sense; most retailers don't sell ONE product line from ONE supplier. Even specialty stores have more than one brand they sell! And/But/So you have this ecstatic euphoria of women being grateful for being *allowed* to spend $10,000 on leggings. The need for the faithful to be grateful is a very key problem in cults.

Women would be told to get ready for the boxes to come--to set up an office, rooms, etc--because once the boxes came they'd be too busy selling to sort. What happened to that full time work for part time labor? Sounds like they're telling women to expect full-time labor! A retailer talks about the exclusivity of the product: a lot of you have mentioned FOMO, or the fear of missing out. Each pattern at LLR was used for only 3,000 pieces. So if you even *thought* you liked a piece, you better buy it! Right now! Or you'll miss out!

The exclusivity of the print lines served a dual purpose: it energized sales (don't wait! buy!) and it prevented retailers from being in competition with each other, since they all had different stock. If they hadn't, they might not have wanted to sign up new sellers! Mark brags that they put out a million new pieces a day but each print has only 3,000 pieces. Doing the math, that's 334 designs a day. So let's go talk to the design department, shall we?

The designers are being worked flat out to come up with new designs every day, with garish or "flare" being emphasized. But a retailer notes: they don't get to choose the designs they want to sell. This is important, ok? Regular retailers usually get to determine what they want to carry from their suppliers. They know what their local market wants. This is why you'll find different products in retail stores: a Wal-Mart in Dallas carries different clothes from a Wal-Mart in Galveston. But LLR is telling its retailers that they can pick their item types (shirt, skirt, etc) and they can pick their sizes, but the designs are going to be up to LLR.

Now let's say you're an actual small business owner that owns, like, a tiny comic shop. You're going to learn your local clients and carry what they like. You can research whether you have a large Magic The Gathering base or D&D base in the area. Maybe nobody plays D&D in your area, but there's a huuuuge Vampire The Masquerade group. That's going to influence your stock! Maybe you buy fake teeth instead of ogre minis, you stock D10s more than D20s. Your map section leans towards Urban rather than Fantasy.

But if you're a LuLaRoe "retailer" you don't have those options. You can't say, look, my clientele is really young in my college town; send me the memey stuff and the pastel goth stuff, but no big grandma florals or fruit designs. You get what you get. AND you've already paid for those clothes. Because you're not selling on commission, where LLR is taking the risk; you're buying the stock and hoping YOU don't get stuck if it doesn't sell. Question: If LLR is taking none of the risk on the product, if THEY aren't getting stuck with the "uglies" no one wants, what is ensuring that they put out high quality pieces and desirable designs that people *want* to buy? (Answer: Nothing.)

Oh, hey, this is horrifying. And my back of the napkin math was right.

@BridhC. I found the post! It's very enlightening/disturbing. "Textile Designers were required to do 50-60 patterns each day; Colorists had to generate 200-300 colorways each day."

Now we get to the multi-level marketing: for every person you recruit, you get a % of their monthly purchases from LLR. (And they have to keep buying every month, to stay active in the program that took months to join.) The number of recruits under you determines your rank within the company: Sponsor, Trainer, Coach, Mentor. Very loving communal names suggesting that you're nurturing and training the younger chicks in your nest.

LLR openly admits that they don't track sales to consumers--just to retailers--which means they have no insight regarding which pieces are selling, which retailers are thriving, and so on. Their business was just selling to retailers. After that, didn't care. One "mentor" had 5,000+ people in their "team". So of course she wasn't actually mentoring them each. That's not how mentoring works. A retailer explains that she bought $78k yearly goods and sold $83k, so that's a net of a mere $6k for the year. But her bonus was $65k. You can see where the real money was.

Mark seemingly starts to explain that only 20% of the retailers made bonuses but DeAnne shuts him down and says that it was just a nice gift to the retailers for doing direct marketing she was too overwhelmed to perform. Mentors were gifted special gold watches. They were pressured to spend their entire bonus checks on designer bags to be aspirational: people would sign up BECAUSE they saw the Louis Vuitton purse on your arm and wanted to know how you could afford it.

DeAnne would personally contact high level sellers upset if they didn't tag the good pictures on their Insta as "thanks to LuLaRoe". That's...a lot. Again, that reminds me very strongly of the cult mentality: everything good, you're supposed to praise God and the church. It's the double edged sword of prosperity gospel: failure is YOUR fault, but success is that of the church and god. Not you, never you.

This demand that retailers live above their means meant a few things. 1, free marketing. (You too can own these things!) But 2, it keeps you savingsless and dependent on the home company. If you're spending everything, you're not saving. It means that you're never going to get out and leave, because you NEED to stay involved because you're living paycheck to paycheck, no matter how large they are. Regular suppliers don't keep, say, Wal-Mart penniless so that Wal-Mart is dependent on them.

LLR keeps up enthusiasm and identity among the group by having huge events. Even outsiders would fly in hoping to win a raffle that would let them hop the waitlist line. They have a cruise for retailers. LLR spends money like water on recruitment events, and I'm watching this as the designers are overworked into exhaustion (how many unique patterns can even exist?) and the quality starts to downturn. They could've invested some of that event money into the clothes, but the clothes weren't really the product. The people were the product, and the events existed to bring in people.

That's the end of Episode 2. We'll take a break here.