LuLaRoe was a force to be reckoned with as an eCommerce merchant a few years ago. Riddled with lawsuits and conspiracy, the once-booming clothing retailer has since hit its downfall.
LuLaRoe has an unconventional business model as a clothes retailer. LuLaRoe does not sell their products themselves, they sell through independent retailers worldwide. Through multi-level marketing (MLM), LuLaRoe requires their sellers to make an initial purchase of $5,000, to turn around and sell these products to customers.
LuLaRoe’s sellers price these items at a markup and sell them through their medium of choice. What LuLaRoe coins as, “a social retail model,” these sellers can create “shopping communities” in-person or online. A few years ago, LuLaRoe communities were commonly on Facebook: sellers would set up a group, a time for the sale, and then conduct the transactions themselves.
Now if there are alarm bells ringing in your head already, you have good instincts: this is a sketchy business model. As a company that provides eCommerce web design services, we could not agree more.
This unique way of conducting business has since caught up with LuLaRoe and they have been in many legal altercations: many accusing them of being a pyramid scheme, and violating sales taxes. LuLaRoe also received complaints about their quality and their refund policies.
So where did it all go all ‘LuLaWrong’ for LuLaRoe? What can we learn in the eCommerce industry from their mistakes? Here are three lessons that we can take away from LuLaRoe’s downfall:
- You should be conducting business through a secure central medium
One of the most glaring issues with LuLaRoe’s business model is that they do not use a central secure medium to conduct their sales. There is no central hub that customers can return to for questions regarding their purchases. LuLaRoe conducts all of their sales through third parties.
Their company site is essentially a front, filled with graphics and photos, with no real substance. Customers can see items but have no way of purchasing them without an independent seller. Furthermore, the return policy detailed for LuLaRoe customers, is that they should, “Get in contact with the independent fashion retailer.”
So what purpose does the company site serve? Besides being aesthetically pleasing, I question its functionality otherwise.
This is one major takeaway from the LuLaRoe business model, you should be conducting your business through a secure central medium, to serve as the nucleus of the organization. With LuLaRoe, there is no core to their eCommerce business. You should be conducting your business through one consistent medium. Which can make an eCommerce business more efficient for you and your customers. As any eCommerce website design and development company will tell you!
This can increase your product and employee satisfaction. With LuLaRoe’s model, it was averaged that 70% of LuLaRoe representatives sold less than $5,000 worth of their retail goods. If business was conducted through their company site, LuLaRoe wouldn’t have inflicted this loss upon their retailers.
You should be conducting your business through a secure central channel, if you don’t want to make the same mistake as our dear friend, LuLaRoe.
- You need to be prioritizing the safety of your customers
With LuLaRoe’s buying and selling process, as we detailed above— there are third parties involved. LuLaRoe does not have a single, secure channel that customers can complete their transactions and receive customer support.
In conducting their business through their independent sellers, LuLaRoe does not provide a safe channel to protect their customer’s information. LuLaRoe is not strict about which payment provider their independent retailers decide to use. Although they do not encourage their sellers to choose a new payment platform— there are no regulatory measures in place to prevent them from doing so.
As a result, there have been allegations that certain independent sellers have been swindling their customers. And with no secure payment avenue in place, LuLaRoe has made it easy for them to do so.
In the eCommerce industry this is something we can learn from, ‘less is more’ when it comes to outside parties. When it comes to handling sensitive customer data it should all be under one secure company platform.
- You need to ensure the quality of your products
Aside from a rather blasphemous return policy, LuLaRoe does not provide a solid way to ensure product quality. As an eCommerce merchant, the most important thing you can do is: provide a quality product to ensure customer satisfaction.
LuLaRoe did not comply with this golden rule and has received multiple complaints about their product quality. There was no transparency from the company. LuLaRoe makes their independent retailers purchase their products, without seeing them first. Thus, the independent retailers have no way to ensure quality and sold these products to their customers. With this system: there was no check and balance regarding product quality.
Many customers complained about holes and weak quality of the products— primarily in their leggings. This issue was so significant, that the outraged customers banded together to start the Facebook group, “LuLaRoe Defective/Ripped/Torn Leggings and Clothes,” which boasts thousands of followers. When prompted about their quality control, LuLaRoe’s CEO simply responded, “We weaken the fibers to make them buttery soft. We have done all we can to fix them.”
As an eCommerce merchant, you should be listening to your customer’s complaints and making a product that is high quality. In eCommerce, learn from the mistakes of your fellow fallen retailers: ensure your product quality and listen to your customers.
You live, you learn
LuLaRoe has provided us with an example of what not to do in the eCommerce industry. With their flawed business model, it provides a learning experience for eCommerce providers everywhere.
If you would like to continue learning about what makes an effective eCommerce business, you should get in contact with a professional. Reach out to an eCommerce web development company, to ensure your company will be a success in the industry, rather than a flop.