LuLaRoe Changed Its Refund Policy and Sellers Are Not Happy

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In May of this year, Racked reported that a growing number of LuLaRoe retailers were leaving the brand. In response to their complaints, the company issued a return policy that guaranteed 100 percent wholesale refund and covered shipping costs for unhappy retailers who wished to go out of business. According to that policy, LuLaRoe would issue return labels to any retailer who resigned officially and refund the entire wholesale cost of the items, provided they were returned in excellent condition. At that time, many retailers expressed distrust of a refund, and some only received partial refunds for the merchandise they had returned. This led many retailers to instead hold going-out-of-business, or GOOB, sales, which LuLaRoe said violated their retailer agreement.

On September 28th, however, LuLaRoe issued a clarification to their policy which claims the initial offer was a temporary waiver, and that from this point forward, any retailers choosing to close their LuLaRoe businesses would have to pay for shipping and would only receive 90 percent of the wholesale value of those accepted returned items. According to the email communication, the policy announced previously was merely temporary and was ended because retailers were taking advantage of the company. “This waiver, in place from April to September to address this specific issue, was never intended to be permanent,” the email read. “We decided to end the waiver when it became evident that a good number of Retailers were abusing the program by returning product in extremely poor condition and providing inaccurate claims, as well as the Retailers using it as temporary solution to struggles in their business.”

This conflicts, however, with the initial announcement of the 100 percent buy-back policy, which stated: “This policy does not have an expiration date, nor does it have a required timeframe in which the product should have been purchased in. The only qualification for this policy is that products returned are required to be LuLaRoe products and must have been purchased through LuLaRoe.”

Alice Monroe* has been a LuLaRoe retailer since July of 2016. Due to dwindling sales and some unexpected health issues, she decided to take advantage of the 100 percent buy-back policy and go out of business. It was important to Monroe that she go out of business the right way instead of holding a GOOB sale. “Sales had drastically plummeted and I was at a point that I was no longer able to order new inventory without going deeper into debt,” she says. Monroe emailed her resignation letter as instructed and completed what is known as the “form stack,” an online submission of inventory to return, item by item. She packed each piece of her remaining inventory in ziplock bags, folded perfectly with tags visible just as her instructions dictated, which she says took hours. She received communication from home office that she would receive return labels shortly and be allowed to return her remaining inventory for 100 percent buy back.

What actually happened, however, is that Monroe received an email stating only that her case was closed. “I called home office and sat on hold for three hours, only to be hung up on by the system,” she says. “I called back the next day and waited 2.5 hours on hold before finally being told that I should sit tight for my shipping labels.” Nine days later, she received the email from home office that the “temporary waiver” had ended.

In order to ship all of her remaining inventory, Monroe would have to pay around $600, so she decided to hold a GOOB sale. Through that sale, she has sold nearly 90 percent of her remaining inventory.

Another retailer, Mary Franklin,* has been in the LuLaRoe business for fewer than six months, but says she quickly regretted signing up. She felt immense pressure from her upline to buy more product, but realized that selling online would not yield a successful business. When Franklin decided to go out of business, she notified her sponsor, who told her, “Not all women are meant to be successful.”

Franklin was repeatedly assured that she could return her remaining inventory under the 100 percent policy; she had decided to end her business when that policy was announced. She completed all of the form stacks, requested a guarantee on LuLaRoe letterhead, and informed the company that she would return the merchandise after giving birth. “They dragged their feet and changed the policy,” she says. “Now I’m stuck.” Franklin plans on opening all of her carefully packaged boxes and running a GOOB sale, but the very thought gives her anxiety. “I haven’t gotten ANY email responses from them. They don’t return my phone calls. They are evil.”

When asked for comment, LuLaRoe reiterated the emails that retailers received, stating:

LuLaRoe has a longstanding policy of reimbursing a departing Independent Fashion Retailer 90 percent of the net cost of the original purchase price of merchandise, but various conditions apply. Some of these conditions include: the product must be purchased by the Retailer from LuLaRoe, it must be in resaleable condition, and it must be product purchased within the past year. Shipping and handling is paid by the Retailer. The policy has not changed since it was implemented in June 2015. From April-September 2017, we provided a temporary waiver to our policy. The waiver allowed departing Retailers to recoup 100 percent of the wholesale cost of remaining inventory, and to have shipping and handling paid for by LuLaRoe, to make their transition even easier, but that period ended. To be fair to Independent Fashion Retailers who were in process of exiting the business when the waiver ended, LuLaRoe grandfathered those who either received an email confirmation from LuLaRoe of a refund amount due to them, or received valid return shipping labels from LuLaRoe, to receive the terms under the temporary waiver. We continue to believe we provide a fair and generous path to Independent Fashion Retailers who want to discontinue their own LuLaRoe business.

But many retailers going out of business no longer trust the company’s word. Recently, two of the top-selling mentors in the company have jumped ship, leaving retailers wondering if bankruptcy is imminent. Jenny Spiewak, currently in the GOOB process, worries about the financial state of the company. “They are showing signs of financial difficulty, which made me scared for my own future with them,” she says. “If they file [for] bankruptcy, money on LuLaCards [the method of payment from LuLaRoe to retailers] will be seized.” Spiewak planned to wait until the end of the year, but the rumors of financial trouble prompted her to move up her separation date and start a GOOB sale. “I started at 1,400 pieces and I’m now just over 1,000 in 24 hours,” she says. Once she surveys her remaining inventory, provided none are damaged, she will send in her resignation letter. “I will never have any further correspondence with them,” she says.

*Names changed at the request of sources.