BONUS 1: Overpriced and Underwhelmed

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Hey, it's Jane Marie.

We're releasing four bonus episodes from season one for the next couple of weeks.

They're about MLMs, again, some of your faves, the ugly banana leggings company for one, and another one that's sort of like a cult.

If you want to unlock all of the bonus episodes right now, you can go to stitcherpremium.com and sign up for a free trial with the code DREAM.

You'll get access to all four bonus episodes today and a free month of listening without ads in Stitcher.

And you'll also be supporting our show.

That's stitcherpremium.com and sign up with the code DREAM to listen to everything today.

Otherwise, you gotta wait over the next four weeks.

Thanks.

Right after we wrapped production on season one of The Dream, a scandal happened in the MLM world involving a company I jokingly refer to as the Ugly Banana Leggings Company, Lula Row.

Lula Rowe is an MLM, a huge one, based out of Utah.

They carry more than banana print leggings.

There are also dresses and shirts, all kinds of what they call buttery soft knitwear and a variety of prints.

And all the styles have names, like actual human names, like Debbie and Jill and Irma.

So this MLM, they got into trouble last year for not paying one of their vendors and ended up in court.

They've actually ended up in a bunch of courts for a bunch of reasons.

I was doing all kinds of other reporting at the time and didn't follow the case super closely.

So we found someone who did.

I'm Haley Peterson.

I'm a senior correspondent for Business Insider.

I mostly cover retail companies and I cover both large and small, private, public, includes Walmart, Amazon, Whole Foods, Kroger, really anything that people buy, I write about.

Including

Lula Row.

LulaRowe popped onto my radar several years ago.

I think it was like three or four years ago, when I heard about these online parties where mostly women were buying up leggings really quickly.

They would go up for sale and they'd be gone in a matter of minutes.

Hey, welcome so much for joining.

We're going to do Sarah's right now.

They are $70.

They are true to size.

If it has a lot of stretch, go down one size.

If you have any questions.

So they will have a Facebook live party where they will invite all of their shoppers.

They have these massive shopper groups that they

have thousands, sometimes thousands of members in them.

And they'll go live on Facebook and sell items almost like an auction.

And they will hold up, sometimes they'll unbox items in real time.

This is a Jacquard fabric, it's gorgeous.

It's a cream with the dark blue, there's yellow, and there's red in there.

Look at that print, it is so pretty.

Jacquard fabric.

And then they'll say, Whoever comments first that it's sold, it goes to that person.

And people are just dying to get particular patterns.

Does that make sense to you?

I know it seems probably very complicated.

It does.

What doesn't make sense to me is that I've seen these clothes

And they look like

almost all of them look really similar to the $4.99 dresses that I buy for my five-year-old at H ⁇ M.

And do you know the ones I'm yeah?

And there's even Walmart's been coming out with a lot of really colorful leggings lately.

There's a lot of food patterns.

A lot of cultural appropriation prints going on.

I spoke to someone once, a consultant, I can't remember where she was, but she was somewhere on the, I think maybe it was Chicago or something in the middle of the winter.

She got a Aztec prints in her box.

It was just a box full of Aztec prints.

And she said, there's no way I'm going to sell this in the middle of the winter in Chicago.

I will explain quickly.

When you're a consultant for Lu LaRowe, you don't actually get to pick the inventory that you sell.

You pick the styles.

What?

You pick the silhouette, but you can't actually pick the patterns, the colors, anything like that.

So that is all sight unseen.

So you're buying a box of essentially unknown items.

And that box was $5,000.

That's right.

The initial buy-in to become a Lu LaRowe seller was $5,000 in the beginning.

It's apparently only $2,500 now.

When the company first came out, people were really excited about it.

They really appealed to people who worked from home or stay-at-home moms that wanted something that was going to be forgiving, to wear, that was comfortable.

So Haley started looking into this company, selling $5,000 mystery boxes full of leggings.

And what she found is surprising if you've never heard our show before.

The people that have done really, really well with LuleRaw, which are a very small percentage,

have made a lot of money.

Some people making bonus checks since then of upwards of $90,000 a month.

If you take a look at the numbers, the company had about 2,000 consultants in late 2015.

That jumped to about 30,000 about a year later.

And then within six months, the company had doubled the number of consultants to more than 77,000 people.

And they're all buying in for 5,000.

That makes the first 2,000 very rich.

Exactly.

Those people who got in in 2015, early 2016, are the ones who were really successful.

And I can almost predict the story that I'm going to hear once somebody tells me what year they got into Lulu Rob.

Like you can say, okay, 2017, here's what happened.

Exactly.

2018, oh, God.

Yes.

After interview after interview after interview, it's been that theme has emerged over and over and over again.

Where did things start going really wrong?

That would be around 2017.

I would say that that's also interestingly when the company experienced its biggest jump in growth.

When the massive growth happened,

there was a bit of a production change, and that's when a lot of complaints started popping up about quality of the clothes that were coming out of LuLaRow.

There's even a hashtag you can look at on Instagram called LuLaRow Fail, where people post post pictures of clothing that's arrived with holes in it.

They also post photos of the front of pants where the print makes it look like you have a huge boner.

Some of those complaints were coming from customers and some of them were coming from consultants saying they couldn't sell what they were getting in their boxes.

Consultants were also complaining that they weren't getting their full order.

So they would order, you know, 60 items and get 20 items.

And the rest, there would be back order slips or sometimes no slips at all in their boxes saying,

you know, we'll send these to you at a later date, or here's some back, what they would call back office credit for these items.

Essentially, the factory at the time couldn't keep up the quantity or quality of the clothing that was in such high demand.

And according to Haley, at the beginning at least, that demand appeared to be real.

Like there were real end consumers, women who wanted stretchy leggings and dresses and wild prints for slightly above what you might pay for the same thing at Target.

But then another problem started happening.

In addition to patterns being out of season and the dip in quality and the back order issue, sometimes boxes contained way too many of the same exact item.

Obviously, all of this made it difficult for consultants to assemble decent collections to sell to their followers.

So they had to get creative and they started doing something that may have been the biggest turning point of all.

They began selling to each other.

Moving inventory around the country unbeknownst to Lu LaRowe, and LuleRowe's profits began falling even faster.

Still, you've got money from new recruits and old going out to Lu La Row and screwed up orders of crappy banana leggings coming back to sellers.

And then, of course, in true MLM fashion, rather than fix those problems right away, Lu LaRowe does a misdirect.

They decide to implement a buyback program, which they were actually required to have by law in the first place, to entice even more new sellers.

And I think at the time it was meant to be sort of a, here's a risk-free way to get into Lu LaRowe, because if it doesn't work out for you, we'll buy back all of your inventory, 100% of it, and there's no risk.

What ended up happening is a lot of consultants used that as an opportunity to get out of the business and sell back their unsold inventory.

Suddenly, Lu La Row had an influx of unsold clothes coming back to their warehouse and a growing number of refunds that were owed to consultants.

And these were in amounts of 5,000, upwards of 25,000 according to consultants that I've spoken to.

So and that was also around the same time that the company changed its compensation structure so that bonuses were no longer based on what their teams were buying wholesale from LuleRow.

It made it so that the compensation for them was based on what their teams were actually selling to customers.

And that resulted in

reportedly a sales loss for a lot of or revenue losses for a lot of top leaders within the company.

And so suddenly it was not as lucrative of a job.

What do you know?

When the company decided to function slightly more like a normal business and follow the rules that the government says must be adhered to in all MLMs, the thing falls apart.

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So you have a kind of a perfect storm of things going wrong at this company.

One of the things you said about sending everything back and then were they paying?

No, that is the short answer.

In some cases, yes, I think that that may have happened.

But I spoke to a lot of consultants who complained that they were waiting months, sometimes over a year, to get their refund checks for the inventory they sent back to LuleRow.

And sometimes the checks that they were getting were not in the amounts that they expected.

LuleRow had a lot of rules about what kinds of inventory they would accept back that some consultants have referred to as LulaMath.

And

some people were really struggling financially while waiting for these checks that were worth $5,000 or more.

And I will say, however, that I've heard anecdotally over the past several months that LulaRow has been sending checks out.

I don't know if that is a result of our reporting or a result of the Washington Attorney General suing LuleRow and

in part demanding that they refund consultants, But people that have been waiting more than a year have started to see their checks come in.

Let's talk about the legal stuff.

Let's see.

LuLero is facing a lot of lawsuits.

Some of them have been settled.

Some of them are still moving through the courts.

There have been lawsuits alleging that LuLaRoe stole prints for its clothing.

The most recent lawsuits are the

Washington Attorney General sued LuLero, claiming that it was an illegal pyramid scheme that made misleading income claims and encouraged its consultants to focus more on recruitment than selling clothes to customers.

The lawsuit also said that a majority of people that sold LuLero ended up losing money.

LuLaro has denied the claims in this lawsuit.

It is still moving through the court.

Another lawsuit, which hit last fall, is from Providence Industries, which is also known as MyDire, which for a long time was LuLero's chief supplier.

And MyDire has sued LuLaro for now more than $63 million, claiming that it failed to pay its bills for as long as seven months.

And in some cases,

some of the money that it says that LuleRow owes it is for items that LuLaro said it no longer wanted after production or items that LuLaro asked MyDire to store

until it could pay for them.

The lawsuit from MyDire also claims, and here's where things get really juicy, it claims that LulaRose's founders, a couple named Mark and Deanne Stiddam, were doing some funky things with the money they owed MyDire,

like maybe hiding the money in shell companies.

More than 20 shell companies, I think 17 of which were set up over the course of two months or so, and that they are hiding these assets so they can fund their quote-unquote lavish lifestyle.

That's a direct quote from the lawsuit.

Lavish lifestyle.

Finally, we get to the Lamborghinis.

Actually, the cars these folks collect aren't Lamborghinis.

They're even more expensive.

We'll tell you all about it on the next episode, but back to the courtroom for now.

The lawsuit also included a quote from Mark Stiddom that was allegedly said to an executive at My Dyer that he was going to abscond with the company's assets and go to the Bahamas with his wife.

Mark has come out and vehemently denied this, saying that that is patently false.

And what is the stiddom's defense for not paying for all of these

that they don't have the money?

No,

that's not one of them.

Their defense was actually that they don't owe the money because the clothing was crappy, which I can see, but dude, you figure that out way before you owe someone $63 million, no?

There's also My Dyer has said that they demanded payment within a certain timeframe, and there's a disagreement over what that timeframe was.

So, okay, what you'd expect, and this is what I expected when the first season of The Dream came out.

What you'd expect is just hordes of Lula Rose sellers coming to their defense.

That's right.

Yeah.

And there has been a little bit of that.

And Deanne has really, she's very active.

Deanne Stidham is very active on social media.

She goes on Instagram Live almost every day and tries to sort of rally the troops and say, you need to speak

about the gift that Lula Rowe is in your life.

Hashtag because of Lula Row.

Hey, everybody.

I am so excited.

I am in a great mood because listen to this song.

I will live.

This is the song.

I'm a fighter.

That's what we are, man.

We are fighters.

I won't let you down.

And mentors and team leaders have told consultants,

and I've learned this through interviews, that whenever you buy a new house or a new car or, you know, something good happens in your life, you hashtag because of Lu La Row and share that with people on social media.

That, as I interpret it, is sort of like a recruitment tool to say, hey, look, this is what your life can be like if

sell Lula Rowe.

We're part of something huge and big and growing.

And guess what?

The more we do, the better it gets.

The more we give, the the more we get.

Okay, I'd watch these videos of Lula Rowe's owner, Deanne, and she's wild.

She posts Instagram videos while driving, in case you're wondering how committed and yet reckless the woman is.

She looks like she wants to look like Stevie Nicks, but instead, she just looks like a grandma wearing too much makeup and jewelry for a trip to the grocery store.

Not that there is such a thing.

Pilot on, ladies.

I've also seen a video, it's a few years old, of her and her husband on the morning news talking about how great they are.

We have a multi-billion dollar business.

It was not built by tricking people into giving us their money.

LulaRoll works for you.

You don't work for Lula Roll.

You get the product, you put it before people, and you sell it, and you have money.

And that's the simplicity of this business.

And it's...

That's as easy as it can be.

And so Dean's really been, you know, trying to,

I guess, restore confidence in the consultants that remain within the company by going on Instagram live every day and saying, we're good, everything's fine.

We've got new styles coming out.

We've got tons of stuff in the pipeline.

Don't worry because, and also don't read the internet.

Don't pay attention to the internet

because

it will distract you.

You know, it'll distract you from your business.

You need to work your business.

She said that over and over again.

And in the face of criticism, so has her husband Mark.

I ask one question.

How long do you want to be upset and angry?

It is a choice.

Once again, with your permission, my life philosophy is that we choose our emotions.

I'm not asking you to believe that.

I'm not asking you to buy in.

I'm not telling you that I'm right.

I'm saying that's a philosophy that has worked so well for me.

Do you have a right to be angry?

Yes, you do.

How's that serving you?

How does it feel to be angry?

And do you want to be angry for a minute?

Do you want to be angry for an hour?

Do you want to be angry for a day?

For a year?

Those choices are up to you because eventually, hopefully, you won't be angry any longer.

But it's so much better to not be angry.

It's so much better to be happy.

And I'm telling you that your happiness is a choice.

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But we don't know you all personally.

Deanna and I love you.

We believe in you.

We pray for you.

So with that, thank you very much.

Have a wonderful evening.

Good night.

How long do you, dear listener, want to be upset and angry?

Well, you should listen to the next episode where we take you deep inside the not-so-secret but oh-so-decadent world of the stiddims before you decide.

Next time on The Dream.

The way that they were able to build up their following and their company through social media is also giving fuel to folks who want to, I believe, take them down in a certain way.

A lot of financial malfeasance, and what accusers are saying is that they're saying they're running a pyramid scheme.

The Dream is a production of Little Everywhere and Stitcher, written and reported by me, Jane Marie, and Dan Gallucci, with help from Lyra Smith.

We're edited by Peter Clowney.

Our executive producers are Chris Bannon, Dan Gallucci, and me.

We have a brand new season coming out in a few months, so don't forget to subscribe.

And we also appreciate you rating and reviewing the podcast anywhere you listen.

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