LuLaRoe: SoCal's $1 billion clothing company with an ace up its sleeve
This is the untold story of an "overnight success" that actually begins in Chino Hills in 1987.
DeAnne Stidham, then a young stay-at-home mom with four small children, lucked into a box of frilly children’s party dresses. That set into motion a series of events that would lay the groundwork for what is now a $1 billion company.
That company, LuLaRoe, is best known for its butter-soft cotton leggings and flowy dresses in wild prints.
In just four years, Stidham says, it's grown from 300 people selling its clothes to more than 80,000 around the U.S. The company says sales last year totaled $1.3 billion, as legions of fans have flocked to at-home "pop up parties" to snag their favorite styles. Scores of other LuLaRoe "parties" take place on Facebook Live, as women log in and buy during live auctions.
Stidham, until now, has not talked to the press, but she welcomed KPCC to her new offices in Corona to share LuLaRoe's very local origin story and the business lessons learned along the way.
The thrill of the hunt
Back in 1987, Stidham was a young mom looking for a way to make extra money on the side. She soon crossed paths with a wholesaler at a local swap meet who was selling named-brand children's party dresses for a bargain.
"I came up with an idea that if he came to my house and brought them, I'd provide all the customers for him," she said. "We didn't have social media. We had answering machines and touch tone phones, so I really worked hard to put the word out."
Stidham's pop up party was a huge success.
"And thank heaven for him, he didn't want to be a seller of little girls dresses in women's homes. He said, 'I'll tell you what, I'll give you the profit of all of these and let you do this,'" she said.
Stidham used the money to buy more inventory.
"We called them dress parties back then. I just sold party dresses for Easter and Christmas – two times of the year where moms typically wanted to take a family picture, dress up really nice," she said.
Twice a year, she ordered wholesale children's party dresses. It was always a random mix of styles, colors and sizes since it was overstock merchandise. She'd load up her car, and drive to friends' houses who agreed to host a pop-up. They'd invite their neighbors and friends to check out her merchandise.
"I would unload everything, and I would just say a prayer to myself, 'Oh please, oh please, help that everybody will love these dresses, because, some of this stuff, I don’t like as much as other styles,'" she said. "And sure enough, that mom would come in, and she would just ooh and ah and scream, and she would take it."
Stidham realized that the random selection was actually a plus. Her customers liked the thrill of the hunt. If they found styles they liked in their children's sizes, or matching dresses for their daughters, they couldn't hesitate. They'd have to buy them.
"I call it creating urgency," she said. 'Women - we just don’t want to miss out. We love a great sale, we love a great opportunity."
For the next 27 years, her dress party business expanded beyond the Inland Empire to all of California and Nevada, Arizona and Utah. Friends and friends-of-friends throughout the western U.S. spread the word and opened their homes to Stidham and her dresses.
A little help from my (Instagram) friends
As the business grew, so did Stidham's family. She adopted three babies from Romania, later sponsored three teens from Romania, remarried, and became a step mom to four more. Her dress party business was a stable source of income, and she had no plans to change it.
Then in 2012, one of her daughters asked her to make a long, flowy skirt. Describing herself as "a mom who aims to please," Stidham pulled out her sewing machine and made the skirt. Her daughter posted a photo of herself wearing it on Instagram.
The likes came pouring in.
"All of her friends were so excited, and we had several requests, 'Do you think your mom will make me one?'" Stidham said. "Here it was, in the middle of summer. And I found myself back to cutting and sewing patterns ... I pretty much laid [the fabric] there and said, this looks like a small, this looks like a medium. And you know, you just make it work."
The orders multiplied. Stidham hired sewers and pattern makers, and she replaced her children's dress parties with "maxi skirt parties." Her loyal clientele welcomed the new merchandise, helping her sell 20,000 skirts in just six months, she said.
"They were my best customers, and they were as excited about it as I was. I would show up, and it was a very casual atmosphere. Same thing [as before]. People come, shop, buy and go. They can bring their kids. Put 'em on the ground. They can hang out together trying on merchandise."
Don't underestimate the lure of a sealed box
Stidham formed her new company in 2013, naming it after her three oldest granddaughters, Lucy, Lola and Monroe.
She added dresses, tops and leggings to the line, and found a super-soft cotton fabric for the leggings, which lit up social media and brought a fan-following to the brand.
In other ways, Stidham stuck close to her dress-party roots. This wouldn’t be a typical multi-level marketing company. There'd be no catalog at LuLaRoe, and no sales presentation for customers to sit through. Pop-ups would be hosted in homes and garages. Customers would be encouraged to bring their kids.
The people who sell the clothes work as "independent retailers," buying their inventory upfront. They can choose their sizes and styles, but the fabrics and prints are always chosen at random.
It costs about $5,000 to get started, which is more skin in the game than other direct sales companies require.
This structure is different from most other multi-level marketing companies, whose sales consultants earn a percentage of their own sales and often can't survive without recruiting a team of new consultants to sell under them. Often panned by consumer advocates, the traditional multi-level model has a poor track record.
Stidham insists that LuLaRoe retailers don't have to recruit sales teams to be successful because they can keep all of their profits. The mark up is also substantial, considering that sellers have relatively low overhead (60-100 percent, depending on the clothing item, according to LuLaRoe).
In an email, a LuLaRoe spokesperson told KPCC its business model "encourages Independent Fashion Retailers to host parties and sell products first, and then build a team if they so choose. Unlike other direct sales companies where you need to recruit a team, LuLaRoe’s retailers can achieve success solely through product sales."
According to the company's most recent financial disclosure statement, only about 27 percent of retailers were eligible for a team sales bonus. The rest were selling alone, not in a team structure.
It’s not clear how many of Stidham's 80,000-plus retailers are turning a profit – but the company says almost 90 percent of them have placed orders to replenish their inventories in the past three months.
But with such explosive growth, and so many retailers, the company has suffered some growing pains. Notably in the spring, customers began complaining about poor fabric quality in some items. The company introduced a "make good" program to replace fabric defects.
Stidham invited KPCC to a LuLaRoe party at a home in West Covina. Retailer Cassandra Carillo said she began selling LuLaRoe as a hobby four years ago. She now makes enough to sell the clothing full-time, allowing her to quit her job at a software company.
Another retailer at the party, Katie Covert, said she's made $50,000 in the past seven months.
"My best month was January. I sold $7000," she said.
It's difficult to know if most retailers are finding that same success. On the company review site, Glassdoor, the feedback from LuLaRoe retailers is mixed.
Carillo said she hosts at least four pop-up parties a week. Over time, she's built her inventory up to more than 2800 pieces of clothing.
At her pop up, dozens of women filed through the house, slipping past one another like a polite ant colony. Kids colored in the kitchen. Ladies sat on the sofa chitchatting. In the back bedrooms, women tried on outfits in front of a full length mirror, then paraded down the hallway for feedback.
Covina resident Deborah Danko said she’s had some bad experiences in front of the 3-way mirror at department stores, and now avoids the mall entirely. At LuLaRoe pop-ups like this, she’s practically got a support group. She remembers her first one, when a friendly bystander noticed the obvious.
"She’s just like, ‘Are you going to get that? Because you look really good and you haven’t taken that off for an hour, you know that, right?’ And I’m like, 'Oh. Yeah, I’m going to buy that,'" she said.
Now, she says, her whole wardrobe is LuLaRoe.