Brief History of Multi Level Marketing

Multi Level Marketing or Network Marketing as it is called world over happens to be a fast growing phenomenon. The fact that anyone, anywhere can become a distributor and earn income from building the network without having to sacrifice any other occupation or additional investment into this business makes it very attractive for people from all walks of life to attempt at joining the network. It is estimated that in US alone over 70 percent of the Direct Selling Revenues come from Network Marketing. Though no figures are available to confirm the revenue figures at national level, over 50 million people are estimated to be engaged in Multi Level Marketing all over the world.

Though there is no documented history of Origin of Multi Level marketing, generally it is believed that this concept owes its origin to ‘Nurtralite’ or formerly known as California Vitamin Company which produces food supplement products. In the early part of 1940s, the Company used to engage in Direct Selling.

The concept of Multi Level or Network selling seems to have emerged accidently when the Distributors discovered that they were generating more sales for the Company by referring their friends and known people to the business opportunity available with Nutralite. At this point of time, there was no system in place to recognize and reward the distributors for their efforts in recruiting other Distributors for the company. With the realization dawning on the Distributors and the Company, the system of paying 2 percent bonus to the sponsor Distributor on the sales that were achieved by the Distributor and the network that he sponsored or built was introduced. This then led to the birth of modern day system of ‘Pyramid Selling’.

Nutralite achieved unprecedented growth and profits in the following decades thanks to the fast growing network not only in the US but across other continents as well. In early 1960s, two men Richard DeVos and Jay Van Andel,c who were the Distributors of Nutralite broke away to build their own company which grew to be the biggest in MLM business world over called ‘Amway’. This company initially made a foray into House hold and cleaning products and went on to buy Nutralite Company and merge the food supplement products into its portfolio.

Yet another distributor named Dr. Forrest C Shaklee too broke away from Nutralite at the same period that ‘Amway’ took birth and found the new Company named Shaklee dealing with Nature’s sunshine products.

Today there are several hundreds of Companies that are practicing Pyramid selling or Multi Level Selling and compensation methods to sell their products. Numerous brands such as Avon, Tupperware, Electrolux, Discovery Toys, Herbal life, Kleenez, Oriflame, Reliv etc have been highly successful in growing their business globally using this concept of sales.

Though there are a lot of criticisms and charges levied against this system and companies both by the industry watchers as well as the trade and Governments, the figures reveal that the concept has been successful in the growth of more businesses in recent years. The Direct Selling Association of US reported that about 25 % of its members were engaging in MLM channel of selling in the 1990s whereas by the year 2009, it was found that over 94% of the members had been practicing this method contributing to about 97% of the total Direct Sales.

While the figures are showing progressive trends and the Companies often promote the success stories of individuals who have become millionaires in the business, it is to be noted that there is growing concern in the trade and Governments of various countries which have been raising questions about the authenticity of the pyramid compensation method which they believe is inherently faulty model and that the revenue or income generation does not happen due to sales of the product but is due to the recruitment of distributors. China has banned this form of Direct Selling since 1998. The trade however seems to be growing unprecedentedly all over the rest of the world.