A brief history of MLM
Nobody knows exactly
when MLM began, because it really evolved over a number of years, prior to World
War II. Most observers agree that
Nutrilite — now an Amway® subsidiary
— was the first true MLM company. In addition to being the founders of network marketing,
they were the founders of the vitamin and food supplements industry, way back in
the 1920s. So the historical connection between MLM and nutritional products dates
back over most of the twentieth century — a fact unknown to most people (especially
those who think that, somehow, MLM companies are johnny-come-latelies to nutrition.
Most of the major product breakthroughs in that industry have been pioneered by MLM
companies, in fact.)
The beginnings
of MLM
In 1949, two young
men named Rich DeVos and Jay VanAndel became Nutrilite distributors. In the ensuing
decade, they build a large, prosperous organisation across America. But, in the late
1950s, a problem arose that was to continue to plague many MLM companies even until
now. And it almost sank their business.
The manufacturing arm of Nutrilite was owned separately from the marketing arm. And,
as often happens in such circumstances (not just in MLM), the marketing arm was seen
to be making most of the money. There’s nothing unusual in this. It’s a fact of life
that those who connect manufacturers to their markets take the lion’s share of the
selling price, in any industry.
To make a long story short, a standoff developed between the manufacturer and the
marketer. DeVos and VanAndel watched, alarmed, as their distribution network dwindled
rapidly due to lack of product and the resulting lack of income from sales. They formed
"The American Way Association" in an attempt to help resolve the stand-off. Finally, unable
to bring the two parties to an agreement, they decided to create a product of their
own that they could supply to what was left of their network.
Amway is born
What happened next
is legendary. In 1959, they formed Amway Corporation. Within ten years, they’d bought
Nutrilite, and Amway has rarely looked back ever since. It’s still the largest MLM
company worldwide.
Of course, that kind of spectacular success soon attracts attention — and imitators. Before long
a rash of MLM companies sprang into existence. But there was also a dark side to
the story — one that still causes problems to this day.
It didn't take sharp operators long to realise that they couldn't take advantage
of people under the strict, ethical rules of conduct required by the MLM companies.
So they came up with a
counterfeit version, based very loosely on a scam from the late 1920s (The
Ponzi Scheme) that
looked like MLM, but allowed them to fleece people who
were basically the same as themselves… lazy and greedy.
Thus was born the
Pyramid Selling Scheme.
The counterfeits
soon emerge
It’s ironic that
people still mistakenly accuse MLM of being pyramid selling when it was actually
the
real MLM companies that first petitioned government authorities to have
pyramid selling outlawed.
It didn’t take long for legislation to be passed to rub out pyramid selling. But
pyramid selling isn’t really a system or structure, despite its cunning name. It’s
a
mentality — an
attitude — which is very hard to legislate against.
Consequently, many anti-pyramid laws also discriminate unintentionally against legitimate
network marketing, “throwing the baby out with the bathwater.”
Over the following decades, MLM has evolved and developed further into the wide array
of companies, product ranges, reward plans and cultures that exist today. This unique,
powerful system of free enterprise continues to grow, attracting more and more people
to it. As we enter the twenty-first century, MLM has never been so well-respected,
so healthy, so attractive or so rewarding.