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MLM History

Before the turn of the millennium

MLM is no way an invention of the 21st Century. It changes, alters and transforms itself continuously. Once upon a time there was only the direct sale, the original form of trade in which the farmer sold his milk directly to the villagers or even more before that time when meat was traded for a club. For various civilizations, such as in ancient China, it has been proven that rambling tradesmen maintained trade relations and offered their goods to the buyer at his home. The reason for the migration of the tradesmen laid predominantly in the overproduction of providers, in addition to that a sparse population in which they were located.

Until the industrial revolution in 1840 tradesman replaced and took over the function of the commercial retail or supplemented these and served as a communications medium. But more and more people moved to the cities and the industrialization and division of labor was unstoppable. When there was a better infrastructure and new ways of communication opened up, the itinerant trade was increasingly repressed, by such things as department stores and retailers. As part of the industrial revolution many new products were invented and had to be sold to the consumers. But these new products were in great need of explanation. Through this trend the idea of direct sales was revived. Because through direct sales the companies could get in touch with their customers personally and had the opportunity to explain their products like they needed to. In those days many companies used direct sales to sell products like vacuum cleaners or washing machines.

The birth of MLM

The first direct seller that made the breakthrough was the “California Perfume Company” established in 1886. California Perfume Company was 1939 renamed as “Avon Products” and is still at the top of the MLM industry. Among other things its success can be described as “good timing”. Avon not only had the right sense concerning products and lifestyle from the 50ies to the 70ies, but they were ahead of their time regarding the entry of women into commercial life.

After the Second World War in the 1940ies in the United States the first company was established, which was exclusively based on Multi-Level Marketing. It was called “California Vitamin Company” and was founded by Carl Rehnborg. The products primarily have been health supplements and were highly in demand at that time. To meet this demand Rehnborg recruited independent distributors to increase the number of sales people.

In addition to the in-house representatives those distributors should find new independent distributors in their circle of friends, acquaintances and customers. As a result they got paid on the sales of the distributors they personally recruited. In this way Multi-Level-Marketing (MLM) was created. In 1945 “California Vitamin Company” became “Nurti Lite” and was the first MLM Company that used similar methods which are today common practice in the whole MLM industry. Two employees of Nurti Lite, Rick de Vos und Jan van Andel founded their own MLM company in 1959 and called it “Amway”. Amway is known as the pioneer of MLM and had a international sensation, when the legality of MLM was clarified in a legal case.

After many millions of dollars had been invested over several years, they carved out the right to exist for the whole industry. The order “Amway decision” acknowledged MLM as ethical impeccable type of enterprise. Since then this order established in many other countries like Canada, Great Britain, Australia, Germany or France. Today Amway itself is one of the most successful MLM companies in the whole world. Many famous companies from all kinds of branches like Panasonic, Palmolive or Master Card use MLM as channel of distribution.

The role of women in MLM

When the U.S. economy was booming in the 80s, the time had come when women increasingly entered into commercial life. They often were the main target group of network marketing companies. They were recruited through flexible working hours that allowed them not to neglecting their family and children. In those days and also today this advantage has been and still is a decisive argument for many women to join the MLM industry. The companies created family working conditions so that work and family life didn’t had to compete and that there was no separation between private and business issues.

In those days being able to participate in commercial life like this and being self-employed, for women was a dream came true through MLM. Furthermore women could not only participate but also acquire higher or even the highest positions in those companies. Until that moment women often were only “allowed” to reach lower positions, but now they were able to determine their own success.

Nevertheless was it important for MLM companies to involve or also recruit men, for example the husbands, too. In the beginning of MLM women should portray the picture of docile and humble wife. The consent of the husband was appreciated before the woman started her career. This method is mainly preferred by companies that like to recruit couples. This is getting clear, if you take a look at the division of work in companies like Amway or Shaklee. For example the man presents the marketing plan and the woman’s area of responsibility includes among other things the sale and the bookkeeping.

Conclusion: MLM allows combining work and family life and because of this fact it is very attractive to women in a world in which the opposite happens to often. Usually those two aspects of life are separated and women are disadvantaged. MLM created the possibility that also women could reach economic independence and still hadn’t to give up their family.

MLM and its dark site

The MLM expansion was not limited to the American market. With the British company Kleeneze in 1969 MLM started it’s triumph over Europe and in 1973 the legal standards for MLM companies were established.

Because MLM proved very successful, other “companies” started working with a confusingly similar method. Black sheeps were attracted by the global success and illegal pyramid or Ponzi schemes were born. Those systems also recruited new members and collected money from them to pay it to the “upper levels”. Al last the whole MLM industry suffered from this pyramid schemes in the 70ies. Until today ML is affected by those illegal schemes.

MLM goes online

At the end of the 90ies the representative’s area of activity shifted because of the implementation of online-shops. As a result from then on electronic order processes were available. The personal treatment of orders continuously lost importance because of the internet. The former area of activity was covered by the online shops and the customers were able to make orders themselves. Today representatives of companies like Quixtar (belongs to Amway) and Avon appear as contact person, personal adviser or even don’t have anything to do with the order process.

The activities of the representatives did indeed often shift in the last several years, but the core activity of building a relationship always stays the same, because a website will never replace a personal conversation.

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