History of Network Marketing
So where does the history of Network Marketing and MLM begin? Some of the top Network Marketing companies around today are well over half a century old, one is even more than a hundred years old.
Does this mean the history of Network Marketing started around the early 1900s? No it doesn’t. This form of sales and distribution was born closer to the 1950’s.
In the early 1940’s, a company called California Vitamins discovered that a large number of new sales representatives who were joining their sales team were actually friends and relatives of the existing employees of California Vitamins.
Why? Because they wanted to have access to the vitamin and supplement product range at wholesale price.
The executives also realized that it is far more effective to have a large sales team who are selling a small amount of products each, then to have a sales team that consisted of a handful of top performers who can generate a large turn over each.
After a while the commission based compensation system was developed. This was designed to encourage current representatives to invite more people onto the sales team.
Both individual representatives and sales teams were rewarded according to the volume of products sold and as a result Network Marketing was born, which is when the History of Network Marketing was made.
Following the transformation of this company’s sales and distribution model, it changed its name to Nutrilite Food Supplement Corporations.
In 1959, former distributors of Nutrilite, Jay Van Andel and Rich DeVoss founded the Amway company. From the very beginnings Amway was based on the same Network Marketing concept as Nutrilite.
Amway has now been around for more than 50 years, is a very well established Network Marketing and is ranked in the
top 10 MLM companies.
It is also operating in over 80 countries with more than 3 million distributors which has naturally allowed Amway to put a very defined footprint in the history of Network Marketing.
It is estimated that there is well over 50 million people participating in some form of Network Marketing worldwide. In addition to this, there is almost 100 billion dollars in wholesale turnover.
It is no wonder why Network Marketing has lead to be one of the fastest growing industries in the world today.
Many economists also predict that MLM will have a huge amount of growth in the future as more and more companies are realizing the massive potential behind the Network Marketing model of selling their products direct to the consumer.
You will find that in the history of Network Marketing, especially in the early stages, there was a lot of resistance against accepting this concept due to the exponential growth in which it has to offer.
Perhaps the first situation the world came to know was the chain letter period that took place shortly after the First World War. The main concept behind this scam was offering people great wealth if they were to send in money through the post.
The chain letter phenomenon died out in the early 1940’s however it initiated fraudulent scam artists in creating pyramid schemes, which caused thousands of people to lose their life savings.
This unfortunately still occurs today to the very unlucky few who don’t do their due diligence before committing to a business opportunity.
Because of such scams, almost every Network Marketing company was heavily investigated in the 1970’s. The Federal Trade Commission (FTC) filed a suit against Amway in 1975, making allegations that it was an
MLM fraud or pyramid scheme
simply because Amway did not sell its products in retail stores and only to its distributors including direct consumers.
This lead Amway to battle out a four year case as well as spending millions of dollars in legal fees to be accepted by the FTC. After this agonizing uphill slog, another mile stone in the history of Network Marketing was made when Amway was deemed not to be a pyramid scheme.
The FTC confirmed that its revenue was created from the sale of its products and it also recognized that Network Marketing was a legitimate distribution system.
From this point on, Network Marketing was very well cemented in the history books and the
growth of MLM
Return from History of Network Marketing to Network Marketing Constultant