Direct Sales as a means of product distribution – which is really all that it is – has been around literally forever.
You can go back through history and the establishment of trade routes and find examples of traders who distributed goods, food, and fur, face-to-face, on behalf of various backers. Sometimes these backers were rulers of a country, sometimes they were powerful individuals, and sometimes they were large businesses or companies.
The North American history of direct selling can be traced back to the 1600’s. For example, the Voyageurs established fur trading routes and posts on behalf of the Hudson Bay Company. The Hudson Bay Company itself relied upon the influence of Prince Rupert, who was the cousin of King Charles II, to acquire the Royal Charter which, in May, 1670 granted the lands of the Hudson Bay watershed to “the Governor and Company of Adventurers of England trading into Hudson Bay.
In New England, in the mid 1700’s, began the phenomenon of the Yankee Peddler, in which peddlers would travel in their cart home to home throughout the countryside, selling their wares.
From there evolved the concept of the door-to-door salesman. The Watkins Company was launched in 1868, selling a popular liniment. The late 1800s saw the spawning of new companies employing door-to-door salesmen to distribute bibles, books, spices, remedies, perfumes, tonics and the like. The California Perfume Company, which later became better known as Avon, was founded in the late 1800s.
The Fuller Brush Company debuted in the early 1900s and it was Alfred Fuller who is credited with transforming door-to-door direct selling into something different. Rather than positioning himself as a salesman who sold brushes and focusing on the features of the brushes, he instead focused his attention on selling the benefits of his brushes to the consumers.
This is referred to as “empowering the consumer”. His entire company vision was crafted in the context of the service he was able to provide to his customer. The approach was revolutionary.
The early 1900’s also saw the emergence of vacuum cleaner and encyclopedia companies such as Electrolux, World Book and Britannica.
The Dawn of a New Age in Network Marketing
The term “network marketing” specifically is 20th century creation. Its genesis lies in the post-World War era of the late 40s and early 50s. This was the dawning of the era of the subdivision in which genuine neighborhoods flourished with their own circle of trusting relationships and backyard barbeques.
It is out of this trend that the term “belly to belly” marketing – or warm market as you may better recognize it – was coined. A company named California Vitamins came to the realization that many of their new sales recruits were in fact friends and family of their existing sales force. These new recruits’ primary motivation to becoming a sales associate was that they wanted the products for themselves at the wholesale cost.
That led the company to recognize it was easier to build a sales force with a lot of people who sell a small amount of product, than it was to find a small number of top sellers who would move mountains of product.
The Advent of MLM (Multi-Level Marketing)
And so California Vitamins designed a revolutionary sales compensation model encouraging their salespeople to invite new representatives from satisfied customers, most of whom were family and friends. Each of those new representatives in turn had the same right to offer the product and opportunity to become a representative to others.
This allowed the sales force to grow exponentially. The company rewarded its representatives for the sales produced by their entire group – or network – of sales representatives. And so multi-level marketing was born.
It was also during this time that the home party plan was introduced. The original party plan was the Stanley Hostess Party Plan, by Stanley Home Products. The focus of the party plan was to demonstrate the myriad of uses and benefits of the products right in the home. Out of the original Stanley dealer roster came the founders of such future marketing program giants as Mary Kay and Tupperware.
The introduction of the multi-level, person-to-person sales program in the mid-1950s coincided with another pair of new giants arriving on the scene. First, Shaklee was launched. Then, a couple of years later, in 1959, came the birth of Amway.
Birth of Amway
The term multi-level marketing, or MLM, became a part of the industry lexicon. And the direct selling industry would never be the same.
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.)
In 1949, two young men named Rich DeVos and Jay Van Andel became Nutrilite distributors. In the ensuing decade, they built a large, prosperous organization 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 Van Andel watched, alarmed, as their distribution network dwindled rapidly due to lack of product and the resulting lack of income from sales. 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.
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.
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!