*By: J.Michael Palka*
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. Nutrilite 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. Which is a fact unknown to most people especially those who think that somehow MLM companies are really-come-lately to nutrition. In fact most of the major product breakthroughs in that industry have been pioneered by MLM companies.
*Two Men and MLM*
In 1949, two young men named Rich DeVos and Jay VanAndel became Nutrilite distributors. In the ensuing decade, they build a large, prosperous business 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. 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 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 realize 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 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 reputable 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 prepare to enter the twenty-first century, MLM has never been so well-respected, so healthy, so attractive or so rewarding.
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*By: J.Michael Palka*