Amazing Secrets about the history of direct selling and MLM. The Untold Story

Published by Pradeep K.J on

Multi-level Marketing, Network Marketing, Pyramid Schemes all fall under the general category of Direct sales or Direct selling. A mode of Selling goods or services with the help of a group of people or network of people.  

 If we dig in search of the History of MLM or Direct Selling, there is no recorded proof for it but actually assumptions only. 

 History is always like that, won’t have any recorded proof of many things. My Findings are written here 

1st Direct Selling company – The history of Direct Selling was started. 

Direct selling is person-to-person selling or door-to-door selling strategy.  

The fact that this mode of selling was first used by peddlers and small business owners even before the 1st Direct selling company registered. We are not looking to dig that out 

 Southwestern company founded in 1855 was the 1st   Direct selling company.  

This company sold Educational books, Software, etc. by using direct selling methods. The university students or college students were their distributors or independent contractors. They recruit a few hundred to a few thousand new students as independent contractors for the company every year. This was an entrepreneurial program for students at that time. 

The history of Direct selling started from this point. 

 It’s all begun. A new era for MLM  

Some say that Nutrilite is the first MLM company. At the same time, the number of people arguing that California perfume company is the first MLM company is not small.   

 Nutrilite started as a California vitamin company by Carl Rehnborg and renamed in 1939.  

 California Perfume Company founded by David H McConnell renamed Avon in 1939.  

 the New era for MLM. Everything has happened after world war 1 or the global economic downturn that happened during the 1920s… Both companies mentioned above have their own space in the history of MLM 

The direct selling and Multi-Level Marketing was introduced to reduce distribution and marketing cost. as well as in the absence of Technology and advertisement this model is ideal for a live demonstration and educative selling  

 This method was largely used by companies selling wellness, perfume, home utilities, books, etc…  

 Companies and individual contractors recruit more individuals to enhance sales. But 

In the early stages, independent contractors or distributors have had no right to recruit more individuals for enhancing their sales. 

1st compensation Plan – Evolution of MLM started 

In the early days of Direct Selling, the distributors or sale representative only get ‘X’ % percentage of their Sales volume only.  

 By the end of the 1930s, The Amway was founded by Jay Van Andle and Richard Marvin DeVoss . They were former distributors of Nutrilite. Later Amway bought Nutrilite 

 Amway introduced MLM compensation plans system into the industry. This paved the way for many changes.  

The system allowed suppliers to profit a portion of the profits from the sales of suppliers on their team. 

This was the first step in the revolutionary transition from Direct selling to MLM  

 From that onwards new era for Multi-Level Marketing Has started.  Later, a variety of compensation plans has evolved. And many companies have emerged after that. 

World Federation of Direct Selling Associations; A representative for Direct sellers and direct selling Companies

In 1978 WFDSA founded. WFDSA was established through 12 direct selling associations.  

The Federation was set up to address various direct selling issues around the globe by allowing DSAs the ability to share information, strategies and to plan common practices.  

Now it has 63 local DSAs representing different country. 

In 1985 the code of ethics(pdf) was introduced by WFDSA. Other DSAs adopted it locally 

History of MLM in India

India always was a sleeping giant in the MLM industry.   

 MLM has introduced in India in 1995 by Oriflame. Since then, many American and European giants have printed their footprints on Indian soil. Amway, Tupperware, Avon, Herbalife…are some of the big shots.  

 Modicare was the 1st Indian-born company introduced in the Indian market. Founded by Samir Modi in 1996.  

 IDSA the member of WFDSA from India also founded in 1996. IDSA has a huge role in dealing with the scam and regulating it. 

MLM has flourished in India during the first 2000s and it was very quick. Many companies earned lots from India. Many leaders earned 6 figures per month. At the same time, a lot of companies have emerged in the sector like mushrooms sprout in the rain themselves all over India. and claimed they are doing MLM business. But actually, they did was pure scam or pyramid systems. This led to the loss of money for many people. The number of people who loses money was 30- or 50-times greater than those who earned money. That was huge.  

 In the 2000s, the golden age and the fall also took place.  

 Due to the lack of a clear legal framework or guidelines, a lot of scams have sprung up. The vast majority of fraudulent companies operate using the Pyramid scheme system to make easy money.  

Companies operating the pyramid scheme at the time were able to misrepresent themselves as the MLM company. And It is not a coincidence that it is still happening around us. 

 It caused a huge money loss for lots of people. As it was a new method in India, which is not possible to identify which is fake. In such a situation, there was no option rather than to stop this new method completely. In 2012, it has done under ‘The Prize Chits and Money Circulation Schemes (Banning) Act, 1978.’    

 The sector has revitalized through the 2016 MLM Guidelines. Now it’s been rebirth to MLM in the Indian industry. Yet, it is a coincidence that there are still over 1000s of fraudulent companies is operating in India using various loopholes. In the event of another ban, a resurgence of the industry in India is not possible. 

I’m afraid that may happen 

Categories: MLM

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