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The History and Evolution of Network Marketing

9th January 2019

The History and Evolution of Network Marketing

 

Whether you call it network marketing, MLM (multi-level marketing) or direct selling, there are now reportedly over 425,000 direct sellers in the country who contribute £2 billion to the UK economy (source: DSA website). From health and fitness supplements to cosmetics, candles, Tupperware and utility services, network marketing organisations are now widely represented in the UK and internationally and are here to stay.

So how did it all start?

The overarching concept of direct selling by cutting out the retailer has been around for thousands of years. The business model of MLM as we know it today originated in the United States, although there’s debate over which company was the first ever network marketing organisation.

Avon claims to be one of the first having been set up in 1886 under the name of the California Perfume Company. Others claim that it was a company called Wachters selling sea vegetable supplements in the 1930’s. Around this time, supplement company Nutrilite (then known as California Vitamin Company) and consumer goods provider Amway were set up (although Amway took over Nutrilite in 1972). Nutrilite was arguably the first company to introduce a fee to be paid to whoever recruited more people to the organisation. Whereas Amway achieved international fame due to winning a landmark court case in 1979 which saw a judge rule that Amway offered a legitimate business opportunity, and not a pyramid scheme as the Federal Trade Commission was making out.

How did it evolve?

Network marketing organisations continuously gained popularity in the US, peaking in the 1980’s.  Women were increasingly looking to enter the workforce and were attracted to MLM’s due to the promised financial independence and flexible hours. In addition, virtually anyone was able to set up and run their own business, regardless of previous experience, age and location at a low set up cost.

The industry hasn’t been without its challenges, as an influx of pyramid schemes operating under the header of network marketing gave (and continues to give) the industry a bad reputation. We look at network marketing as a business model further in our blog ‘Network Marketing as a Business Model – does it work?’.

Kleeneze was the first UK based network marketing company and was set up in 1923. It went into administration in 2018.

The industry today

These days, there is a great variety of products and services offered via direct selling, not only through the traditional face-to-face approach but also online and via home parties. In a recent study, 42% of distributors quoted social media as their top channel for orders, with social selling parties increasingly taking place via Facebook Live and Skype. On average, direct sellers reported monthly earnings of £372.95, with the majority (63%) of direct sellers having another job alongside their direct selling business.

Now a highly regulated industry, the main industry body Direct Selling Association UK (DSA) “works to see direct selling universally recognised and respected as one of the finest methods of marketing to consumers”. The DSA represents over 50 industry members, all having to adhere to a strict code of conduct.

 

PRB Accountants provide tax and bookkeeping services to network marketers and are not affiliated with any specific network marketing companies.

Contact us on network-marketing@prbmp.com or 01444 458252 if you’d like any assistance.

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