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Wednesday, May 22, 2013

Direct selling and network marketing a brief history

Direct selling had always been a part of mans history. An ancient tradition that originated in man’s basic need to exchange goods and to communicate, as early as 2000 B.C the Code of Hammurabi, a monument of Babylonian law, protected the general welfare and integrity of the Babylonian direct seller, who was then referred to as the “peddler.” The Code stated that“the peddler shall swear the oath of God” if any enemy caused him trouble as he travels shall be protected. It also said that the merchant who sells the goods must be fairly compensated.



Trade provides mankind's most significant meeting place. New ideas, along with precious artifacts, have always travelled along trade routes.The shared news of a community has frequently been the talk during market days. As man established economic ties with his neighbours, he traveled extensively despite geographical barriers. The development and use of roads and water routes for commercial activity were part in the history of direct selling. The early direct seller exchange pottery, stone weapons, tools, agricultural products and raw materials with people from other lands. Barter, the direct exchange of goods for goods, was the principal means of trade.

Among the early civilizations, Egypt, Syria,Babylonia and India were actually involved in trade. Ivory and ebony were exchanged for pottery and stone vessels. Indian beads and vases, believed to have originated in remote localities, were found in Babylonia.
In Greece, the caravan trade that connected the Greek world with Asia, Anatolia, which is presently Turkey, was an area in which direct sellers, travelling by donkey, sold cloth to people they encountered along the way. The purchase price was generally higher than at trading centers because of the length of the haul and the hazards of the expedition.

In the 5th century A.D., Athens was involved in a great deal of direct selling. Many producers who sold direct to the consumer without the intervention of a middle man, continued to sell their goods in this fashion, despite the growing urban population which spawned a new class of retailers. The direct seller of the 5th century either sold his wares about the street or exhibited them for sale on stalls and in shops. Others travelled from place to place, following armies on the march. They visited great festivals and fairs as well, and sold from village to village. Nearly every culture shares a heritage of direct selling.

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 through out the country side, selling their wares. From there evolved the concept of the door-to-door salesman. 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. Until the 1840s, peddlers were an important distribution channels in serving rural areas, isolated farmers and the emerging wholesale phenomenon, which would become an essential part of modern commerce,the grocery store. With the coming of the rail road and improved communications, manufactures could expand there markets, grocery stores could directly order to manufactures in distant places and cities and receive the merchandise. Retail stores and more improve transportation; together with the rise of wholesaler to supply them, ended the peddler as an integral part of distribution.

However the independent sales person had continued as a sales channel in a different role. After The American civil war of 1861-1865 independent sales people began to sell only the goods of a single manufacturer. And the redirect selling began to evolve.

Alfred Fuller of Fuller Brush Company in 1905 was responsible for transforming door-to-door direct selling into something different. Instead of positioning himself as a salesman who sold brushes and focusing on the features of the brushes, he 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. He hired 270 dealers throughout the U.S. to follow his business plan and paid his sales force on commission only. By 1919, the Fuller Brush Company had made $1 million in sales; by 1960, $109 million.

In 1931 Frank Stanley Beverage who was a former vice president of sales for Fuller Brush Company. founded Stanley Home Products with Catherine L.O’Brien, Influenced by the economic hardships of the Great Depression, Frank and Catherine envisioned an opportunity for people to start their own businesses with minimal investment, selling products that people use everyday.Stanley Home Products sold household cleaners, brushes, and mops. Some Stanley dealers began giving demonstrations for clubs and organizations rather than for individuals to increase sales volume. Other Stanley dealers quickly embraced this idea as a way to maximize the selling presentation. These dealers took the “clubs and organizations” concept into homes by having the home owner invite friends and family over….and the “party plan” was born.

Stanley Home Products became the training ground for many well-known company leaders. Mary Kay Ash, founder of Mary Kay Cosmetics;Brownie Wise of Tupperware; Jan and Frank Day, founders of Jafra Cosmetics; and Mary Crowley, founder of Home Interiors all received early training as Stanley Home Products dealers.

In 1934 Carl Rehnborg started the California Vitamin Corporation selling what today are known as vitamin supplements. In 1939 the company changed its name to Nutrilite Products Company, Inc. 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 them selves 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.

In 1945 - Nutrilite contracted with Mytinger & Casselberry to become the exclusive American distributor of Nutrilite products. Mytinger & Casselberry created the first documented MLM compensation plan. The introduction of the multi-level, person-to-person sales program in the mid 1950s coincided with another pair of new giants arriving on he scene. In 1959, two Nutrilite network marketing salesmen,Rich DeVos and Jay Van Andel, broke off from the company and founded Amway.Many consider this as the beginning of a new era in the history of network marketing because that company grew to become among the largest network marketing firms in the world.
The 1950 to 1960s saw the network marketing industry expanding dramatically to include Shaklee (1956), Amway (1959), Mary Kay (1962), and the National Safety Associates (1970). In 1970s, the growth of the network marketing industry was gaining momentum. In 1975 - The FTC (Federal TradeCommission) filed suit against Amway Corporation for operating a pyramid scheme. but in 1979 - An administrative law judge ruled that Amway’s multi-level-marketing program was a legitimate business opportunity, as opposed to a pyramid scheme. Giving way for a new direct selling model to evolved.

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