What is the MLM Industry?

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Multilevel marketing is also known as the MLM industry. It is a system in which an individual buys a product at a discount and sells it at a profit and a business opportunity where additional salespeople are recruited. Many companies in the MLM industry have sales operations around the world, with hundreds of thousands of independent distributors selling and recruiting. Most consider the compensation plan to be the main indicator in determining whether a sales organization is in the MLM industry.

It was in the United States in 1945 that most consider the MLM industry to be created when the California Vitamin Company began selling Nutriliteā„¢ vitamin supplements through independent sales representatives under a new compensation plan. The plan’s hallmarks included a required level of personal sales of the products, profit from the sales of the individual rep and commission on the sales of anyone that person recruited, and bonuses based on the volume and consistency of sales and recruitment. Commissions were also earned on recruits from recruits with various levels of recruits allowed. These various levels came to be called the team leader downline.

In a typical MLM organization, a potential new team member is introduced to the product or service offered through an independent representative. Often, the business opportunity to sell the product is introduced on the first sale. Potential sales reps are often required to purchase a certain quantity of the product and a starter kit, attend training, and sell the product to a certain number of new customers. When these requirements are met, the new sales rep is typically freed to begin establishing their own downline.

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The home office of an MLM company often offers a variety of administrative support activities. This may include advertising, web presence, payment processing, shipping, training and commission disbursement. The home office also often runs sales and recruiting contests, where performance at certain levels earns money, prizes, travel, and recognition.

Companies in the MLM industry offer a wide range of products through independent distributors. Products include nutritional supplements, cosmetics, household products, wine and kitchenware, among many others. The MLM industry also offers services such as prepaid legal services and life and health insurance.

Some companies in the MLM industry have been accused of being pyramid schemes. In a pyramid scheme, there is no actual sale of products to anyone outside the downline; profit results only from selling to those a person persuaded to sell. A true MLM organization requires its distributors to sell to those outside the downline.

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