Knowledge center

History of formation and development

First, what is multi-level sales?

Multi-level sales method is a direct way of selling products to consumers through a network of multi-storey and multi-branch distributors. Commissions/incomes are paid to these distributors coming from their own sales results, as well as their sponsors.

Where does it come from?

The origin of this method was associated with the name of American Nutrition Researcher Karl Rehnborg. He is considered the father of the 21st century’s most promising business for inventing and replicating his idea of ​​network marketing into life.

The story of a great innovation…

Karl Rehnborg (1888-1973) was an American chemist. For 20 years, he lived and worked for many different companies in China. Between 1920-1930, the government fell into Chiang Kai-shek’s hands, Karl was imprisoned by the Chiang government with other foreigners. In the poor living conditions of the prison, he realized the role of nutrition on human health. In order to overcome the situation of malnutrition, Karl came up with a method of adding the nutrient of iron to the rations by scraping it from rusty nails, and bargained with jailers for more types of vegetables.

The initiation of the 21st Century’s most developed business model

Returning to the United States in 1927, Karl began processing various nutritional supplements based on alfalfa, a grass containing lots of vitamins, minerals, protein and many other beneficial nutrients. He offered free product testing to his acquaintances, but no one dared to try. After much hard work without any result, he realized that no one would appreciate obtaining something for nothing, so he came up with an idea, which later developed into an advanced business.

The limitlessness

Karl asked his friends to introduce this nutritional supplement to their acquaintances and agreed to pay a commission for each product bought. He also decided to pay commissions to anyone introducing the product.

He was surprised when the information on beneficial nutritional supplements began to be widely spread. The sales of the product went beyond his imagination and people were dying to meet him in order to refer to this new product information.

High profit with no expense on advertising

In 1935, he founded VITAMIN PRODUCTS COMPANY and changed its name to NUTRILITE PRODUCTS, Inc. in 1940. Thanks to this new distribution method where consumers were also product distributors, his company quickly reached $7 million in sales without any expense on advertising. The uniqueness of this method is that those participants could receive higher commissions when costs on advertising and intermediaries (agents, retailers, warehouses, etc.) were reduced to a minimum.

A happy ending …

In the early 1970s, multi-level sales suffered from opposition. In 1975, there were people in the United States federal government opposed to multi-level business and considered it a form of illegal business.

At that time, multi-level sales companies began a struggle to affirm the truth and correctness of their model.

Eventually, the US Federal Trade Court accepted the legitimacy of this business method in late 1979. Since then, the first law on multi-level business has been established in the United States.

The first encounter in Vietnam

In the beginning of the 21st century, multi-level business began to enter the Vietnamese market and has achieved unexpected revenue in its first two or three years.

However, massive development in breadth and lack of close supervision from the state management agency at the beginning changed the network-based business model in Vietnam. A large number of companies took advantage of this business model to gain illegitimate profits. This brought unfriendly views to the industry.

Setting up a website to promote earning commissions between participants and exhorting high-interest financial contributions, are new forms of multi-level sales that are increasingly flourishing. Many sophisticated, disguised variants of multi-level sales are blooming from here to there to “trap” people but still attract thousands of participants.

As soon as many of the unjustified multi-level companies were removed, new transformations immediately emerged with more sophisticated ways of operating. One of the methods for “dodging the law” is to sell services through a multi-level business model. People who are “cheated” when participating in these types of systems are often fooled by high profit values, while not even knowing what products they are actually buying.

A strong step …

In Vietnam, the multi-level business model has also developed and achieved many successes since the 2000s. Products distributed in multi-level sales, mainly consisting of supplements, cosmetics and consumer products have grown diversely in types and models.

Up to the present, the multi-level sales model in Vietnam is gradually differentiating between the true multi-level sales model and pyramid-based sales models (disguised as multi-level model).

In addition, with the initial legal framework on multi-level sales activities since 2004, Vietnam’s current regulation monitors this activity quite closely.

Recently, with strong participation from the Government, the Ministry of Industry and Trade, media agencies, industry associations as well as the struggle and affirmation of decent multi-level companies, the multi-level sales method in Vietnam has gradually tightened and developed in the right direction, bringing trust to consumers.