Network Marketing in Russia. History, Legality, and Top MLM Companies

Network marketing in Russia appeared relatively recently, and the first companies emerged during a rather difficult time for the country. Now, MLM has become part of the modern economic system and represents one of the ways of doing business. Attracting with its simplicity and advantages, the number of representatives of this sales principle is growing every year.

By the way, it is worth clarifying the concept of network marketing:

Network marketing (multi-level marketing, MLM; Eng. Multi level marketing, MLM) is a principle of direct sales of goods and services based on creating a network of distributors. Each independent partner, in addition to selling products, can attract people with similar rights. The income of structure participants consists of commissions for sales volume and additional bonuses for the productivity of personally invited people.

The History of MLM Development in Russia

One of the first examples of direct selling principles application is the American vitamin company Nutrilite Products, founded in 1934. Initially, the company attracted distributors who consumed its products personally and recommended them to their relatives and friends. At the same time, they provided an additional income of $50 per month, which was a significant amount for that time. In 1943, the company expanded and introduced the first comprehensive marketing plan, deepening referrals on multiple levels.

Marketing Plan - is a set of rules that determine the volume of rewards for distributors and the scheme of their accrual. A well-written marketing plan indicates the direction of product and service promotion in the market.

By the way, the founders of Nutrilite Products were Jay Van Andle and Richard Marvin DeVoss, who sold vitamins from 1949 for 10 years. In 1959, enterprising distributors took a slightly different direction and founded their own multi-level company called Amway.

The peak of multi-level marketing worldwide was in the 1980s - 1990s. In the 1990s, network companies distributed any goods and services - from cosmetics and technology to art objects and long-distance telephone services.

The early 1990s. The concept of network sales came to Russia in this period. The economy was transitioning from socialism to capitalism. The state stopped regulating and controlling prices, enterprises were being liquidated, unemployment was increasing, and many could barely feed their families.

In network business, people received respect, recognition, and assistance from other participants in multi-level marketing. This explains its powerful development in Russia.

Initially, the best foreign companies selling dietary supplements and cosmetics (such as NutriPlus, NewLife, Oriflame, etc.) entered the market.

The first MLM company to start sales in Russia was Herbalife, selling weight loss tea and dietary supplements.

MLM attracted with its simplicity, upon entering the network there were no restrictions, anyone could engage in distribution.

The style of networkers was quite aggressive, copied from the style of American and Israeli MLM companies. The method of work consisted of the following: huge halls of the public were gathered, for whom the charismatic leader of the network company conducted an advertising campaign for a unique product and motivated to collaborate with the company, with words about unimaginable earnings. The task was to attract as many people as possible, but there was no emphasis on education.

Late 1990s. At this time, Russian network companies began to appear, which launched their own production or simply distributed goods of national manufacturers. By the end of the 1990s, a generation of entrepreneurs with experience in network companies had emerged. It was they who began to create network structures across all regions of Russia and other countries.

Network marketing was gaining momentum, but this experience was not entirely successful. The business was built on the limited knowledge possessed by the founders after several years of working as distributors. All the intricacies of managing an MLM company were learned through practice, with little access to specialized literature. This sheds light on why many people failed to create a successful business.

It is worth noting that methods that worked successfully abroad were not always effective in Russia. All the experience of foreign companies and examples of marketing plans had to be adapted to Russian realities.

It was precisely due to a deep understanding of the economic situation and the mentality of the country's residents that domestic companies became successful. For example, Argo, Artlife, Vitamax, Mirra-Lux, Russian Line, etc. Information about optimal marketing conditions can be found in our article Your Ideal Compensation Plan

Starting from the year 2000, it became increasingly difficult to secure advantageous positions in the market. Network marketing then became popular as a way to promote products without huge financial investments.

Network companies that were established back in the 1990s have evolved into large corporations, confirming the prospects of the industry and the reputation of MLM in the country.

Since 2009, distributors have started actively adopting technologies and developing network marketing through the internet.

The main conclusion from all that has been said is network marketing in Russia has survived, is alive, and will continue to exist. The only question that arises is the attitude towards this business in our society is not the most positive.

Legality of MLM in Russia

Network marketing itself is absolutely legal and respected business, and earnings from network business, like any other commercial activity, are subject to state taxation.

However, upon seeing the effectiveness of this type of product and service promotion, scammers became more active, creating the phenomenon of financial pyramids and tarnishing the reputation of the MLM industry. With the development of the network marketing industry, fraudulent schemes are increasingly and better disguised under it.

Let's remember the financial pyramid "MMM" (early 90s), which ended in a loud crash. Other major financial pyramids in the 90s and 2000s were "Vlastilina," "Russian House Selenga," "Tibet," "Hoper-Invest," and "Rubin" ("SAN"). The count of those affected by the organization's activities ran into millions, and the founders received real prison sentences.

The difference between legitimate network marketing companies and scams can be found by reading the article Network Marketing VS Pyramids

Top Network Companies in Russia

Currently, the economies of countries continue to recover from the crisis, providing network companies with new opportunities for active growth. New technologies such as blockchain, bots, and distribution services are also contributing to this, simplifying online business management and significantly accelerating the development of network companies.

You can view the top MLM companies in the CIS countries in our article MLM Companies Dominating the CIS Market

According to the Besuccess website, as of February 2019, there are 128 product-based network companies operating in Russia under the classic multi-level marketing scheme.

TOP MLM Russia can be formed based on the number of requests in search engines.

Faberlic

In 1997, a company called "Russian Line" was founded, and 4 years later the Faberlic brand appeared. Currently, Faberlic cosmetics are used in France, Poland, Romania, Hungary, Ukraine, and Germany.

Faberlic offers decorative cosmetics for the face, eyes, lips, nails, facial and body care products, hygiene products. There is a range of cosmetic products for men and children. In addition, the domestic manufacturer offers clothing and accessories, health and home goods.

Siberian Health

The Siberian Health project was launched in 1996. The company's main activity is the sale of dietary supplements. The company has offices in 16 countries, including Ukraine, Kazakhstan, Germany, Bulgaria, the USA, the Czech Republic, and Mongolia.

Coral Club

Coral Club was founded in 1998 and specializes in dietary supplements and other health products (therapeutic cosmetics, devices, and equipment). Initially, the business was a branch of the American brand Royal body care, but later became an independent entity.

NL international

International company NL international was founded in 2000 and is engaged in the sale of teas and drinks, fruit bars, dietary supplements, cosmetics, and household care products.

Currently, NL has over 350 offices and 100 stores in 24 countries.

Tentorium

Tentorium Group of Companies was founded in 1988 and actively develops the beekeeping industry. The company is engaged in scientific and experimental developments in the field of beekeeping, production of bee products, and therapeutic and preventive activities.

Tentorium produces over 200 types of products, including various types of dragees, honey and honey compositions, creams and balms based on bee products and various phyto components.

As we can see, the main feature of successful companies in Russia has become the quality of products and standing the test of time, as almost all of them were created in the late 90s.

Overall, network marketing has shown high crisis resistance and successfully developed in conditions of unemployment. MLM companies provide an opportunity to earn income in the face of a complex economic situation in the country.

If you are inspired to create your own network company or want to boost sales through an affiliate program, the experts at FlawlessMLM are always ready to help and provide a free consultation. Contact our manager in the website chat (flawlessmlm.com

Contact us today and learn more about solutions for your business.