Multi-Level Marketing (MLM) is a business model or marketing strategy in which the distributors' income includes their own sales, and a percentage of the sales group they recruit, which is commonly known as their ‘downline’. Customers can also sign up as a distributor to sell the company’s product. Usually, the sign-up fee will be the price paid to purchase the product.
For the distribution of goods after manufacturing, the product has to go through the distributor, wholesaler and finally the retailer before reaching the hands of the consumer. A MLM is a form of direct sales with special features, of which recruiting is fundamental. A person, recruited by the company to sell a product, earns commissions; if that person recruits others, this second layer is called the person's "downline." The person earns a cut on the sales of people in the downline, called an "override." But those in the second level may also recruit others and create their own "downlines." The first person in the chain gets an "override" from every level, however many there may be, although always less the farther removed the source is. Often recruits are required to purchase an initial "starting inventory" of the product. By theory, the MLM mode of operation is simply more cost efficient and easier to run. Best example of a MLM company is Amway.
MLM businesses appeal to people who want to work part-time and need a flexible schedule, like students and mothers of young children. In addition, MLM businesses usually do not require a long-term commitment from their sales representatives. They might enjoy the flexible working hours coupled with the chance to generate a healthy revenue stream.
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