Meet the new paradigm: network marketing in Japan; Can American-style marketing work in Japan?

Japan, Inc., Nov, 2004 by Yusuke Imura

ONE NIGHT IN EARLY June, over 20 curious Japanese and foreign audience members gathered in the second-story meeting room of Nikken Japan's Akasaka headquarters in downtown Tokyo. The videoconference receiver beeped with an incoming call from Toronto, Canada. Our business mentor was online and waiting.

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LINDA AND BOB PROCTOR, our partners in this undertaking, launched into an introduction of the Nikken business opportunity in English. Despite our assurances that the prospects could understand English, we watched as some people were gradually lost during the 30-minute presentation. The Q & A session lagged so seriously that an interpreter was required, and there were more than a few awkward silences in places.

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We wondered if we had made the right choice in holding our first event in English over the videoconference medium. However, after the completion of the call, four or five guests stayed afterwards for product demonstrations or individual consultations, yielding very promising results. In the end, we declared the event a success, knowing that we would still have to refine this business tool a bit further in order to make it successful in Japan.

A different path

Can American-style Network Marketing work in Japan? This is a question my wife and business partner, Wendy Jonas Imura, and I have asked ourselves many times over the last six months, after starting on this unique journey. Our decision to make a change was based on an idea from Robert Kiyosaki's financial literary classic, Rich Dad, Poor Dad: The new economy pushes people from old paradigms into new ones.

In the old paradigm, a good education and stable employment at a major company guaranteed a stable income and a comfortable retirement plan. The current Japanese educational system and society suggest that this is the path for everyone.

However, as people have come to realize, the old paradigm is actually based on a big lie. Japanese companies now hire and fire at will, making job security a thing of the past. With the crumbling pension system, individuals must look out for their own financial needs as they age.

The reality of a new paradigm became apparent to us, and we knew we had to make our own path.

We decided to quit our corporate jobs and focus on developing our own businesses. Our new path and paradigm required a new vehicle: multiple sources of income providing security and stability. We investigated a number of paths or vehicles that could have provided us with multiple sources of income or passive income, including real estate, the stock market, franchising and other options.

However, while these opportunities were promising, they required a large initial investment of money, skills and time at a level we were not yet prepared to invest.

Then a friend introduced us to network marketing, an opportunity initially passed over by many people because they do not understand the structure or system adequately. When we first took a look at network marketing, we studied its structure, which is often misunderstood.

What we found was that the term "network marketing" (sometimes called "multi-level marketing" or direct sales) simply refers to a product or service distributed directly from a company to consumers.

While most companies choose to distribute products using traditional in-house or external sales routes (retail sales locations, wholesale sales routes, sales staff, television or catalog sales and/or an Internet presence), network marketing companies use a network of independent distributors, who then purchase the right to distribute the company's products for promotion and distribution.

Independent distributors market and sell the company's products using word-of-mouth, independent sales tools or other methods. Successful network marketers also recruit, train and motivate other distributors in teams and multi-level organizations. Distributors are rewarded for their sales both through a percentage of retail sales and by leadership incentives designed to activate organizational growth.

A true network marketing company provides both types of incentive (for real retail sales and organizational growth) to its distributors, distinguishing it from a multi-level scheme, which provides payment only for signing up further levels.

A growing industry in the US

After understanding the business structure, we began to look into the background behind network marketing, especially in the US. We discovered that network marketing was a business with some history, having started in the 1940s, when Nutralite Products, Inc. began sales of nutritional supplements.

The business is also large and growing. Annual sales in network marketing were $28.69 billion in the US alone for 2002, with 13 million distributors. Some 55 percent of the American public bought goods via direct sales during 2002, according to the United States Direct Selling Association (DSA, www.dsa.org). Globally, some $85 billion in products and services are sold via direct sales.