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For more information/links, see http://goanet.netfirms.com
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Received this article some years ago, when Amway commenced
operations in India, and the $US was around Rs.35/- . With the
dollar around Rs.50/- today, this article seems very relevant.
=================================================================
=====
With Soap in their
hands
&
Hope in their
hearts
--
-- Ramjee Chandran
Cover Story
========
According to the local office of Amway India, about six thousand
five hundred Bangaloreans have already signed up to become Amway
salespersons. These 6500 persons have paid the USA-owned Amway
Co : Rs. 4200 each. 6500 x Rs.4200 = (almost) Rs.3 crores.
Cash up front. And that’s only in Bangalore.
A Bangalore company probably can’t raise this kind of money in
the stock market in these days of tight money conditions. And
Amway did. Without advertising. Without the great dollops of
press coverage that even the launch of a new whisky usually
generates. It’s all word of mouth, we are told. Word from the
mouths of people living abroad who have been told by Amway to
call their kith, kin and caboodle in India. Word is also to spam
you on the Internet. Spam is unsolicited promotional material,
junk mail on the Net. Word is to send you cheap postcards.
Calling, writing, faxing or spamming people in India to tell them
of the good news.
The good news is that they have the means to help you to change
your life. To own your business. To earn your freedom. To not
just get a life, but get a lifestyle. The subliminal message
is: Stop being a loser. Whatever you have been doing with your
life, it is worth less than what you can do as an Amway
salesperson.
When I put this last proposition across to an Amway salesperson,
his response was this: “You’ve hit the nail on the head. You’re
right. That is the case”. He explained further: “You don’t
have to give up your publishing business” (thank God). “Use your
spare time profitably. What do you do when you drive to work?
Nothing! What do you do in the evenings? Watch TV? Pah!”
Right through this entire opening phase, something nagged me.
There was no mention of what Amway did. What was the word that
this guy kept talking about. "What was Amway selling?" I asked
him. “The dream, my man,” he replied, his face aglow. “the
dream. Amway is not selling you anything. Amway is giving you a
business opportunity you cannot beat” “The business opportunity
to do what?” I asked, still confused. “The opportunity to use
world class products. The opportunity to get others to use world
class products. The opportunity to change your life.”
“What world class products?”
“Only the best”
“Name one product”
“Many products. 10,000 products. From shampoo to
Chrysler cars!”
“I can buy Chrysler cars in Bangalore?”
“Not yet. But the day will come. Maybe not Chrysler
cars, but maybe Marutis.”
“I can buy a Maruti through Amway?”
“Of course when they tie up the deal”
“What deal?”
“Distribution deal. If Maruti is smart, they will
understand that in a few years, only multi-level marketing will
survive. Even Bill Gates said it. The end of retail selling is
here. Amway will overtake them. By the year 2000 no one will
buy anything from shops”.
“Which shops?”
“Any shop. Every shop.”
“Nilgiris, Shoppers’ Stop, Folio and Bata will all
close down?”
“Yes, of course.” He sounded a little exasperated.
Then he became paternal. He employed the tone one uses to talk
to a friend’s child
“Are you aware of Amway?”
“Yes”, I replied “I have read everything they gave
another salesman like yourself. And I went to an Amway
meeting.”
“Then you have learnt nothing, my friend,
nothing!. You must have spoken to the wrong person. The world
is going to change. Haven’t I already told you that retail
selling is dead?”
I did not give up. “Where is this place where they stock 10,000
products. I’d like to see it for myself.”
“Well, it’s not 10,000 products yet. But it will
get there.”
“How many products do they have right now?”
“That’s immaterial. You’re just being pedestrian.”
“Tell me how may products do they have?”
“Six”
“Six of what?”
“Detergents, a great Liquid Organic Cleaner which
you can pour into your plants after cleaning the floors and Dish
Drops which will make your glassware shine like anything.”
Before I could speak, he added : “They also have a lotion and a
shampoo. But why am I telling you all this. The point is not
the products but the opportunity. Not matter what the products
are, the opportunity will make you lots of money. And then you
can retire. What is needed is not for us to quibble about the
details. We, you, me and everybody must do all we can to make
this succeed”
Then totally pickled in his own sales pitch, he began to shout:
“Get off the pot! Get on the phone, man, and spread the word!!
Use your magazines and tell lakhs of people the good news!!!”
So I got off the pot, picked up the phone and began to research
the story.
How It Works
==========
Amway’s operations rest on what is called Multi Level Marketing
(MLM). It has been called ‘network marketing’, ‘pyramid selling’
(a phrase that inspires vitriol among Amway types). It has also
been compared to a chain letter or the buying of a lottery
ticket. How it works is both simple and complicated at the same
time.
You try and sign up others as fellow Amway distributors. You get
commissions on whatever they buy. You also get commission on the
purchases made by the people whom they in turn sign up as Amway
distributors. The more people you sign up, the more they will
buy. The more they buy, the more money you will make.
How to Become a Millionaire
-----------------------------------------
Now I will explain the 9-6-3 scheme because every Amway
distributor talked about this. Having signed up, you get 9
people to sign up. Next each of the nine people gets 6 people to
sign up. Then, each of those 6 people gets 3 people to sign up.
Here is the calculation:
You = 1
You x 9 = 9 people
9 x 6 = 54
54 x 3 = 162
Total = 226 Amway
distributors in your group.
If you achieve this target, you no longer ‘belong’ to someone
else’s group. You become a ‘direct’.
The next assumption is that each of these 226 people in your
group will buy an average of Rs.1500 worth of Amway products
every month.
226 x Rs.1500 = Rs. 3, 39,000
per month
For every Rs. 1500 worth of product purchase you get 50 PV (Point
Value) It works out to about 3.34% of the value of products
bought. For every PV, you get a commission. It’s called ‘bonus’
.
There is a (telescopic) slab system to determine your bonus. The
lower the quantity of purchase, the lower the commission. Till
you reach the level of 200 PV (that’s Rs. 6000 worth of goods),
you get no bonus. With 200 PVs, your earnings (bonus for that
month), will be Rs 180. When you (together with your group) buy
Rs. 15,000 worth of products, you will get 500 PV. Your bonus on
this will still be 3% and your personal income will be Rs.450 per
month less whatever is to be shared with the others in the group.
If you and your group members buy Rs. 3.39 lakhs worth of Amway
products every month, you will earn 11,300 PV.
Your bonus on this will be 21% and you will earn Rs. 71,190.
After sharing your bonus with the others in your group, you will
be left with Rs.40500/-
Amway products v/s Other Products
1. G&H Body Lotion, 250ml, Rs. 316.00
Nivea Lotion, 250ml, Rs.110.00
2. Satinique (shampoo and conditioner) 250ml, Rs. 314.00
Sunsilk (shampoo and conditioner) 250ml, Rs.85.00
3. Dishdrops (1litre = 4 litres), Rs.420.00
Godrej Concentrate (1 litre = 4 litres), Rs.64.00
4. SeeSpray Concentrate (1 litre = 4 litres) Rs 290.00
Colin Glass & Household Cleaner, 4 litres, Rs.252.00
5. Amway Zoom Concentrate, 1 litre, Rs.299.00
Robin Cuffs N Collars, 1 litre, Rs.128.75
6. LOC High Suds Organic Cleaner (1 litre = 167 litres)
Rs.322.00
Teepol, 5.5 litres = 167 litres, Rs.352.00
(Note: I could not work out a way for people to spend Rs.1500 a
month, without wasting the product)
At this level, the bottom 162 people in your group make no
bonuses at all because their PV is less that 200, having bought
only Rs.1500 worth of products. However, you have nothing to
worry about. You will make bonuses on their purchases because
their PVs are counted in your tally.
Remember, you will earn this Rs. 40,500 a month only:
1) IF you get to sign up 226 people
2) IF you make sure that each and every one of the 226 people
buy Rs.1500 worth of products every month; and
3) IF every one of these 226 people has the ability and the
desire to pay Amway prices, because Amway makes the claim that
their products are “world class”.
When you get 226 people in your group, you become a ‘direct’.
Your commission drops to 4% on the purchases of the group. Then
what? Then you go sign up more and more people if you want to
make more money.
If you want to become a millionaire, you will need to sign up
several hundreds of people and have them all buy more Amway
products. If you are the poor sod at the bottom of the heap, you
will be told “if you work hard”, you can sign up hundreds, why
thousands, of people from anywhere in the world to become Amway
distributors and that by “working hard”, you can beat the odds
and become a millionaire. (when you become a millionaire by
“working hard” in your spare time, you can buy the BMW they kept
showing you in the promotional videos … the one that had the
stereotype honey-blonde draped over the dude who was playing
golf).
You are also being told that if you aren’t making nice dollops of
money, it is because you aren’t “working hard”. The definition
of “working hard” is to get as many people as you can to pay
Amway Rs.4200 to become distributors. There’s another way. That
is to sell products door-to-door or person-to-person. You could
do that too. There should be nothing to stop you from lining up
outside apartment buildings with the “dabba distributors” of
Bangalore and sell Amway shampoo for Rs.315/-. You could also be
posh and invite the ladies of your kitty party for tea and then
sign them up or sell them shampoos or detergents.
The Positive Side to Amway
====================
Let me say that the above is the positive side to Amway. That
is, the chance to make money. It is the chance to get oneself
involved in a trade as a side business, specially if one is
trying to recover from a failed (or failing business) or one has
lost one’s job. To the extent that a few people will surely make
money, the systems works. Alas, that’s not where the story ends.
Because for every one who makes money, there will necessarily be
many who do not. Indeed, as I went along from Amway distributor
to Amway distributor, I found myself vastly better informed than
most of them, with the exception of one articulate couple. They
spent over two hours with me, explaining the nitty gritty of the
commission structure. Despite reservations, I thank them for
this. In direct contrast was my experience with the people at
Amway’s nice office on Airport Road.
Hiding from Questions
================
I spent two hours in the Amway office. The administrative
manager, Arijit Mitra turned out to be extremely personable and a
gentleman. However, he did say that he would not be able to
answer any questions about the details of the scheme and he
wanted to know why I wanted to write an in-depth story. His
colleague, a lady that distributors speak to, first told me that
she would come back in ten minutes and then she vanished from
plain sight. After 1½ hours, there was no sign of her and Mitra
kept me engaged. Then another lady came out and told me that
she was “very busy”. I told her I would wait indefinitely.
Then Mitra re-appeared from the bowels of the Amway office and
looked apologetic. He said his colleague would not meet me
because she did not want to meet me. He explained that she was
not “authorised to talk to the press”. I tried to ask him to
tell Vinitha not to hide inside the building and that my
questions were very simple. But no dice. I never got to ask
questions of the very person who was qualified to answer them.
Then I asked Mitra to call her superior (Gowri Someone) in Delhi
so I could talk to her. He did. He told me that she had told
him the same thing. Mitra asked me to go to Delhi and speak to
someone called Steven Beddoe, He said there was no one in
Bangalore who was authorised to talk to the press. I asked Mitra
why Amway had people in Bangalore who were authorised to take
money from Bangaloreans but no one who could be accountable for
this. Mitra had no answer.
The Underside of Amway
==================
My basic problem with Amway is that I believe that the success of
some is dependent on the failures of others. That is:
1. Amway will make money; and
2. Some distributors will make money; but
3. Both will do so at the expense of the many that might not.
And those who don’t will probably be middle income people for
whom Rs.4200 is a major piece of investment. (My accountant
spends less on school fees for his two children for the whole
year.)
As a quick aside, let me quote the ‘zero sum theory’.
For those who might not know it, this is a theory propounded by
the famous economist, Lester Thurow. His book ‘The Zero Sum
Society’ explains it in detail with a lot of econometric models.
It will take me over a 100 pages to go into all that. Basically,
Thurow said that for every person who has made a certain amount
of profit, someone else has made an equivalent amount of loss.
This
is like the horse races. Any Turf Club will make money. A small
number of bettors will make money. One of them will hit the
jackpot. The only way that the Turf Club can make someone rich
is because thousands of hopefuls lose their bets and their money.
It is the losers’ money which is collected and passed on to the
lucky ones. The lottery works in pretty much the same way.
I am not saying that Amway is like a horse race or a lottery.
But the overall money movement and the odds of someone becoming
rich are startlingly similar. This is better explained with
numbers.
Remember how many people you need to sign up? I’ll remind you.
225. If you must get 226 people (including you) to sign up,
then consider this. 6500 people (in Bangalore alone) have
already signed up. Each one of them hopes he or she will make a
lot of money. It is reasonable to expect that if one Amway
distributor stands a chance of becoming a millionaire, then every
Amway distributor should stand an equal chance of becoming a
millionaire … otherwise it is exactly like a horse race. So, if
all 6,500 people adhere to the 9-6-3 formula, then hold on to
your hat when you read this
6,500 x 9 = 58,500 Amway
distributors
58,500 x 6 = 3,51,000 Amway distributors
3,51,000 x 3 = 10,53,000 Amway distributors
That’s ten lakhs fifty three thousand (or 1.053 million) Amway
distributors for the city of Bangalore.
An employee of Bata Shoe Company, (the masters of retail
selling), told me they employ about 30,000 sales people in their
1,500 stores across the nation.
30,000 Bata sales people for the whole of
India
10,53,000 Amway sales people only for
Bangalore
The standard response to this is that all these Amway sales
persons are not necessarily going to be in Bangalore. You can
pick up the phone and call some one anywhere else in the world.
Therefore you can call your cousin in Ooty and tell her the ‘good
news’. She pays Rs 4200, then she will call her nephew in
Raichur who will pay Rs.4200 and he will call someone else who
will pay Rs.4200 and so on.
All this is done in the hope that more sign-ups mean more people
will buy Amway products. So if not 10,53,000 Amway sales
people, how many will actually operate in Bangalore? Let’s
hazard a guess. Half … 5 lakhs salespeople; 2 lakhs sales
persons; 1 lakh sales people? Will there be any left at all.
Two days after my visit to the Amway office, I received a call
from the Amway HQ in Delhi, from Steven Beddoe, GM, Distributor
Services. He told me that the numbers would never grow to what
I have mentioned above.
Because I persisted, Beddoe suggested that the possible number of
Amway distributors in Bangalore would be about 1.67% of the
middle class population. Bangalore’s population is about 5.2
million. Of this, let’s be conservative and say that 25% are
middle class. That is 1.3 million of which 1.67% (21,710) would
be Amway distributors. Beddoe reacted again. He said he didn’t
think that the total number of Amway distributors would be that
many. (He even said that the number was less for a certain South
Asian country.) I asked him if that number could be as low as
10,000. He said that was a possibility. (10,53,000 to 10,000
and we still don’t have a number).
Then the chances of people making money is slashed because Amway
themselves are suggesting that each person will sign up less than
2 other people on an average. Therefore, if some of them manage
to sign up 226 people, many others won’t sign up people at all.
And if you divide this 10,000 into groups of 226 , then the total
number of ‘directs’ in Bangalore will be 44.
10,000 - 44 = 9,956 Amway distributors who do not stand the
chance of becoming ‘directs’. Who will be among the lucky 44?
You? I asked Beddoe to help me with this puzzle and apart from
giving me philosophical discourse, he couldn’t address the matter
of numbers. All he said was that Amway distributors should sign
up more and more people. Which brings me to my next thought.
Why Amway Will Make Money Even If You Don’t
===================================
Another interesting calculation : If 1.05 million people sign
up, Amway will receive Rs. 4,422 million (Rs. 442.26 crores or
US$ 110.55 million) in up-front cash from this “cash rich”
country. They will have earned all this money without having
sold a single one of their very expensive products.
What is a Pyramid Scheme
====================
China recently banned direct selling, The Chinese government
defended its move on the basis that direct selling operations
like Amway can easily turn into “Pyramid Scheme” operations
without thorough regulations. In a typical pyramid scheme,
people are obliged to buy over-priced products which they cannot
return. The only way that the company makes money is by bringing
more and more people into the network. The company makes money
on their initial sign up fees.
Such companies would not care if products are not sold, since the
pressure to move products rests with the “distributors”. The
distributors are also motivated to sign up more and more people
because that’s the only way they can move any products. The
danger of the pyramid scheme is that those who join later in the
scheme are stuck at the bottom of the pyramid and have very
little chances of making any money. But no one wants to believe
that he is at the bottom of the pyramid. And the effort to sign
up people far exceeds the motivation to sell the products from
door to door.
The Federal Trade Commission of the USA ruled that Amway was not
a pyramid. The basis for its decision was that Amway encourages
its distributors to sell products at a retail level. But the
Advocate newspaper in the US reported that these rules are not
enforced or followed; in fact, not even monitored.
Suggesting that Amway is a pyramid scheme evokes considerable ire
among Amway people. All of them parrot the standard Amway
comeback that every corporation is a pyramid. The guy at the
top makes more money than the bloke at the bottom. But in a
commercial operation, that is, any company, nobody takes money
from all the employees as Amway does from all its salespeople.
Then by some chance, if all these people actually manage to spend
Rs.1500 a month on products, Amway will giggle into their bank
manager’s sleeves having earned another Rs. 18,954 million
(Rs.1,895.40 crores or US$ 473.85 million) on sales every year.
Surely, the numbers I have outline above are absurd. No one
supposes that Amway will turn this kind of money around.
But the significant thing is that these calculations are based on
Amway’s numbers, not mine.
I seek to demonstrate from these numbers that no matter how many
Amway sales people there are and how much they buy every month
(even if they do not buy anything), Amway stands to make a lot of
money from the initial sign up fees. Because, for Rs. 4200, you
get about Rs.2000 worth of products. (It means they have sold
Rs. 2000 worth of products for Rs. 4200) The rest, they say,
goes towards giving you a ‘business opportunity’.
In addition Beddoe informed me that each year, distributors will
have to “renew their contract”. He wouldn’t confirm the exact
amount they will have to pay, but said it would be in the region
of Rs. 1,200. So the existing 6500 people will give their
American masters a revenue of Rs. 78 lakhs a year … money for
jam.
One Amway distributor told me that if he did not buy products
worth at least Rs.1500 every six months, he would be bounced out
of the system. One Amway employee denied this. Another
distributor said that the distributor I spoke to was a
“bullshitter”. (Frankly, I found it difficult to establish who
should be believed.)
If this is true, Amway stands to make about Rs. 2 crores a year
from this minimum performance requirement. Add to this the
number of others (in the entire country) who may have signed up
and your guesstimate on Amway’s profits is as good as mine. They
could recover more than their entire capital cost in a quick
manner with a hefty profit to boot, without any heartburn about
selling products. If they were keen on selling products, they
would appoint a number of sales agents who would knock on doors
and sell individuals the Amway Dish Drops as an alternative to
Teepol. This is what the honest ‘dabba distributor’ does.
The cornerstone of my arguments is that this is a fair and just
system only if each and everyone of the Amway distributors stands
the same chance of making the same money. I wonder if those
signing up realise that they will most likely be at the bottom
of the heap and may not make any money at all. Is Amway a
pyramid therefore? Again, time will tell.
To refute this argument, some Amway salespersons told me that
there are no guarantees in any business. Some will make it and
some won’t. This is the silliest argument where Amway is
concerned. In no other business is every buyer propositioned to
become a “distributor”. And in no other type of business does
the principal company take capital deposits from every buyer. If
this mathematical argument is not clear in your mind and you
still think that the system will work for everyone who signs up,
you must be the guy who gave all his money to Mr C R Bhansali.
How This Is Done At The Expense Of The Middle Class
========================================
When I posed the absurdity of the numbers to a distributor, he
replied : “Yes, your calculations may be right, but quite
definitely, only a few people will succeed in the Amway
business.” Here’s another way of putting it : Most people will
fail in the Amway business.
I have established that the only way to succeed in the business
is to be able to sign up vast numbers of people and make them use
the products for themselves. The other way is to run around
peddling soap from door to door after having bought it from Amway
at a discount. I cannot see any of the Amway distributors I met,
ringing my doorbell to sell me Amway Gly-Honey hand lotion.
Selling soap is infra dig
Selling hope is chic
The effect that this has on the middle class is unfortunate.
Subjected to videos and presentations by the select few who have
struck it rich, they believe that they, too, can strike it rich.
In response, Steven Beddoe said that middle class people might
have smaller ambitions (like buying a scooter or educating their
children) and Amway will make their humble ambitions (my
expression) come true.
When I was waiting in the Amway office, I saw a lady signing up.
The address she had filled out belonged to a building a few
streets from mine. It was not a rich address, so I made a few
enquiries. I learned that her family income is about Rs.5000 a
month. She had just paid Amway Rs 4200. Clearly her monthly
savings cannot be more than around Rs 500 a month, if she is
lucky. And she had just bought herself a shampoo for Rs 315,
among other delights. She picked up her Amway cardboard-box of
dreams and struggled down Airport Road towards the bus stand.
I thought about the kind of individual who would sponsor a lady
like this. What would the sponsor have told her? That she stood
the chance of becoming a millionairess? That all she had to do
was to smooth-tongue nine others into becoming Amway
salespersons? That her life of abjection was over and that she
now had the “chance to use world class products?”
The barren truth is that what the lady had just bought gave her
friend’ 40 PV. (I have heard of someone else who was diddled for
a few pieces of silver by a ‘friend’. I cannot decide which is
the greater greed, the greater treachery.) Her Rs 4200 has gone
into the Amway system. This has added to the kitty into which
the more fortunate will dip.
The fact is that in the USA, a more socially homogenous society
than ours, it is possible for any American, from whatever
background, to approach another American with a degree of
confidence and talk about Amway or anything else. In India, as
we all know, things are different. The lady I speak about would
not be given the courtesy of a smile by most people I know. Our
class conscious snobbery would prevent them from standing beside
her when the great achiever from the USA is shouting “Hooo Hooo
Go Diamond!” into a hapless microphone.
I imagine that she stands a snowflake’s chance in hell of making
it to the top of the Amway heap. All she now has is a bottle of
world-class indeterminate substance which will make her glasses
shine like crystal. And the dream that she is a favoured
participant in the great American, now Indian, dream. So what if
Bangalore is reaching saturation? All she needs to do is to pick
up the phone and call her cousin in Coimbatore to sign him up.
The trouble is that she does not have a phone. She cannot afford
one. It is from the money of thousands of individuals like her
that the zero sum society seeks its rewards.
So What
======
So my opinion is that all of it falls to deception. Because all
Amway sales people are made to feel that they stand the chance of
becoming millionaires. This was energetically contested by one
salesperson. She said that in the Amway sales meetings people
are repeatedly told that some of them will not make it. I asked
the Amway people if they said this at the time of signing people
up. They said no. They were only administrative people.
Sponsors should take care of this.
There is a dissonance between what Amway says (in general) and
what Amway distributors say to their prospects. Steven Beddoe
admitted there was this dissonance but told me about the reams of
literature which Amway calls it Code of Ethics. All this is very
noble, but Beddoe was not able to tell me exactly what mechanism
Amway has to monitor and enforce these ethics across so many
thousand Amway distributors. If things go wrong, Amway can hide
behind their rule book and say that the distributors were wrong.
Even during my research, Amway company officials said several
times that I was “wrongly informed” by Amway distributors.
To my mind, this is a dissonance which is convenient to Amway.
But the greater dissonance is this : If Amway knows that only a
few of their sign-ups will succeed, they are doing the gravest
injustice to the Indian middle class by taking their money and in
return selling them a little more than a hard-to-fulfil promise.
Typical Amway Defense
=================
“Amway will never saturate the population. There are only 2
million Amway people world-wide. A fraction of the population”
(Why? Obviously this means that Amway have failed to sign up as
many people as the 9-6-3 scheme permits.)
“Amway is billion dollar corporation. Whatever you might say,
they are successful. You can plug in to their system.” (Fact :
Amway is successful by taking money from people. I challenge
Amway to draw a correlation between the money taken from sign-ups
and the volume of products they have moved through retail sales.)
“If you have a bad impression about Amway, you’ve spoken to the
wrong people.” (Right. That’s what Nazis say when denying the
holocaust)
“Amway is perfectly legal” (So was C R Bhansali for a while)
“Every major corporation is a pyramid” (See : ‘What is a pyramid
scheme’ on page 10)
“I met so many rich people at Amway. Surely such a rich guy
cannot be taken in by a scam” (Sure. And has it occurred to you
that he may have become rich by taking money from people like
you?)
“So many Fortune 500 companies have formed partnerships with
Amway” (These are not partnerships. Pepsi Corp doesn’t become a
partner of Safina Plaza by having a vending machine there. Amway
only vends Pepsi. They have not signed a partnership agreement.)
“After all, Rs. 4200 isn’t such a great risk. You get products
for Rs.2000” (Not a great risk for whom? I would hate to lose
Rs. 4200. I would also hate to buy soaps for Rs.2000 even if
they are “world class” soaps)
“If you think Amway is so bad, what do you have to offer me that’
s better?” (Let me tell you. Work hard and get the hell out of
everyone’s hair. My advise is this : Go Diamond … go away!)
These are only some of the things that you may hear from the
Amway crowd. The basic defence from people appears to be that
they do not wish to hear that they may not have properly assessed
the significance of handing over Rs. 4200 to Amway. As for the
people who work for Amway, they serve their American masters
well. After all, it does appear that we are genetically
engineered to serve our masters well.
One distributor said to me that Amway gives him the opportunity
to help someone. “Even if all people do not become millionaires,
it will help at least a few. Some of them will make at least Rs.
1500 a month. Won’t they?” I contest the viability of even as
small a sum as this. To make Rs. 1500, he or she will have to
sell at least Rs. 25,000 worth of goods. At the level of Rs.1500
usage per month, the sale of Rs. 25,000 worth of goods covers at
least 17 families. Which means 17 more Amway distributors
(unless he sells the products door to door).
Amway types often add product discounts to their potential
earnings. It is silly to count discount on forced purchases as
cash in hand. Therefore, my friend (who wishes to help the
impoverished earn around Rs.1500 a month) must tell them that not
only must they cough up the initial Rs.4200, but they must get
another 16 people to cough up Rs. 4200 each. And get everyone to
spend Rs. 1500 per month. This would be a considerable
achievement for someone in an economic strata where he or she
needs to earn Rs 1500 a month. Not to mention all the lovely PVs
that my pal himself will collect from the person he is ‘trying to
help’. I believe that my friend’s deception begins with himself
and therefore spills over to his bottom dogs.
And Who Is Bill Britt?
===============
>From the experiences of friends I spoke with in the USA, what is
more likely to appear on the Amway list of promises is
promotional cassettes and books rather than more products. The
promotional material is designed to help an Amway distributor
“sell, sell, sell.” The basis for this activity is propounded by
American, Bill Britt. He and another American, Dexter Yager, run
two of the most successful ‘systems’ under the Amway banner. It
is said that about 90% of Amway’s products move through these two
systems.
In India, what is being discussed is the Bill Britt system. The
Advocate newspaper in the USA reported that to follow Britt’s
system is to spend hundred of dollars a year on motivational
tapes. Amway distributors are told that “spending money to buy
these tapes is the key to building a large successful Amway
business.” Therefore, it is likely that new products peddled by
Amway distributors will not be more soap but more hope in the
form of these motivational materials.
One USA based distributor, an Indian (who has since left the
business), told me that these tapes were meaningless and were
sold to people by convincing them that they weren’t doing well
enough. He said that the tapes would become an item for sale and
Amway distributors will be selling them to each other in a self
feeding frenzy. I asked a Bangalore salesperson about this. He
said : “Yeah, we’ve got that covered. We will buy one set and
make many copies of it an pass it around for free. This is
India, man.”
Exactly. That is exactly my problem with a business which makes
people hand over their savings to Amway to buy themselves a dream
and then try to create parallels between the growth of Amway and
the growth of the church to justify themselves. Bill Britt is
reported to be unashamed to use God to promote the Amway trade.
He reportedly said once that he sponsors a system
set in place by Jesus. “There was a man that sponsored twelve
people 2000 years ago and I’m in his group. Because he sponsored
twelve and he taught us sponsoring, he now has one-and-a
half-billion people in his organisation. So I think we have a
pretty good precedent of what sponsoring is all about.” (All we
have is the Shankaracharya who keeps to himself most of the
time.) Even with all the two-paise philosophy that foreign Amway
distributors can throw at Indians, it falls to the sensible ones
to try and understand the hidden agenda and separate the lure of
lucre from the realities of returns. That may happen, if not
immediately, then later. After all, this is India, man.
And What Of Products
=================
Most Amway salespeople agree that the present range of six
products is not sufficient to generate usage of Rs. 1500 a month.
They expect more products will be added. I asked the Amway
officials when they would release more products, what products
and at what price. One employee said he had absolutely no idea
and wouldn’t tell me anything even in the vaguest detail because
he hadn’t been told anything himself.
I mentioned this to a distributor. It distressed him
considerably and he told me that he would call Amway “and give
them a royal bollocking”. How could he be made to wait to earn
his PVs? According to the Bill Britt system, he should soon
retire to his counting house.
Steven Beddoe contradicted his Bangalore office. He said that
Amway plans to launch new products every three months. By
August, a laundry detergent. By October, a hand cream soap. By
December, a toothpaste. (Bye, Bye Colgate Palmolive?)
Another Mathematical Conundrum
=========================
In the course of conversation, Beddoe mentioned that Amway
maintains Rs. 28 crores worth of product stock. I asked him how
many months worth of inventory that represented. He consulted
with his finance man said, nine months. That works out to a sale
of Rs. 3.1 crores per month. At the stated average of Rs. 1500
per Amway distributor per month, it works out to 20,667 users. A
mere 20,667 Amway users for the whole of India? With many more
people than that having paid up the Rs.4200?
Summary
=======
If all Amway did was to manufacture and sell their products
through door-to-door salespeople there would be no problem. The
choice of purchase is left up to the individual. By asking for
deposits from buyers in the beginning and again every year, it
looks like Amway seeks to build a captive consumer base. Once
someone has paid Rs. 4200 to Amway, he is naturally disinclined
to buy Nivea hand cream instead of Amway Gly-Honey hand lotion.
The element of personal choice is thus prejudiced.
By involving their “distributors” in a complicated system of
down-the-line commissions (which most of them showed no signs of
comprehending), they are given the impression that there is a
limitless market for Amway products. The truth is that the
market share for Amway is as limited as the market share for any
other product. Traditional retail trade is not about to
collapse. And because of the expensive price structure, the
growth of the market is restricted to the very wealthy.
Calling this “an opportunity to use world class products” is a
bit like calling the purchase of a Mercedes Benz for Rs. 25 lakhs
an “opportunity”, when an efficient Maruti 800 for one-tenth of
that price will do nicely. With all these constraints, telling
people of profit mechanisms tied into several thousand people
buying Rs. 1500 worth of Amway soaps every month seems laughable
in a country where entire families lead their lives on less
money.
Transplanting an American operation into India is downright
dangerous under the circumstances. The per capita GDP in the US
is $26,980. The per capital GDP of India is US$ 340. (Source :
Barclay’s Bank Economics Department.)
The cost of becoming an Amway distributor in the USA is US$ 120.
In India, they have simply multiplied this by 35 and made it Rs.
4200/-
I Have Seen The Light …
And If You Haven’t, You’re Not My Friend
==============================
The parallel with an evangelist (with the light in his eyes who
gives you unsolicited advice about Jesus, equally, the
all-American Hare Krishna selling you the Bhagavad Gita) is
inescapable. You can recognise him in a minute. His opening
lines run something like this : “I have a wonderful way for you
to make a lot of money with little effort.” : Tell such a person
: “Oh, you’re talking about Amway, aren’t you?” And watch his
expressions fail him immediately. He squares his shoulders and
gives you his complete attention.
He is the Amway distributor. He is in your face. He looks
directly in your eyes and gesticulates in your peripheral vision.
You can’t look anywhere but at him. Nothing matters to him but
you. You are the next cog in his wheel of fortune. He expects
that you will be lured into his web of promises. The promise
that he has the ability to make you a millionaire. The promise
that you will not just get a life, but a lifestyle. That your
good fortune can be willed to your children and that you and your
progeny will live off what he will describe to you as ‘residual
income’. His evangelism is complete.
I overheard one distributor tell his wife : “I think so-and-so
will soon become a convert”. His ability to make money depends
on your signing up. Your ability to make money depends on who
you can get to sign up and thus the web expands.
In Bangalore, the growing tribe of Amway salespeople have
inspired all kinds of emotions in non-Amway distributors. The
‘I-have-seen-the-light’ evangelism is all but alien to our
society and it inspires dread in many.
Writer Ajit Saldanha said : “When I see an Amway sales guy, I
leap like a nimble mountain deer out of his path.”
Hotelier Rishad Minocher said : “I laugh at them. At least a few
dozen people have tried to ‘convert’ me.”
A fashion designer said of her friends : They get very excited
about this whole thing. But it’s not for me. I will not be seen
selling detergents.”
Another lady working for a media relations company complained
that one of her colleagues has stopped doing any office work :
“He uses the office phones to prospect for Amway business and
ties up al the lines. Normally a very dumb fellow, he is
emotional about Amway and his own livelihood matters to him no
longer.”
US$ 120 does not represent anything close to a risk even for the
lower income American. Rs.4200 exceeds the monthly income of
most Indians. And a 250 ml shampoo for Rs. 315 is unspeakable
for all except the richest among us. One Amway employee said
that they did not want the Indian middle class to get hurt but
that Amway could not possibly check into the economic background
of every sign up. Bullshit. Even small finance companies in
India have the mechanism to look into the backgrounds of their
borrowers. That is because they themselves would get hurt if the
borrowers failed. The reason Amway does not look into the
background of their distributors is because Amway will not get
hurt if the distributor fails. (They are taking his money up
front).
Quite correctly, I think, Amway should not worry itself about the
fate of people who willingly sell the family silver to become
Amway distributors. After all, who is anyone to say that the
Indian middle class knows not what is does. (Steven Beddoe made
the gratuitous offering that he felt Indians are not dumb
people.) And what Amway is doing is to tell all their prospects
that they could make pots of money. But with the full knowledge
that many of them will not. The Latin phrase, ‘caveat emptor’
simply means ‘let the buyer beware’.
But what if nobody is a buyer and everybody is a seller … with
soap in their hands and hope in their hearts?
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