Monday, 24 April 2017

With soap in their hands & Hope in their hearts

Here is an article which was written way back in 1998 by Ramjee Chandran and published in The Bangalore Monthly Update magazine in June, 1998. The writer envisioned the fraudulent scheme of Amway long back before the police filed criminal cases against the MNC, which has been still in 2017 looting the public in the name of direct selling handing over highly-priced, adulterated and unbranded products to the consumers.

Ramji Chandran
According to the local office of Amway India, about 6,500 Bangaloreans have already singed up to become Amway salespersons.
These 6,500 people have paid the USA-owned Amway Corp. Rs 4,200 each i.e. 6,500x4,200= (almost) Rs 3 crore. 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.
But 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’ve 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 are 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 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. He 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. May be not Chrysler cars but may be Marutis.”
“I can buy a Maruti through Amway?”
“Of course! When they tie up the deal.”
“What deal?”
“Distribution deal. If Maruti is smart, theywill understand that in a few years, only multi-level marketing will survive. Even Bill Gates said. 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. TGhen 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 salesmean like yourself. And I went to an Amway meeting.”
“Then you have learned 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 dead?”
I didn’t 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 is immaterial. You’re just being pedestrian.”
“Tell me how many products do theyhave?”
“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. No 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 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 my phone and began to research the story.
Amway’s operations rest on what is called multilevel marketing (or MLM). It has been called network called ‘network marketing’, pyramid selling (a phrase that inspires vitriol among Amway types). It has also been compared to 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 commission on whatever they buy. You also get commissions 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.
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’s the calculation. You=1. Youx 9= 9 people. 9x6= 54. 54x3=162. Total=262 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 1,500 worth of Amway products every month. 226xRs 1,500=Rs. 3,39,000 per month.
For every Rs 1,500 worthof product purchase you get 50PV (Point  Value). It works out to about 3.34% of the value of products bought. For every PV you get a commission. It is 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 200PV (that’s Rs. 6,000 worth of goods) you get no bonus. With 200PVs you 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 500PV. 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 lakh worth of Amwayproducts every month, you will earn 11,300PV. Your bonus on this will be 21% and you will earn Rs 71,900. After sharing your bonus with the others in your group you will be left with Rs 40,500.
At this level the bottom 162 people in your group make no bonuses at all because their PV is less than 200, having bought only Rs 1,500 worth of product. 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 1,500 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’.
Amway Products vs. other products
1.       G&H body lotion, 250ml Rs 316 – Nivea lotion 250 ml Rs 110.
2.       Satinique (shampoo & conditioner) 250ml Rs 314 –Sun silk (shampoo & conditioner) Rs 85
3.        Dishdrops (1 litre=4 litres) Rs 420—Godrej Concentrate Rs 64
4.       SeeSpray Concentrate (1litre=4litres) Rs 290—Cxolin Glass Household cleaner Rs 252
5.       Amway zoom concentrate 1 litre. Rs 299—Robin Cuff’s N Collars 128
(Note: I could not work out a way for people to spend Rs 1,500 a month without wasting the product)
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 i.e. 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-blond 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 as people as you can to pay Amway Rs 4,200 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 shampoo or detergents.
The positive side to Amway
Let me say that the above is the positive 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 system works.
Alas, that’s not where the story ends.
Because for everyone, who makes money, there will be necessarily 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.
I spent two hours in the Amway office on Airport Road. 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 indeed, he wanted to know why I wanted to write an in-depth story. His colleague, a lady that person distributors speak to, firs told me that she would come back in ten minutes and then she vanished from plain sight.
After one and a half 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 reappeared 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 budding 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 (Gowry 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 that was no on 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 Bangaloreans but no one who could be account table 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 4,200 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 bythe 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 Turn “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—6,500 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 stand s 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 achere to the 9-6-3 formula, then hold on to your hatwhen you read this.
6,500x9= 58,500 Amway distributors,
58,500x6=3,51,000 Amway distributors
3,51,000x3=10,53,000 Amway distributors
That’s ten lakh fifty three thousand for the city of Bangalore.
An employee of Bata Shoe Company told me that they employ about 30,000 sales people in their 1,500 stores across the nation. 30,000 Bata sales people for the whole nation and 10,53,000 Amway sales people only for Bangalore.
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 per cent are middle class. That is 1.3 million of which 1.67 per cent (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.) e even said that the numb er was less for a certain South Asian country)

I asked him ikf that number could be as low as 10,000. He said that was a possibiolity. (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 two other people on an average. Therefore, if some of them manage to sign up 220 people, many others won’t sign up people at all.
And if you divide this number—10,000 into groups of 226, then the total number of directs in the Bangalore will be 44. In essence, 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 sing up0, Amway will receive Rs 442. 26 crore in upfront cash from this ‘cash rich’ country. They will have earned all this money without having sold a single one of their very expensive products.
Then, by some chance, if all these people actually manage to spend Rs 1,500 a month on products. Amway will giggle into their bank manager’s sleeves having earned another Rs 1,895.40 crore or on sales very year.



Unknown said...

Thank you for Shearing Blog

David Smith said...

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