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Pyramid Scheme Alert (PSA) provides current and historical news items that are of interest to our members and visitors. None of the reports or commentaries is intended to imply that any of the referenced companies have been charged or convicted as illegal pyramid schemes.

WITH SOAP IN THEIR HANDS & HOPE IN THEIR HEARTS

by Ramjee Chandran

(From The Bangalore Monthly Magazine in July, 1998. Bangalore is one of the five largest cities in India. It is located in the South Central part of the country.
Note: "Rs." refers to the Indian currency, Rupee. Approximately 42 Rupees equal one US dollar. The initial investment that Bangalorans are making in Amway is Rs. 4,200 or about $100. As noted in the article, the per capita GDP of India is $340 )



According to the local office of Amway India, about six thousand five hundred Bangaloreans have already signed up to become Amway salespersons. These 6,500 people have paid the USA-owned Amway Corp. Rs. 4,200 each.

6,500 x Rs. 4,200 = (almost) 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. 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 sales person, 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 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 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 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 many 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. 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.

HOW IT WORKS

Amway's operations rest on what is called Multi Level Marketing (or 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 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.

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's 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. 1,500 worth of Amway products every month. 226 x Rs. 1,500 = Rs. 339,000 per month. For every Rs, 1,500 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. 6,000 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 $35 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 71,190.00. After sharing your bonus with the others in your group, you will be left with Rs. 40,500.

AMWAY PRODUCTS VS. OTHER PRODUCTS

1. G&H Body Lotion, 250 ml, Rs. 316.00

Nivea Lotion, 250 ml, Rs. 110.00 2.

2. Satinique (shampoo & cond.) 250 ml, Rs. 314.00

Sunsilk (shampoo & conditioner) 250 ml, Rs. 85.00 3.

3, Dishdrops (1 litre =4 litres), Rs. 420.00

Godrej Concentrate (1 litre=4 litres). Rs. 64.00 4.

4. SeeSpray Concentrate, (1 litre=4 litres) Rs. 290.00

Colin Glass & Household Cleaner, 4 litres, Rs. 252.00 5.

5. Amway Zoom Concentrate, 1 litre, Rs. 299.00

Robin Cuffs N Collars, 1 litre 128.75 6.

6. LOC High Suds Organic Cleaner, (1 litre=167 litres) Rs. 322.00

Teepol, 5.5 litres=167 litres, Rs. 352

(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 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 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 (see box) 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 , 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 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 (see photo) 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 system works. Alas, that's not where the story ends. Because for every one who makes money, there will 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 2 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 2 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 distributors speak to, first told me that she would come back in 10 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 "authorized 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 authorized to talk to the press.

I asked Mitra why Amway had people in Bangalore who were authorized 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. 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 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. 6,500 people (in Bangalore alone) have already signed up.

Each one of them is a 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 = 351,000 Amway distributors.

3,51,000 x 3 = 1,053,000 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. 1,053,000 Amway sales people only for Bangalore.

The standard response to this is that all these Amway salespersons are not necessarily going to be in Bangalore. You can pick up the phone and call someone anywhere else in the world. Therefore, you can call your cousin in Ooty and tell her the 'good news'. She pays Rs. 4,200, then she will call her nephew in Raichur who will pay Rs. 4,200 and he will call someone else who will pay Rs. 4,200 and so on.

All this is done in the hope that more sign-ups mean more people will buy Amway products. So if not 1,053,000 Amway sales people, how many will actually operate in Bangalore? Let's hazard a guess.

Half ... 5 lakh salespeople? 2 lakh sales people? 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. (1,053,000 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 number-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 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 4,422 million ( 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 regulation.

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 also are 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 others 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 (Baton Rouge, Louisiana) newspaper in the US reported that these rules are not enforced, 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. 1,500 a month on products, Amway will giggle into their bank manager's sleeves having earned another 18,954 million ( 1,895.40 crores or US$ 473.85 million) on sales every year. Surely, the numbers I have outlined 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. 4,200, you get about 2,000 worth of products. (It means they have sold 2,000 worth of products for 4,200) 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 6,500 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. 1,500 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 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 realize 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. 5,000 a month. She had just paid Amway Rs. 4,200. Clearly her monthly savings cannot be more than around 500 a month if she is lucky. And she had just bought herself a shampoo for 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 millionaires? 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. 4,200 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 an 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 its 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 DEFENSES

"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 a 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."

"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. 4,200 isn't such a great risk. You get products for Rs. 2,000."

(Not a great risk for whom? I would hate to lose Rs. 4,200. I would also hate to buy soaps for Rs. 2,000 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 defense from people appears to be that they do not wish to hear that they may not properly assessed the significance of handing over Rs. 4,200 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. 1,500 a month. Won't they?" I contest the viability of even as small a sum as this. To make Rs. 1,500, he or she will have to sell at least Rs. 25,000 worth of goods. At the level of Rs. 1,500 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 soap 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. 1,500 a month) must tell them that not only must they cough up the initial Rs. 4,200 but they must get another 16 people to cough up Rs. 4,200 each. And get everyone to spend Rs. 1,500 every month. This would be a considerable achievement for someone in an economic strata where he or she needs to earn Rs. 1,500 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 hundreds 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 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 and 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 2,000 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 organization. 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 THE PRODUCTS?

Most Amway salespeople agree that the present range of 6 products is not sufficient to generate usage of Rs. 1,500 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 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 (see box), he should soon retire to his counting house.

Steven Beddoe contradicted his Bangalore office. He said that Amway plans to launch new products every 3 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 28 crores worth of product stock. I asked him how many months worth of inventory that represented. He consulted with his finance man and said, nine months. That works out to a sale of 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. 4,200?

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. 4,200 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 that 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 25 lakhs an "opportunity", when an efficient Maruti Rs. 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 1 Rs.,500 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 $26,980. The per capita GDP of India is US$ 340. (Source: Barclay's Bank Econ. Dept.)

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. 4,200.

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 recognize 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 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 salesguy, 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 all but stopped doing any office work: "He uses the office phones to prospect for Amway business and ties up all 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 lower income Americans. Rs. 4,200 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 borrower 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 it 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?


Sources for my story included these websites: http://www.jps.net/jasong/ http://student.uq.edu.au/~py101663/miscult/scamway.htm http://www.awod.com/gallery/rwav/slarsen/amway.html http://www.willynet.com/rglasser/amway/ http://members.jlee.com/midgett/ http://www.theadvocate.com/news/story.asp?StoryID=887 The Yahoo search site is: http://search.yahoo.com/bin/search?p=amway Or look up this newsgroup: Newsgroups: alt.business.multi-level Most of what you read on the Net against Amway (from the USA), is about the evils of 'social engineering' -how Amway sales people are brainwashed and try to brainwash others. While much of this appears to have relevance to India, our story rests on the economic evil since that is the greater danger to our country.
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False Profits

This page last updated on 10/3/06