9.1.5
Eziba
(USA)
Eziba was launched in November 1999 as an on-line
‘global bazaar’ offering hand-crafted products from 60 countries to
individual consumers (business to consumer). While a ‘for-profit’
commercial enterprise, the company also supports the Eziba Foundation to
improve the lives of artisans.
In
March 2000 Eziba secured second-round funding of $70 million, including $17.5
million from the leading US on-line retailer amazon.com. This was subsequently
scaled back to $40 million overall.
Like
Novica, the site groups products by type and region, is searchable, and offers
some information on producers (though not to the extent of Novica).
The
site enables customers to order a free, full-colour printed catalogue, which
has increasingly been the focus of marketing efforts (rather than the web
site). Thus promotional campaigns for the Christmas 2000 season focused on
direct mailings of printed catalogues. The site notes that ‘we started off
as an e-commerce company, and we've evolved into a multi-channel resource for
world crafts’.
In a
business press release of October 2001, CEO Bill Miller identifies the paper
catalogue as being their most successful marketing tool:
‘The
catalog is an increasingly important dimension of our business. It is our most
cost-effective marketing tool and attracts hundreds of thousands of people to
www.Eziba.com, who find what they want in the catalog and then order on the web
site. The catalog has enabled us to rapidly grow revenue, while helping us to
simultaneously reduce cost. While revenue is currently running ten times over
last year, total expenditures are running roughly one third less than last
year. We have steadily been engineering the company to take advantage of the
success of the catalog. The result: Eziba is moving rapidly toward
profitability.’[1]
In
January 2002 Eziba reported record sales for 2001 (triple that of its first
year, 2000). ‘Eziba's sales are derived equally from its web site
(www.eziba.com) and catalog. For 2001 the company mailed 11 catalogs, including
four during the crucial November/December holiday season, for a total
circulation of more than seven million.’[2]
In July
2001 Eziba announced a new retail partnership with the American Craft Museum,
and in February 2002 announced they plan to open their first retail outlet in
New York in April 2002. This will be a 900 sq ft store featuring a selection of
1,000 products from the web site and catalogue.[3]
Above: Eziba’s printed
catalogue for April 2002.
9.1.6
10,000
Villages (USA)
10,000
Villages (www.tenthousandvillages.org) is a US ATO (Alternative Trading Organisation) selling
fairly-traded crafts through a network of over 60 shops in the US
(achieving sales of $10.9 million of craft goods in 2000). They are a
member of IFAT (the International Federation for Alternative Trade) and the
US Fair Trade Federation and have been marketing handicrafts since 1946. It
is a non-profit program of the Mennonite Central Committee (MCC).
While
10,000 Villages has a web site, they have decided not to sell any handicraft
products directly on-line until the market
develops more fully. So the site provides details of their retail stores, with
details of selected merchandise, with some feature articles about individual
producer groups, with links to their products.
10,000 Villages feels that
investing in e-commerce in the current economic climate will be unproductive
for them. 'If we sell on-line, we may sell one item at a time,' says
Marketing Director Dwight McFadden. 'But if a customer visits one of our
shops, they will probably buy two or three items. We want our customers to
touch and feel our products.'
10,000
Villages has invested in ensuring that their retail shops (200 in both US and
Canada) have a consistent look and feel, and are attractively laid out. They
believe the Internet does not allow them to promote their goods to their best
advantage. They also want to ensure the best financial returns for producer
groups, since they are committed to paying a fair price to artisans (in 1999 on
average 27 per cent of the retail price went back to the producer group;
compared to perhaps 15% via commercial importers). They do not believe that
significant investment in e-commerce facilities would give a sufficient return
either for themselves or their producers.
10,000
Villages is however using email to help their network of volunteers order
products from their warehouse, enabling them to offer a streamlined and more
efficient service.
They
report that they have been approached by a number of the new on-line craft
stores, who wish to take advantage of the infrastructure and experience they
have developed over the last 56 years: including quality control, relationship
with producers, import and distribution channels, warehousing etc.
10,000
Villages has adopted an approach of ‘wait and see’.Given the very limited success
of fair trade craft products in the business to consumer market, their
conservative approach may well be proved right.
9.1.7
Traidcraft
Plc (UK)
Traidcraft is a UK public limited company, founded in 1979,
which is a major importer and distributor of handicrafts, fashion goods,
stationery, beverages and foods sourced in the Third World. They trade with
over 60 producer groups in 25 developing countries.
|
|
1999/2000 |
2000/01 |
|
Sales |
£7,466,000 |
£8,394,000 |
|
Gross profit |
£2,828,000 |
£3,001,000 |
Source:
Traidcraft Plc Annual Review for year
ended 31st March 2001
Traidcraft’s Annual Review[4] for 2000/01 notes this has been ‘the second most profitable year in our history’, and the fourth consecutive year of profitable business ‘following a period of losses in the mid 1990s’. In 1996/97 Traidcraft rationalised their business (announcing 50 job losses and disposing of their few remaining retail shops); and in 1997/98 ceased trading with 19 craft and fashion suppliers ‘as part of their ongoing programme to recover profitability’.[5].
Much of the growth in 2000/01 is due to the increased sales of food goods through supermarkets – and it is clear that Traidcraft Plc sees the greatest potential for growth in food products; whereas their sales of craft goods in the UK remain almost static (Figures 25 and 26).
Figure 1 Traidcraft sales growth 2000-01
Source:
Traidcraft Plc Annual Review 2000/01
Figure 2 Traidcraft 'What our customers buy' 2000-01
Source:
Traidcraft Plc Annual Review 2000/01
This trend is also noted in Traidcraft’s own analysis of fair trade purchases (Figure 27):
Figure 3 Traidcraft value of purchases
Source:
Traidcraft Plc Social Accounts 1999/2000, section 1.1.1
Figure 28, which shows the product groups sold by Traidcraft’s Fair Trader volunteers (who account for around 60% of all Traidcraft Plc sales) also reflects the trend away from crafts to food products:
Figure 4 Traidcraft Fair Trader sales by product group
Source:
Traidcraft Plc Social Accounts 1999/2000, section 1.4.1
Traidcraft Exchange is Traidcraft Plc’s linked charity, which provides business training and market information to overseas producers (including the ECOTA Forum, Bangladesh, one of whose members is one of this research project’s collaborators, HEED Handicrafts). Traidcraft Exchange focuses on six main partners, concentrating on local capacity building and trade facilitation. This includes a range of services and supporting activities, including occasionally providing a designer to travel overseas to visit producers to assist with product development for the export market; providing market information reports (eg colour and style trends in handicrafts in the USA); capacity building in production management and quality control.
Traidcraft Exchange had an income in 1999/2000 of £2.04 million.
Traidcraft Plc sells food, craft and fashion items through their mail-order catalogue, via their network of over 4,000 volunteers[6], and to wholesalers and large UK multiple stores such as BHS, Sainsbury, Waitrose and Safeway. While their volunteer Fair Traders account for 60% of Traidcraft’s turnover, a further 25% of sales are accounted for equally between the mail order catalogue and sales to independent World Shops[7].
Each Traidcraft’s craft producer group is asked to meet the following fair trade criteria:[8]
·
be
organised for the benefit of its members
·
be
concerned for the personal welfare of its members
·
pay
wages which are, or are above, the average in the locality
·
make
products that are, or may soon be, commercially viable
·
pay
no more than a reasonable service fee to agents (if they are involved)
Traidcraft has a web site (www.traidcraft.co.uk), which recorded over 20,000 hits per month in March 2000[9]. In addition to providing background information about Traidcraft’s activities, details of producers and their stories, and their detailed and highly-transparent Social Accounts 1999/2000, the site hosts an on-line store with a small selection of products. These include clothing (T-shirts), tea, coffee, chocolate and other food goods (such as snack bars and breakfast cereals). The only craft product available on-line is Traidcraft’s branded football from Pakistan.
The site allows visitors to order Traidcraft’s latest mail order catalogue, join their email list, as well as to display a listing of UK shops selling Tearcraft products.
According to International Director Andy Redfern, the web site achieves sales of up to £1,000/month (including food and craft goods) – representing a very small proportion of their overall sales (less than 0.2%). However, like 10,000 Villages in the USA (see 9.1.6), Traidcraft’s Fair Trader volunteers can use email to order goods – and were generating 300 orders a week in this way in April 2001.
Traidcraft also uses email (and digital photographs) to enhance liaison with producers, and for product development. They have found that digital images can give a good idea of what a product will look like, but still require producers to send physical samples before they would consider making an order. Digital photographs (such as compressed jpeg images) are not colour accurate, so Traidcraft prefers producers to work from the standardised set of Pantone colours.
Traidcraft have previously experimented with using CD-roms to distribute product information to commercial buyers, but found the medium was too slow, and unsuited to the needs of professional buyers. They found that buyers preferred to use a printed colour catalogue, which they could scan through rapidly, selecting a few products they would like to see as physical samples.
9.1.8 Global Sources (Hong Kong)
Global Sources (www.globalsources.com)
is a Hong Kong based b2b (business to business) marketplace offering
product and trade information for volume buyers. A number of their
‘vertical’ categories include craft products, such as furniture and
furnishings, kitchen and tableware, ceramics and porcelain etc.
The company began in trade publishing (Asian Sources monthly magazine, founded 1971), developing Asia’s first web-based B2B portal in 1995 (alongside continued publishing of magazines and cd-roms).
The Global Sources on-line market was launched in 1999; with financial processing facilities added at the end of 2000. Over $20 million has been invested in Global Sources since 1995, matching (mostly Asian) manufacturers with buyers all over the world.[10] In August 2000 Asiaweek voted them best B2B web site in Asia. The lure, as for other numerous B2B exchanges in Asia, is to generate revenue from financial transaction charges. However few B2B exchanges to date, if any, are actually profitable.
According to Asiaweek, Global Sources made $11 million on sales of $91.8 million in 1999/2000. But most of its profits came from print advertising and web-related marketing for clients. A loss of $1.8 million was forecast in 2000/01 because of the on-line venture. ‘Although we believe Global Sources has been successful in achieving a profitable online catalogue-style advertising business, the jury is still out on whether it can replicate the same success with online transactions,’ says a Merrill Lynch brokerage report.[11]
By January 2002, Global Sources report they have over 300,000 active buyers (those who have enquired using the web site, as well as recipients of magazines and cd-roms), and 135,000 suppliers.
The site offers a range of services. On-line product catalogues (for internal use, or for promotion to a company’s existing customers) cost from $720 pa for 200 items to $1530 pa for 650 items.
However to access Global Sources 300,000 buyers is significantly more expensive.
A standard marketing web site (with homepage, company profile and product ‘showroom’) costs from $9,600 pa (up to 15 products) to $35,880 pa (up to 100 items). Enhanced business marketing web sites (with extended company information and higher ranking in searches) costs from $17,880 pa (up to 15 products) to $44,160 pa (up to 100 products).
Global Sources also enables ‘private offers’, whereby products can be securely targeted at individual buyers who have expressed a preference for this type of product. Thus competitors do not see what products are on offer, and the seller is able to track feedback and orders automatically using the site. ‘Private offers’ cost from $250 for 10 (existing sellers) to $970 for 10 (new sellers).
The site also offers a free basic listing for suppliers, and claims to generate 2.9 million business enquiries a year (of which 31 per cent come from Asia, 22 per cent from USA and 17 per cent Western Europe). Their own survey of 5,000 suppliers in November 2001 found that 18 per cent had received ‘many orders’ (amount not specified) from the site; while 43 per cent had received no orders to date.[12]
ASHA Handicrafts had considered using Global Sources, since some craft business contacts in India had reported this as being a cost-effective way of advertising. However the level of charges to access ‘active buyers’ is beyond their budget, and likely to be significantly more than craft producers can afford.
9.1.9 Conclusions
Following our overview of craft-related web sites, and interviews with selected personnel, we conclude:
· Craft sales in the B2C sector (business to consumer) market have been disappointing. Among fair trade operators, the US ATO PEOPLink has achieved very low sales (and is now focussing on its CatGen system to enhance B2B (business to business) operations. The web site of UK ATO Traidcraft generated sales representing just 0.2% of overall sales, while US site Viatru (formerly world2market) closed during the course of this research. Eziba (USA), despite investment in excess of $40 million, like many e-commerce ventures, has yet to become profitable (and is increasingly exploring off-line channels). Novica (USA) is attempting to make direct selling of craft goods to consumers profitable (using a network of offices to consolidate orders) but has not disclosed sales data.
· Craft sales in the B2B market are more promising, if still undefined. Both OneNest (USA) and PEOPLink’s CatGen (USA) have set up B2B marketplaces. The level of OneNest’s actual sales is unknown, while it is still too early for CatGen (still at demonstration stage). The generic Asian B2B portal Global Sources reports that 18 per cent of suppliers advertising on their site had sold ‘many orders’ (but no breakdown is given by industry, product type or size of company, or by Return on Investment).
· Like the rest of the ‘dot com’ market, early optimism about the potential for craft sales on the Internet has given way to a more realistic assessment of the market. Increasingly e-commerce sites are using off-line marketing (conventional) methods to find customers: thus OneNest has moved towards print advertising, paper catalogues and exhibiting at trade fairs; while Eziba has found most success with its mailshot of colour catalogues (and is now planning to open its first retail outlet in New York).
· We also note that generally sites have been unwilling to disclose actual sales information, but have been willing to give relative data (eg sales comparisons with previous years). For these reasons hard data is hard to come by. The experience of individual producer groups we know of (eg collaborators in this research and others) suggests that actual sales are low indeed.