Until recently, most of my experiences with fair trade led me to believe that this type of business, while laudable, was inefficient, and its prices were unaffordable. Fair trade meant connecting remotely-situated artisans and growers with luxury shoppers willing to pay extra to support a social mission.
But business models dependent on uncompetitive prices aren’t sustainable, Evan Goldsmith, founder and president of Hope For Women, a company that sells eco-friendly products, based in Burlington, Vt., tells me. A member of the Fair Trade Federation and adherent to fair-trade practices, his company sells fairly priced merchandise from Colombia, El Salvador and India to corporate accounts, retailers and other businesses in the U.S.
Likewise, Mata Traders, a Chicago-based company that sells fair-trade clothing for women, strives to keep its prices accessible, according to part owner and marketing director Jonit Bookheim.
Goldsmith and Bookheim both shared their insights on how not sticking to the status quo can make a difference and a profit.
Word-of-Mouth Referrals Work
One of Hope For Women’s largest accounts was landed through word-of-mouth marketing. Aveda, the eco-friendly beauty product giant, became a customer when a Hope For Women warehouse worker shared fair-trade items with one of their regional sales managers. The sales professional then carried merchandise samples to the corporate office in Minnesota, where employees examined, passed around and talked about Hope for Women’s merchandise.
Handmade cards depicting women with prominent hair styles were of particular interest. Company executives purchased these to send congratulatory notes to the owners of its top 200 salons. Further, they were excited by obtaining a product aligned with the corporation’s social mission.
Despite Goldsmith's initial concern about not being able to control the content of the sales presentation (he typically likes to create and present a formal pitch), he began investigating the salon industry and Aveda’s business practices. He quickly recognized the opportunity and took steps to tap the profit potential of supplying products to the corporation.
Among the successes that stemmed from the word-of-mouth referral was the “Gift of Hope” holiday gift set program. Hope For Women and its Colombian partner supplied a handmade hair accessory (constructed of a tagua nut, a sustainably harvested rainforest product) for nearly 400,000 gift sets distributed to Aveda salons, spas, stores, institutes and academies for the 2010 holiday season.
Valuing People Pays
Business owners often think of valuing their employees, customers and vendors as a cost of doing business, not as a boon to productivity and profitability.
The partnerships that Hope For Women enjoys with its producer groups were critical to the success of its “Gift of Hope” program, which the company put together in about six months. This fast-track scale-up was possible because of the company’s value of people associated with producer groups–from top-level representatives to artisan workers in the field.
Mata Traders has also benefited from the responsiveness of artisans associated with fair-trade cooperatives in India and Nepal. Jonit notes that the cooperatives are similar to social service organizations, providing services such as literacy classes, financial literacy training, vision testing and on-site daycare.
This mutual support pays off when Mata Traders needs design adjustments for styles with costs that are higher than anticipated. The company works with the cooperatives change elements of a design at less cost, like simplifying a pattern, while maintaining product integrity.
Build a Cost Structure That Supports Profitability
Fair trade can be costlier than other sourcing methods. Shipping from remote inland areas to port cities is especially expensive.
But fair trade companies adopt nontraditional business methods to support profitability. For example, Hope For Women saves money by employing telephone representatives to call on salons, bucking the industry standard of a field sales force. Mata Traders operates a booth at Chicago’s Anderson Galleria to get retail exposure without the cost of a traditional storefront.
Rather than hope that people will pay more than market value to support a social mission, Hope For Women and Mata Traders strive for competitive pricing of innovative and on-trend products first; then, they let the social benefits tip the scales for corporate buyers and consumers alike.
Julie Rains is a senior writer at Wise Bread, a leading personal finance community dedicated to helping people get the most out of their money. Get daily money tips by following Wise Bread on Facebook or Twitter.
Photo credit: Hope For Women