Welcome to Fair Trade Month. This post on launching a fair trade business was written by Sangya Giwali, founder of new ethical, artisan-made jewelry company, Blooh, which operates according to fair trade principles.
Launching a Fair Trade Business
In a world swimming in wasteful and exploitative practices, the promise of businesses operating on fair-trade principles is crystal clear. But creating and sustaining a business like this is a different story.
Sustainability has become a catch all phrase for businesses recently; generally, it refers to a balanced system that optimizes for both human and environmental benefit. A win-win.
Yet the supply chains that power most of the things we fill our homes and closets with are anything but. The more I learned about this industry, the more I thought about the skilled handworkers I’d met on my travels to bustling town centers like Nairobi.
Here was an industry failing to capture a widely distributed talent pool and still worth billions of dollars, easily surpassing the GDP of entire nations.
A Fair Trade Business Begins
Earlier this year I cobbled together $3,000 to start Blooh – a tech-enabled double-sided marketplace that connects a network of talented global craftspeople to a larger US market. Building on principles of fair trade, like fairness and opportunity, we work hand in hand with talented artisans that specialize in modern jewelry with the aim of reaching a larger customer base.
The alternative for many is being at the mercy of local markets prone to massive global fluctuations like the pandemic. By July 2021, we had launched a pilot with roughly 60 artisans in Nairobi with the hopes of innovating and promoting production in an industry that has yet to enter the 21st century.
All this time, I’ve been ecstatic to start something so aligned with my values. But the cost of doing business holistically is very high for newcomers, and the effects are felt by everyone involved, from the entrepreneur, investor, all the way to the customer. An instant catch-22 that reflects why there’s no shortage of good intentions.
The High Cost of Doing Business
Beyond startup costs, inventory alone can cost anywhere from $3,000-$20,000 before turning a single sale. Ethical certifications can take up to $1,000 and scale with revenue. And having a marketing budget so early on is a pipe dream but crucial in an ever-competitive e-commerce landscape.
Working with a PR firm can cost anywhere from $2,000-$20,000 per month. You can comfortably launch and afford the first 1-2 years with $50,000 – $100,000 if you have any hopes of reaching the mass market. This is already a conservative estimate, the more you want to increase benefits the higher this number soars.
Unfortunately (for many of the reasons explained below), the number of people starting out with this type of stash is little to none. I’m convinced that social entrepreneurs are a different breed and can overcome any challenge with dogged persistence, creativity, and resourcefulness.
But the incentives to keep going are very little and many don’t last. Here are some of the reasons why…
Why Fair Trade Businesses Fail
With over 300 million workers in the global handmade and creative industry, including these workers into everyday supply chains isn’t just about impact, it’s good business practice. Doing so naturally promotes equity and sustainability.
However, in the investment community, companies that prioritize a triple bottom line (people, planet, and profit) are still considered expensive and risky, since they don’t immediately turn around substantive returns for the investors.
Put another way, when a good portion of money goes back to the producers – including creating safe working conditions – the shareholder becomes a mere participant in the company ecosystem rather than at the top of the chain.
Coffee is arguably the only poster child in recent history where investors line up in mass to promote a value chain– but it seems the conversation has effectively stalled there.
You might be quick to point out all the good intentioned investors that are changing the game, and you’d be right. But there are still countless caps on much needed capital that disqualify early fair-trade businesses from even having a start.
A new generation of investors are needed to seriously experiment with new funding schemes in order to shift this equation towards a true participatory model.
Matching Money with Makers
Where money flows people go. Because of a lack of success in funding this space, there is a gap in infrastructure from technology to support networks needed to accelerate fair trade ventures.
These businesses inherently operate in some of the most remote and impoverished areas of the world, largely manually. This means it takes more effort to coordinate things like logistics and payments using ad-hoc 3rd party systems.
Why is this bad? Because it becomes significantly harder to manage the work at scale. Technology is directly tied to improving productivity; it changes how well companies can compete and therefore their riskiness score.
Think of any industrialized nation to date. Technology has been behind every success. To have any chance at succeeding in the long run, fair trade ventures must innovate entirely new ways of working while trying to get products to market – a double bind given the capital challenge already mentioned.
Blooh is an example of an entirely bootstrapped company, not unlike many others motivated by the same mission, that’s trying to innovate at this intersection.
Fair Trade Matters
Knowing all this, I hope it’s obvious why fair-trade or anything ethically made is considered luxury. All the costs and challenges mentioned above add up and leave each company fending for itself.
The price tag itself isn’t necessarily a bad thing. Instead, the limelight should be on the system that forces this to be so.
In 2021, our individual expectation of how much something should cost is grossly distorted by a culture of businesses racing to cut costs without much regard for people caught in the chain.
The effect is a market that’s gotten so used to convenience and the $3 t-shirt price tag. Peel back this layer a bit more and you find a more complicated picture of growing inequality, where this may be the most people can afford. It’s a cyclical race to the bottom.
So, who’s right and wrong in this web?
The biggest solutions will have to come from the biggest players like investors and governments alike. Without accountability at this level progress will be sluggish.
But I hope you also see yourself caught in this loop. The total spending power of Americans in 2020 was projected to be $12.5 trillion USD. Creating a world of new, responsible supply chains are at the heart of solving many big problems like climate change and rising inequality.
If you have the means, vote with your dollar this fair-trade month and months beyond for the type of change you want to see.
About the Author
Sangya is the founder of Blooh and an avid systems thinker. With experiences spanning financial services, tech, and marketing, she is always imagining new ways of working with and relating to the world around her. Motivated by her lived experiences across the developing world, she started Blooh to truly enable the global artisan and creative community. She’s a reluctant tennis player, Schwarzman Scholar, and Alter Fellow.