Tips for Starting a Fair Trade Business: The Story of Earth Divas

When the owner of Earth Divas, Ed Edmundson, decided to start a company that sold 100% fair trade items, he had no idea how to get started. Learning the ins and outs of how to source and supply fair trade items was a huge undertaking. And, like any business owner he made some mistakes along the way!

I wanted to write this post for those of you who’d like to get more involved in the fair trade industry. Whether you just want to learn more about what it’s like to start a fair trade business, or you’re interested in starting a fair trade business of your own, Ed has some great advice to help you learn more about the business of fair trade.

Question: How do you get started selling fair trade items?

The key thing is to visit the country that you are sourcing from, and never source from China.

When I started in 2004, I used the internet to find artisan groups. However, when I went to Nepal I realized that often, these artisan groups were just ‘middle-men’ with nice websites.  I was able to find the real artisans by going to the tourist shops and asking them who actually made their handbags.  Then I would pay them to take me to where the items are made.  They are made in small houses in and around Kathmandu.  There is usually a lady in charge (who usually couldn’t speak English that well, if at all); often, the artisans would come work in her home.

Over time, I’ve built a network of these small artisan groups.  I use my cargo agent for all communication, payments, and any updates.  So I’ll ship DHL samples to my cargo agent or send him photos, and he then brings them out the ladies who make samples.  My cargo agent then takes photos of the samples and sends them to me because the ladies don’t have internet or a computer.  My cargo agent and I chat on Skype roughly once a week and he’ll send me production updates.

2. Are you still using this system?

I still use this system, but it’s flawed and can get very frustrating.  I’m now pushing forward on multiple fronts, but will share some info about how and why I’m doing things the way I’m doing them now.

In the early days this system worked well,  when I was doing mainly small, easy to make hemp items and recycled silk items.  But we would always have problems with quality and consistency.  I still use my cargo agent who still works directly with these artisans, but my business started to grow beyond what I could support through this network.

3. How do you insure that Earth Divas bags really are fair trade?

When I was in Nepal… roughly 2006/2007.. I met a guy named Ganesh and he had a business that had a number of sewing machines.  I explained that the only way I could work with him was if he would embrace fair-trade principles.  He was willing to do this, and he and I worked through all the issues.

He had many customers that were not fair trade, but he agreed that for my order, we would break out the cost of each item into material cost, overhead cost, labor cost and profit.  And he and I would do the measurements and look at the cost of each item.  Then we would add 30% additional to the labor cost.  Then he would explain to the workers that this item is for EarthDivas only and that they would be paid extra.

This worked for a while, but created some tension because they wanted to be paid extra for all items.  We then agreed to set up a separate production group in another location with a few artisans.  And I would give him orders way in advance so there wouldn’t be a big rush.  We did this for over a year but then he said it is creating lots of tension because other artisans wanted to work for EarthDivas.

Actually, before we set up this separate production group we did make a profit in 2008, and Ganesh paid for the food and the banquet hall and i gave back all the profits in cash.  We put the cash in envelopes and handed it to them.  But since 2004, I’ve only made a profit one year and the next year, the artisans were thinking that Ganesh was keeping the profits.  Then we set up the separate production facility. However, it was very complicated to have two production facilties.  Ganesh tried to be fair and we tried to make it work. Then the recession really hit and my business really slowed down.

At the time, I had lots of inventory and I didn’t place any orders for serveral months.  Stores just stopped ordering. At the same time, my sales reps were saying, stores want something new. They’re tired of the hemp look.  They want cotton handbags.

Up until this point, I had never worked with conventional cotton.  I had used organic cotton in the lining of some handbags but it was crazy expensive.  But I decided that it was more important to employ artisans than to maintain my principle of not working with conventional cotton.  So three things all sort of happened at the same time that moved my business away from hemp to cotton.  One was that my customers and sales reps wanted it, two was that the economy was really suffering and I could sell these items for much less because cotton is much much lower cost than hemp and finally, Ganesh was very tired and frustrated with trying to make fair trade work.

So I basically started from scratch again, looking for fair trade vendors that could make cotton handbags.  On my first order, with my first vendors, I made it really simple.  I said “Give me your best price,” then I would factor in what the maximum price was that I could sell that handbag at wholesale, and would factor in the overhead, customs, shipping cost, commissions and there was usually, on many items a small gap that I could increase my price to.

I would say, ok… for this handbag, I can pay a bit more, and if I pay a bit more I want better zippers, better quality lining and I need you to do me a favor.  This favor was to pay the aritsans a bonus.  From experience, I learned that the artisans could not know that the payments were coming from me, and that it could not be seen as a regular thing.  So we agreed that before the artisans would go back to the villages, he or she would give them some cash to take home as a holiday bonus.

This is something that I am certain was done. I worked with about six folks that had houses in Kathmandu, and I knew that I was not working with a middle man.  And I would talk to groups that I had worked with for years in the past and I would compare how much the artisans were being paid, and I found out that things in general had really improved for the artisans.

When I started the King was in charge and the Congress party ran the legislator and it was very pro-business, without lots of protection for the artisans.  Then through violent protest, the Maoist party was able to force elections. I was in Nepal at the time and it was pretty scary.  The police would light bonfires on the roads and stop cars and I would get out and they would inspect the trunk then let me go. They did this to all cars on the road at night.

But the election was held, Jimmy Carter was there, and it went off without a hitch.  Basically, the Maoist swept the elections.  Sort of ironic that they Maoist were fighting for the right to vote in a free and fair election.  Since the Maoist have been in charge, and its always been and will for the foreseeable future be somewhat unsettled, the workers have gained a decent minimum wage and with a number of other rights.  They have been able to go on strike and they feel much more empowered than ever before.

When I started, I would ask the artisans questions… are you happy?  Do you like working here?  How much to do you earn?  What would be the one thing you could change?  Almost always, the feedback was yes, were happy, we like the work, we like to make money, but we wish we could make more.  Now, since the Maoist are in charge, you can see that the artisans are much, much happier. They wear much nicer clothes.  They are very happy and confident and they feel like they are the boss.  It’s a pretty noticeable change.

4. What does the future hold for Earth Divas?

My goal has always been to start my own production facility in Nepal.  This way I can control everything and be 100% certain that I’m doing everything I can to benefit the artisans.  I have been going to Nepal 2 to 3 times a year since 2004 and I always stay at the same hotel and folks see me walking around with my backpack and samples.

About 3 years ago, a guy named Sarad came to the hotel and told me his story.  He is from a fairly wealthy family, he has his own small clothing shop and he used to make garments.  In his house he had about 20 sewing machines that were not being used.  He asked me if we could work together and I agreed, but it would be as a partnership where he would only hire women tailors and when we had no orders we would focus on sampling and training.  He found a small building and rented about 4 or 5 rooms.  I have been giving him more and more orders each year and I’ve been paying him extra for samples and to find a designer who can create new designs.

Over time, my hope is that he will be able to make about 75% to 80% of all items.  But right now, while the quality is excellent, it does take him about twice as long to make and the cost are a bit higher because he is not able to buy material in larger quantities.

5. Does Earth Divas really return all profits back to the artisans?

The key thing that I do with fair trade is that I don’t take a salary or any compensation and I give back 100% of the profits to the artisans.  In 2011, I think I lost about $5,000.  This is really not bad, and I think in 2012 I will be profitable.   My wife works at Marriott and pays all the bills, and I’ve borrowed lots of money from her, and put all of my personal savings into this business.  My goal is to get revenue up to a point were it will be self-sustaining and I don’t have to keep putting money into it, then I want to pay my wife back!

6. Do you have any other tips for people who want to start a fair trade business?

So, this is just one of many stories in the creation of Earth Divas! There are many many more.  I would really encourage you to join the Fair Trade Federation and also to reach out to other members of the fair trade federation to hear their stories.

If you can find a country that is closer, like Costa Rico or Guatemala, I would encourage you to consider that option instead of Nepal.  In Nepal, they don’t have power for, on average 8 hours a day.  They have to use generators to run the sewing machines.  And then there are so many issues with getting materials like fabric and zippers.  It really drives me crazy.

I do work with some really good groups out of India… one is called Creative Handicrafts, from Mumbai and the other is Speedtrust from Chennai.  They make handbags, and it is so much easier, but I feel like they have lots of opportunties to work with customers, whereas Nepal is just really tough…but very rewarding.

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