HandicraftsVCA-PaulChandler.ppt
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Transcript of HandicraftsVCA-PaulChandler.ppt
HANDCRAFT VALUE CHAIN ANALYSIS
Paul Chandler
Terms of reference
“To develop an analysis of supply chain for handcrafts … to improve the standards and procedures of FT so that producers’ added value and market access are significantly increased … make recommendations to inform setting of quality standards and system”
Terms of reference
• Focus on baskets and jewellery • Traidcraft Market Access Centre• Interviews with
– 13 Southern FTOs– 7 Northern FTOs– 4 UK mainstream buyers– 2 consultants and steering group
Presentation structure
• EU crafts market potential• Value Chain Analysis• Producer impact• Recommendations• Discussion
EU Crafts market: size
• Gifts and decorative articles: • €12.7 billion (2003); 38% imports• Germany, UK, Italy, France =75%• China dominant source of imports• Sales through independent shops,
department stores and mail order
EU Crafts market: formal barriers
• Few tariff barriers for handcrafts• Increasingly strict H&S
regulation:– Hazardous substances (esp if food
contact); infestation; skin allergies; recyclable packaging; labelling requirements etc.
EU Crafts market: consumer demand
• Growing interest in interior decoration; homes more central to well-being and self image; one-off items, to personalise homes
• But: functional rather than purely decorative
• Concern for environment/ethics • Downward price pressure
EU Crafts market: commercial buyers’ concerns• Cheap products; high volumes• Consistent (good) quality;
standardisation• New designs; design-led product
development• Short lead times; on-time delivery;
agile customer service
EU Crafts market: Fair Trade handcrafts
• Handmade products can be unique selling point
• But: will struggle to compete with cheaper machine-made products unless quality and design superior
• EU FT market €100 million (0.75% of total) – static, ethical consumer only
EU Crafts market: Conclusions
• A sizeable potential market• Mainstream opportunities in more
up-market niche areas• But price/quality and service levels
will be crucial – and need to improve
Crafts Value Chain
• Short; straightforward; mainstream and fair trade similar
• Mainstream may use agents to link importer and exporter (3-15% commission, never own product)
Importer/ wholesaler
Retailer
Consumer
Producers
Producer Group/ SME
Exporter
Crafts Value Chain: NFTOs
• Fair Trade additional services:– FT advocacy; advance payments;
capacity building; market information; capital investment; forgiving and loyal customers
• But: not growing/innovating; some lack professionalism; loyal to existing suppliers only
Crafts Value Chain: mainstream
• Are also values-led mainstream actors: many deal with SFTOs
• But care: values-led players are not typical of the mainstream:– tough price negotiations; inflexible;
slow payers; not regular orders; frequent staff changes; don’t try to understand producers’ situations
Crafts Value Chain: key issues - sourcing
• Raw material sourcing – environmental and ethical sourcing of growing concern
• Pricing issues between SFTOs/producers: – how is labour valued?; local living wage? – overheads and “free” raw materials?
– opportunity cost / contribution?
Crafts Value Chain: key issues - pricing
• Northern buyers not aware of what producers get from SFTOs: likely to become more important
• SFTO gross margins vary greatly• FT prices received by SFTOs are
generally better than mainstream; though some good mainstream payers too
Crafts Value Chain: key issues - pricing
• Mainstream mark-ups from 500% to 3,000% (highly branded)
• FT mark-ups are often lower at 300-500% (but does this devalue perceived value?)
• Levels of mark-up in Europe not seen as concern by most SFTOs.
Crafts Value Chain: key issues - governance
• FT pro-poor bias means lower supplier competence; theory suggests this will lead to more intervention from buyers.
• Pressures to be market-led.• High dependency on NFTOs;
insufficient diversification; few examples of FT supplier “graduation”.
Crafts Value Chain: key issues - governance
• FT price negotiations fairly standard and well-managed
• Some SFTOs want more market information from NFTOs
• Lack of critical feedback from NTOs impedes development
Crafts Value Chain: key issues - environment
• Inefficiencies in infrastructures • NFTOs/SFTOs insufficiently
specialised?• Lack of investment and
technological innovation in FT – (fears it will reduce labour inputs?; small is beautiful focus?)
• Exchange rate vulnerability – dollar fluctuations
Crafts Value Chain: key issues–failure to mainstream
• NFTO lack of vision/skills?• NFTO lack of capital?• Lack of FT label (but
costs/benefits, standards?)• SFTO/producers lack of
technological investment• SFTO lack of scale/productivity;
quality; design; lead times
Producer livelihood impact
Sustainable livelihoods model
Financial Physical Human Social Natural
S
P F
N
H
Producer livelihood impact
FINANCIAL: • level of income increases;• regularity and security of income; • SFTO savings schemes for
producers BUT: contract workers/seasonal
labour issues
Producer livelihood impact
PHYSICAL: • Income used to acquire assets• Better access to infrastructure e.g.
electricity, education, health (via premiums)
BUT: Limited capital investment in productive capacity
Producer livelihood impact
HUMAN: • Training programmes• Empowerment• Confidence BUT: heath and safety of
processes; social/family tensions; more education to be done
Producer livelihood impact
SOCIAL: • Formation of producer groups• Reduced isolation BUT: also creates new obligations
Producer livelihood impact
NATURAL: • Environmental issues considered
in fair trade chains BUT: in reality this is relatively
low on the movement’s agenda
Producer livelihood impact
• A generally positive picture – but based on SFTO/NFTO inputs, not direct producer research
• Many FT producers still near poverty line
• Diverse experience across products and countries
Recommendations: market access
• Improve sales and marketing of existing work• Develop strategy to mainstream handcrafts;
establish a success story in handcrafts • Establish and invest in market led supply
chains • Ensure the right product is created for
producers• Ensure FT verifiable supply chains top to
bottom • Promotion FT and ethical purchasing• Develop FT standards and (possibly) label• Review and scale up
Recommendations: social quality
• SFTOs need to improve producer capacity and understanding of FT
• Reduce dependency - local markets; small businesses as well as manufacture
• Develop stronger groups and networks• Address risk: regular employment, currency
protection• Southern advocacy for SME friendly
environment and individual access to affordable services
Discussion
• Do findings/descriptions ring true?• Relationships SFTOs/producers;
costing and pricing models• Reaction to recommendations:
– Specialisation– Investment needed to mainstream– Issues in enabling environment
TRAIDCRAFT
fighting poverty through trade