Business Tactics in Recessionary Times

1. Business Tactics in Recessionary Times Kevin Ward Co-Founder Global Crafts Wholesaler USA Sherry Masih Business Development Manager Noah's Ark Producer India

2. Why do some companies in all sectors do well in recession while others struggle and some fail ?

4. Three Rules For Making a Company Truly Great – Harvard Business Review April 2013.Better Before Cheaper Revenue Before CostThere are No Other Rules

5. Noah's Ark: A Business with the objective of social welfare for the people involved started 27 years ago by our founder Mr. Samuel Masih. With only one thing, “faith” in the artisans and urged to prove that social businesses can also earn profit while staying in competition. Our mission: To empower low income artisans to break the cycle of poverty and to preserve the cultural traditions of their crafts through our commitment to Fair Trade. Noah’s Ark model is Hybrid composed of: A Fair Trade for-profit that creates a sustainable revenue stream for artisans through the export of handmade crafts to international buyers. A not-for-profit, funded solely by the for-profit, that provides health, education, clean water, profit sharing and capacity building initiatives directly to artisans, their families, and factory workers. Areas of impact :Moradabad, Jaipur, Saharanpur, Nagina, Sari Tarin, Delhi, Hapur, Firozabad

6. Commodity Level:In today’s market competition is high. To compete at a basic level in today’s market you must be great at the commodity level.Better Before CheaperRevenue Before Cost

7. What this means for Global Crafts:10 years ago when Global Crafts entered the market, being Fair Trade was enough. Customers would tolerate late and incorrect orders. Having a functioning website was more than most. In the last 10 years Fair Trade wholesalers have proliferated, competition is tougher and customers have changed. No longer are US Fair Trade retailers dominated by those who are doing it as a charitable activity. The new wave of retailers are entrepreneurial business people who expect high levels of service.

8. StrategyOver the last 5 years we have invested in our customers service. Expanded our warehouse facility from 2,500 to 10,000 sq ft.Invested in mid level management and supervisionInvested in a new website (Early 2012)Improved our on-time shipping (defined as – any order received by 8 am should ship same day) – currently around 80% Improved Quality Control on ProductsImproved our packing – materials and quality – invested in some green materials.

9. Commodity Level:Noah’s Ark focuses on quality, by purchasing raw products from artisans and finishing them in house.All the QC & packing is done in house. A lot of focus is given on product safety and testing as we have a very reliable NABL accredited testing lab set up by Govt where products can be tested on almost half of the price of SGS or Intertek or TUV. Also we do lot of experiment to develop products with 2 or 3 different materials. What makes Noah’s Ark efficient at this level?Staff 35 full-time workers on-site, plus 49 artisan groups employing over 500 artisans (10-15%) of whom are women. Monitoring of the production for QC, working conditions and wages.Giving competitive prices to the buyer, investing almost 15% of our net profit on different social and artisan’s projects and still to be profitable.

10. Our investment into our artisans workshops, has created a positive marketing strategy at a commodity level and improving the overall performance of the artisan where they are gradually understanding the importance of fair trade, quality and timely deliveries. We are the only fair trade producers in our town of Moradabad.

11. Our Impact at Commodity Level:20 independent artisan workshops established during 1998 2012 through capacity building initiatives 100 women trained in vocational stitching school 225 children educated in 2011-2012 school year290 estimated workers and family members given access to clean water 650-700 workers and family members received free dental, eye and medical screenings in 2012 $20000 (USD) in grants and no– or low– interest loans to artisans for vital equipment purchases and business development In 2012 we started sharing some percentage of our profits with the grass root artisans (artisan working in the workshops and not the head artisan or workshop owner).

12. Brand Level:You do not want to compete on price alone. You must compete on a Brand Level.Brand is in the eye of the beholder, your brand is what your customers think about you, not what you think about yourself. Being exceptional at a brand level means your customers will not switch suppliers based on price and they will help you grow by word of mouth.The commitment to your business dealings also gives you a brand image. Many times FT buyer needs a large quantity perhaps for a promotional event (they asses which supplier can do this on time). That’s where your name (as a supplier) should come in their mind at first place…..that is also a brand value.Better Before CheaperRevenue Before Cost

13. What this means for Global Crafts:Initially we operated very much as a commodity. Our brand was very weak and we made very little investment in the brand. As competition increased we realized that to succeed we need to develop and strengthen the brand. This is a work in progress.Brand strength can only be achieved if the commodity level is rock solid. Any good work you do on your brand will be wasted if the execution is poor.

14. Strategy:Internal Development of brand assets – Logo, colors, font’s, mission, vision etcImplementation in the new websiteTwo rounds of product tag developmentDevelopment of assets for customer use, POS material, video, posters etcExternalIncreased our marketing budget from around $30k or 4% in 2008 to $150k or 7% in 2013. This include full page print ads in major trade magazines, online retargeting etcWe interact with customers on Social Networks etc

15. Brand Level: In a city of almost 700,000 where more than half are involved in the metal trade, how is it possible to compete based on fair trade?What Noah’s Ark focuses on as a brand?- Word of Mouth - Product Differentiation- On time delivery- New website development- Customer Awareness- Customer Accessibility- Learning new trends/buying patterns- Recycled Materials

18. Supply Strategy • Educating about fair trade principles to our artisans and providing transparency in our business. • Working with buyers who support fair trade and offer us encouragement. • Our supply is focused on: Design, Product Development, Quality, Compliance & Logistics.

19. Opportunity Level:Only once you have built a solid foundation at the commodity level and insulated yourself to some degree from price competition by strengthening the brand can you be flexible enough to take strategic risk with new opportunities. Great companies in all fields change the way business is done, they can do so without significant risk because the foundation is in place. Great companies innovate.Better Before CheaperRevenue Before Cost

20. What this means for Global Crafts:Achieving this level is a goal, that will never be fully realized for any company. However a significant amount of our growth in the last 5 years has come through taking opportunities that most of our colleagues have been unable to take. In most cases because of a lack of capacity.

21. Strategy – example one:In 2009 we were approached by a large online retailer in the USA who already had a strong foothold in the “fair trade” market. To participate we needed to be able to drop ship products on their behalf. By 2010 we had 1000 sku’s onsite and were shipping 50,000 packages a year for them. Up to 1,000 packages a day in peak season. During the 4 years of the contract we have short shipped 2 orders, never late shipped an order and completed all order processing the same day every day. The same company had approached other similar sized companies, who declined in most cases realizing that they lacked the capacity. In a few cases due to branding decisions.

22. Strategy – example two:We recently launched our wholesale “Marketplace” – in this program we provide access to other US wholesalers to our customer base through a fulfillment and marketing model. Showcasing products on our B2B website and pushing them through other online channels we have access to for a commission. We currently have two partners and are seeking 2- 3 more to add this year. We believe that in the long term the US Fair Trade wholesale market will need to consolidate in order to deliver for artisans. We believe that 100’s of small organizations lack efficiency and brand power to deliver Fair Trade to a mainstream market and we hope that this initiative will start that discussion. We do not expect this to be the final solution.

23. Opportunity:- Noah’s Ark International Exports goes beyond basic Fair Trade tenets to provide healthcare, clean drinking water, education, and growth opportunities to over 500 artisans. Opportunities are seen in smaller buyers also by keeping a very clear differentiation of price, product and productivity level of the products country wise. We never say no to any sample developments and continue to do R&D on product innovations…..which ultimately results in creating opportunity of order.Growth Plan -Noah’s Ark International Exports is building a new 25,000 ft2 eco friendly facility to house both factory and offices in order to meet increasing order demand and audit requirements and to further our mission of supporting low income artisans by employing more people in Product Finishing Departments, where they can learn the skills.

24. Impact of the new factory: • Double current turnover by increasing work capacity and ability to meet requirements of interested international buyers • Create up to 50-70 new jobs, many of which could be filled by women, who do not traditionally work in metal crafts but would be able to work in factory quality control, packing departments and may be some in processes also. • Improve environmental standards of waste processing to make sure that environment is protected and water is used responsibly. • Provide consistent and clean energy to enable daily operations to continue uninterrupted. • Store orders for container load rather than send these same-day to the transporter, which will reduce package handling and therefore potential for breakage • Prepare ourselves for the standard set by big international buyers and, consequently, increase work provided to independent artisan workshops.

25. Challenges • To be competitive yet Fair Trader in the international market • Decrease in the handmade products demand, along with higher expectations to pass audits. Which means, higher investment. • Bigger retail franchises only prefer buying from bigger factories but convincing them with our model of working • The role that buying agencies play, by acting as agents for the big mainstream buyers • Unwillingness of the hard line designers of India to work in smaller towns like Moradabad and the cost of hiring such professionals. • Due to illiteracy the artisan are not able to maintain the records for audits etc. • The factory concept (production under one roof) implemented by main stream buyers is taking away the traditional cottage industry of our town resulting closing of almost 50% small workshops. How we can keep the traditional work alive ?

26. Three Rules For Making a Company Truly Great – Harvard Business Review 2013………Better Before Cheaper Revenue Before CostThere are No Other Rulesexcept commitment to Fair Trade will make it Greater – Noah’s Ark

27. Impact of Fair Trade: Case Study • Khalil Ahmed a grass root artisan who was working with his brother came to us six years ago on one day in the wintery night of December with his ailing son asking for money to go to the doctor. We made arrangements for the treatment and after two weeks of testing his skills, we gave him some samples for development which he did in couple of days. • He started working from his home ( where all his other 3 brothers were living ) shared the workshop. We did some initial investments for his machinery and generator set. • Today he owns a brand new workshop where he works with another 7-8 artisans, working on fair trade principles keeping all the necessary records. • His success lies because of (a) uniting his workers (b) ability to develop the samples quickly (c) credibility in market for buying raw materials (d) completing the orders in time.

28. Khalil Ahmed 6 years ago…… not only worked hard but created a confidence with his co-workers, paid them fair wages and is also contributing to our Profit Sharing Program started since last year

29. The Result:

30. Started the work on building a new workshop with the help of Noah’s Ark in 2011

31. Workshop completed by the end of 2012 “Fair trade is more about building a confidence in the people, rather than condemning them. This can be achieved not by policing but by participation of every stakeholder willingly”.