The motivation behind ROUTE:
While Our project captures the large market potentials of artisanal goods, it would help achieve UN SDG #1 No Poverty and #8 Decent work and economic growth. We believe that our project would fill the gap between where we are now and where we should head to by reducing poverty and promoting inclusive, sustainable, and decent work opportunities in rural areas.
The target artisanal goods makers of our project are mainly from rural areas in developing countries, such as Myanmar, Indonesia and sub-Saharan African countries. More than 700 million people in the world still live in extreme poverty, surviving on less than US$1.90 a day. Worldwide, the poverty rate in rural areas is 17.2 per cent—more than three times higher than in urban areas. In fact, 8 per cent of employed workers and their families worldwide lived in extreme poverty in 2018. High poverty rates are often found in small, fragile and conflict-affected countries, where we would place our platform in to connect the local makers there with end markets elsewhere.
By empowering rural artisans to sell their products at higher volume and higher prices, we help increase the incomes they are able to bring to their families, we could help bridge the gap to eradicate extreme poverty for all people everywhere by 2030. Improved economics situations for those living in rural areas fit well into UN’s specific SDGs such as:
• By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions
• By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters.
While a job does not guarantees a decent living, our platform helps to bridge this gap in a way that we ensure a full transparency of fair-trade, work ethics, and the absence of child labour. We would not connect, and discourage any connection, with immoral artisanal goods traders or makers that violate this principle. The values of our platform align with those of UN SDGs:
• By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
• Average hourly earnings of female and male employees, by occupation, age and persons with disabilities Proportion of youth (aged 15-24 years) not in education, employment or training Proportion and number of children aged 5‑17 years engaged in child labour, by sex and age.
• Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms.
Through increasing income of adult goods makers in rural areas, we ensure a better chance that their children could go to school and receive education, which fits well into the UN SDG:
• By 2020, substantially reduce the proportion of youth not in employment, education or training.
As technology has largely improved our access to merchandise and we now live with great material prosperity, we see the imperative of responsible consumption and sustainable sourcing. Furthermore, due to the sheer discrepancy of bargaining power and varied regional infrastructure development, the income inequality between different regions and demographic groups have widened especially in emerging countries. It is critical that we pay more attention to poverty relief and empowerment of the vulnerable. For the next 5 years, we believe project like ROUTE that helps connecting the world, enabling of the poor, and encouraging moral consumption behaviour should be promoted.
The market potential for artisanal products is tremendous:
Shifting Consumer Preferences are further driving demand for consumer products:
5 consumer macrotrends are already shaping the future of the retail industry:
1. Age Agnostic
Consumers no longer hold with conforming to demographic expectations – everyone connects. Namely, baby boomers have much more in common with the values and priorities of millennials and younger generations than many realize, and it is this inclusive mindset that needs to be better understood and catered for in the future.
2. Back to Basics for Status
Consumers are searching for authentic, differentiated products and experiences that allow them to express their individuality. In developed economies, consumers are re-evaluating their spending habits, moving away from overt materialism to simplicity, authenticity and individuality. In emerging economies, the same pattern is likely to emerge as they continue to develop.
3. Conscious Consumer
The rise of ethical consumers is significantly impacting the retail industry: what used to be the domain of ethically-positioned niche producers is now being embraced by conventional companies through higher welfare alternatives to existing products. Conscious consumers are flexible, spontaneous and influential and this trend will spread to others.
4. Digitally Together
High-speed internet, particularly the acceleration of mobile internet, is driving live interactive experiences online and facilitating collaboration on large files instantly. From dating to education, we have grown to expect more authentic, life-like interactions online. Therefore, as our technological capabilities and comfort in using them grow, so will the range of things we can do Digitally Together in the retail sector.
5. Everyone’s an expert
In the past, shoppers relied on a certain brand or information source to get what they wanted; now, connected consumers are better informed, curious and vocal. This embodies the switch in power between retailer and consumer.
The time to invest in artisanal goods is now:
These macro-trends result in an increasing preference and demand for artisanal, sustainable and ethical products, which must be accessible and presented transparently to consumers. To remain competitive and successful, there is a call to action for companies in the retail industry, who must constantly innovate, drive prices down and streamline and aestheticize their offerings to entice consumers. Current market leaders, such as West Elm, a leading player in the home goods space in the US, are now responding to these shifting consumer preferences and are making an effort to offer sustainable and artisanal goods. West Elm has announced that 20% of their future product mix will be artisanal products and they have since spent $275 million in sourcing products from 35+ artisanal communities around the globe. Evidently, there is a market for artisanal goods, especially in developed countries such as the US.
Our project value proposition and goals:
The traditional way of getting artisanal products from artisans in developing countries to consumers in developed markets:
The traditional way to match supply and demand in the retail industry is dominated by the middlemen (e.g. local market buyer, local market distributor, international buyer), who capture all the value created in the value chain and, consequently, harm both the maker (i.e. rural artist) and the market (i.e. consumer).
Several factors explain why the maker and the market are the weakest agents of the retail value chain:
Maker (rural artist)
• They often live well below the poverty line, becoming desperate to sell their crafts at any price (even if it is at loss)
• They often do not understand the value of their products (due to lack of knowledge of the marketplace and consumers’ Willingness To Pay) and highly underestimate the intrinsic value
• They usually have only one outlet to sell to (e.g. a buyer who can take their products and sell them in the local market) and, hence, hold no power in setting the price
Market (consumer)
• While they may like the product, they have little to no information regarding the product (who made it and how it is made), being unable to determine their true WTP and make an informed investment decision
• Current supply chain system provides little to no transparency, making it impossible for conscious consumers to connect their purchase to the cause they support and, hence, deterring them from purchasing the product
• They face tremendous mark-up prices, which are fully captured by middlemen
One can conclude that the traditional way of matching supply and demand benefits the middlemen (who capture full value chain value creation) and harm the maker and market (who get underpaid and overpay, respectively).
Our new proposed project: ROUTE’s value proposition
ROUTE (our group’s solution) is an online “maker-to-market” platform to distribute hand-crafted, artisanal goods directly from makers, artisans in developing countries, to consumers, buyers in developed countries.
ROUTE emerges with the purpose of resolving the unfair value distribution across the traditional retail value chain. To do so, ROUTE aims to streamline the supply chain to remove the middlemen, allowing both makers and market to maximize their value capture. Therefore, ROUTE’s mission is the following: We are essentially providing the “route” for products to travel directly from maker-to-market.
Following this purpose and mission, ROUTE will reliever upon their sustainability goals by providing significant positive externalities for both makers and market:
Maker (rural artist)
- ROUTE will empower artisans from small communities around the world by giving them access to a marketplace suited for / adapted to their products and educating them to become true “micro-entrepreneurs”
- As a consequence, markers will be able to become the new price setters of the marketplace
Market (consumer)
- ROUTE will allow consumers to connect with their purchase purpose and make informed purchase decisions by fostering transparency across the new value chain
- ROUTE’s value proposition will genuinely entice consumers, thus, the consumer network is expected to become wider and wider, resulting in better purchase prices for the market
Project’s business model:
In terms of Business Model, ROUTE acts as an eCommerce logistics Company that finds its foundations in 4 pillars:
1. Reliable and authentic Maker-to-Market bridge: ROUTE represents an easy-to-use, TRUSTED online platform/marketplace for rural artists and consumers to sell and buy products
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- Maker: need to feel that they are being treated fairly and need to be certain that they will receive the money for the goods they sell
- Market: need to perceive transparency in the supply chain (including treatment and support of makers), the quality of products and the guaranteed “fair trade” stamp of approval ensured by ROUTE
2. Re-wired supply chain to ensure operational efficiency: to allow a simplified retail value chain, ROUTE will have to undertake (and master) core supply chain activities across the value chain. To do so, the company will rely on state-of-the-art technology that allows real-time monitoring of supply and demand.
1.Collect artisanal goods from artists
2.Send to warehouse
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- Proofread product description and check pricing – social impact component
- Quality Control (make sure product matches description; clean)
- Photograph items
- Package / tag (include seller profile and product description)
- Post labeled product to website as available to sell and inform seller accordingly
3. Facilitate sale
4.Ship to end customer
3. Retail-as-a-Service to maximize value creation: ROUTE will be able to collect additional revenues by providing on-top services backwards (services for maker) and forward (services for marker) in the value chain:
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- Services for Maker: service deducted from future sales (instead of being charged as an upfront payment). Examples of potential services: inventory management, product photographs, material sourcing, microfinance loans, workshops with designers to identify trends, entrepreneurial education workshops, etc.
- Services for Market: service paid upfront by consumer. Examples of potential services: smart product selection, sourcing wholesale from co-ops, flat shipping fee, “meet the maker” trips, etc.
4. Reinvestment into Social Impact: ROUTE will actively contribute to artisans’ cause by reinvesting part of its profits into educational and entrepreneurial workshops offered to ROUTE’s artisans.
ROUTE’s game changing approach:
ROUTE changes the rules of traditional retail by fostering a re-wired and simplified value chain, a fair split of value creation and the introduction of a social impact dimension.
First, ROUTE’s business model entails removing the middlemen from the retail value chain. This results in a simplified value chain, where maker and market are directly connected through a reliable and authentic online platform (ROUTE).
Second, ROUTE’s business model shifts value capture towards maker and market and risk-taking towards the best suited player (i.e. ROUTE), ensuring fairness across the value chain. This is an unprecedented way of functioning in the retail sector.
Third, ROUTE’s business model pushes for a strong presence of social impact initiatives that are embedded in the new value chain and that, unlike in other industries, add value to the value chain (e.g. by educating makers these are able to better price their products).
As a result of the 3 points raised above, ROUTE’s business model entails a shift in the product-process matrix. Concretely, there is a shift in the process while maintaining a high level of product differentiations, since the supply chain experiences a significant reduction of unit costs (e.g. less agents, simplified value chain, better and fair pricing across the value chain, etc.).
ROUTES’s Financial Goals: We believe that we can create a profitable company while also distributing value to the makers and the market as artisanal goods are high margin products.
Points of Uncertainty and Implementation Challenges:
The implementation of ROUTE comes hand-in-hand with 5 main challenges:
• Building awareness, trust and demand in target market, which can be costly and difficult to promote since “everyone” says their product is sustainable and authentic
• Building a network of artists, which requires knowledge spreading and trust — this is a potential barrier to scaling as it takes time to build and establish this trust
• Ensuring quality standards are met without iterations between ROUTE and artisan (taking into account that ROUTE’s first contact with the product is upon arrival at the warehouse)
• Collecting products from rural areas, which can be remote and highly scattered
• Scaling-up at the correct pace, since artisanal goods are unique and take time to make, so ROUTE may run into supply problems if demand grows too quickly
We believe these challenges can be mitigated if we secure the capital to build trust among both artisans properly with time. It will be vital to put the artisans first, focus on their personal development and remain true to our brand. Also, we believe we can partner with local NGOs, textile/artisanal museums, cooperatives, etc. to help build this trust within the artisanal communities.
Written by: Darragh Egan, Joao Mexia, Viviane Ping & Marie-Aude Vassy