Artisan Business Tips for Success. A Conversation with Colvin English, Hedvig Alexander, and Daniella Mastracci

Missing the Middle & Steps to Find it

During Aid to Artisan’s E-Market Readiness Program, this panel discussion with Daniella Mastracci, Colvin English and Hedvig Alexander sparked an interesting conversation that I wanted to share with you.

Within the artisan field, what we all have been noticing is there is increased demand for artisanal products among retailers and middle-sized brands/wholesalers, yet artisan groups are often not set up to receive these orders. The conversation was about “missing the middle” and ways we can help fill this gap and strengthen the sector for both buyers and artisan producers alike. For example, how can we set an enterprise up to fulfill orders for 30-100 in a variety of styles and colorways as opposed to 5-10 pieces or 1000 pieces at factory level. This growing middle tier of medium-sized brands and businesses is a real opportunity so it’s important we get it right. I think this conversation offers some important insight as to how to get there. 

With all that you have seen and experienced, if you were to give artisan producers three tips to help get there, what would they be? 

H: Everything comes down to sales and commercial viability and it’s key to define your core customer target in order to access the right sales channels for your products, the right pricing, the right financing and the right technology: 

1.     We are seeing that less than 24% of artisan businesses have any business management tools, including basic accounting. Spend this “downtime” getting your business into order. Work to be better organized as that will serve you well later and help you build and scale your enterprise.  

2.     Payment terms on large wholesale orders are now moving to net 90, making financial cash flows a real challenge for producers. Finding financing options may now be necessary. Products that can sell volume (more commodities oriented) and luxury goods with larger margins will be better positioned. We will likely begin to see more small scale luxury and cost-efficient volume commodities during and post-COVID.

3.     The key to addressing the "missing middle” production spot is aggregation. Production must be able to be scaled up and down depending on season and the possibility of continued COVID shutdowns. This can be done with the right technology and having an external network for artisans that you can tap into during high season and busier times.

C: As distribution channels have flattened and businesses have been affected by decreased sales from the pandemic, we see buyers looking for more opportunities to purchase unique handmade goods from artisans but in smaller quantities and with a faster turn-around time. The timeline for ordering has also been changed with the loss of traditional sales venues like trade shows so many buyers still have not placed Fall/Winter/Holiday orders and are not even sure how to do so. Buyers are less willing to commit to larger orders, given the decreased sales and continued uncertainty. Artisan groups that can inventory a limited product line for immediate shipment will be well-positioned to work with these firms.

D: Taking advantage of this time to really focus and build up the backend of the business and implement systems and tools to help you to scale your business will be invaluable. With the slowdown in production, there is an opportunity to develop systems that work for you – or test new systems that will help you to manage and maximize your production. I also believe it is an opportunity to work with some of your key accounts to test production and lead times on larger orders. While many may believe that now is the time to try new strategies and markets, the opposite may be true – focus on your strengths and find your niche and continue to do it well. This will also help to improve quality and provide training opportunities to grow your artisan pool.

It takes two to tango, so what can buyers do to help make the relationship stronger and more streamlined? 

H: The more communication between buyer and artisans the better. Better communication removes a level of risk that no one can afford right now. That has hurt the handmade sector before. One thing buyers can really help with is payment schedules so they don’t expose artisan producers to 90 days net payment terms. Even now buyers generally have more financing options available to them than artisan producers have.

C: Buyers need to communicate any issues they are facing to their supply line. The more the producers know the better positioned they are to be creative in their offerings. Smaller quantities, combined shipping for better rates, and extended payment terms are just a few ways producers might be able to help buyers but they need to know the issues the buyers face in order to do this. 

D: Collaboration and communication are key – work with your artisan partners to communicate your challenges, understand what issues they’re facing and how to work together to scale up and ensure growth for all parties involved. Having open, honest conversations can result in some innovative ideas. We’ve seen some magical things happen when buyers bring their suppliers in a particular area together – these businesses work together, learn from each other and hold each other accountable to make sure they all reach a perfect order every time.

When thinking about warehousing and going online, what do you suggest artisan producers do to best handle production of small orders while costs are high and keeping too much inventory is a risk?

H: Scale and effective manufacturing is key for selling wholesale into mid-size, multi-door retailers. Businesses must be flexible for made to order and should lean into inventory only on evergreen product that is less impacted by seasonality and can be sold year after year. Secondary markets become key to moving excess inventory. By contrast manufacturing brands who have control over the manufacturing costs are able to have more differentiated pricing. 

C: The key to warehousing and inventory management is to limit the number of products being offered for immediate shipping. Focus on best sellers knowing there will be a market for these items at some point. I do not recommend investing in inventory costs for an unproven product line.

D: I agree with Colvin – if selling online direct to consumers is your strategy, keep your offering down to your best sellers and limit the amount of inventory you carry. If you would like to sell online, it’s best to do so in your local market where you understand the consumer base and have more access to direct marketing channels. If you want to grow your online sales overseas, I believe it is best to work with some of your key customers who are already selling online and understand how you can support them to sell more, ultimately resulting in more orders for your business. Entering the direct to consumer market overseas means higher risk, higher shipping costs for small orders and could risk cannibalizing your sales to your wholesale customers, as you become a competitor.

What advice you would give to both artisan producers and buyers to help both sides create stronger businesses and work together more successfully? 

H: We think there are increasingly opportunities in the market, but it has to be easier to buy from the sector. Buyers want reduced risk. That means quality assurance, transparency (impact measurement), on-time delivery and better communication. Artisans need better tools to manage their businesses, more financing options, less expensive logistics and better access to markets. The sector needs a smoother and less risky supply chain to become a more relevant "manufacturing” option and attract more mainstream buyers. At People by People we are trying to build a platform that can address most of these issues with the right tools and services. This will need to happen in collaboration with a lot of partners trying to do the same from various angels.

C: Transparent communication is key to a successful long-term relationship for both buyers and producers. Especially when dealing with international firms there are too many cultural differences to make assumptions on any level. Expectations need to be communicated in writing as clearly as possible. 

D: Looking at each other as partners rather than supplier-customer changes the dynamic of the relationship. Annual strategy meetings can really help to change how you do business with each other, identify opportunities for growth and where and how some strategies may have fallen short in the past. When looking at the relationship as a partnership, it becomes clearer that when one succeeds, the other will as well. 

What are your thoughts on the future of wholesale for artisan producers?  

H: B2B will be here for some time to come as most artisans just can’t respond direct to consumers (shipping, warehousing, communications and many other issues). We need to all work on finding better access to the market for artisans. 

C: We are still not in a position for direct to consumer to work well for international artisans. There are still too many logistical hurdles. So, wholesale/FOB will be with us for a long time. Given this, the channels continue to flatten and even the smallest stores have the capacity and desire to buy as direct as possible from artisans in the field. Producers who educate themselves on the logistics and costs of supporting these firms are well-positioned to grow and thrive. 

D: There will always be a need for a wholesale market to get these incredible products in the hands of global consumers. There will be more and more opportunities to source direct from artisan businesses as they become more sophisticated. New artisan businesses are launching all the time, and it is important to ‘walk before your run’ in reaching export markets. There will always be a place for distributors/importers in the value chain. I do believe that the focus on ethical sourcing with wholesale will continue to grow. Transparency, environmental and social impact, as well as fair business practices will become more and more important.

I would like to think that there is also more of an opportunity for collaborations amongst artisan producers in-country to reach wholesale markets. I’ve seen this work incredibly well firsthand in Eswatini, where a group of craft businesses collaborated in accessing new markets through trade shows, buyer visits and smaller businesses mentorship programs (originally called Pure Swazi before becoming Swaziland Fair Trade Network). Working together you’re able to share costs, learn from each other and celebrate successes together.

What are your thoughts on the future of trade shows? Are they worth the investment for artisan producers and artisan brands alike? 

H: I think they are becoming smaller and smaller and that this will begin to happen increasingly online. I agree that people want to touch the products, but I think there are many things we are doing to improve the buyer experience online. 

C: Trade shows, in general, are still the best concentration of buyers in one place and I believe they will survive in some capacity as our current situation is brought under control in the next few years. Buyers like to touch things before they purchase them, which is why online returns are so high. Trade shows are one of the best ways to put products in buyers’ hands. In the meantime, the best avenue to increase sales is with your existing customers who know your products already. 

D: The model of a trade show – bringing a critical mass of suppliers and buyers together in one location – will always have a powerful result. Especially when looking to work with new buyers/markets and especially because with artisan product nothing can substitute being able to touch, feel and see the products firsthand. Smaller, niche shows are starting to present themselves as well. In the next couple of years, I do believe that there is going to be a shift towards online trade events. We are testing one model with the Handmade Futures Summit on the September 23/24 in partnership with Williams Sonoma. We see this as a small pilot event, to be able to launch a larger virtual one next year, followed by another in-person trade show in the years to come. 

What has been working to help keep your retail shop alive and strong during this time?

C: Communication and empathy. We understand our customers are new at navigating this situation just as we are. We want to make them as comfortable and as safe as possible and this means we also understand that we may not see them for a while. 

What is something you wish you knew when you first started Far & Wide that could be helpful for those just starting up an artisan brand?

H: A few things:

1.     Just how expensive it is to build a direct to consumer brand.

2.     How hard it is to build a business in a sector with such a fragmented eco-system because you have to address so many issues – not just market access but financing, digitalization, business growth, etc.

Any additional thoughts on opportunities for the sector (brands and producers) during this time?

H: The sector needs to become more digitally and financially savvy and generally more up to date on business practices. If this does not happen it will not be able to compete and will remain niche and underdeveloped.  

C: Handmade products continue to be in demand for consumers during this difficult time, perhaps even more so as conscientious buyers recognize the impact of their dollars. Telling your story is even more important moving forward.

D: Consumers are still buying handmade but are making more intentional choices as to where they spend their money. Tell your story, measure and communicate your impact, and work with wholesale partners that share your same vision to grow the sector together.