If you were buying a 256 MB of memory from Buy.com from your home in Fremont, CA or Albany, NY, you do not have any insurmountable transactions costs. That type of trade occurs millions of times routinely since the infrastructure and processes are in place already.
Here is a trade that does not occur routinely: an artisan in a village close to Shantiniketan (a town near Kolkata in West Bengal) produces an exquisite 2-foot tall clay horse at a material cost of Rs 40 and four hours of his time. The best price he gets for it is Rs 100 at the market in Shantiniketan. A Swedish businessman thumbing through an in-flight magazine sees a beautiful clay horse in the background of a picture in an article. He would have loved to have one of them and would have been willing to pay $100 for one. He chanced upon the object, does not know where it is made, where he can buy one, how much does it cost, and so on. So also, the artisan in that village does not know that he could sell hundreds of clay horses to customers world wide at price of Rs 1,000 each.
That trade does not occur, leading to losses on both sides: income to the artisan, and an object worth possessing for the Swedish businessman. If the artisan (A) could be connected to the customer (C), a trade would take place. We need to develop the system that makes that trade happen. And we have to create a system that would connect a very large number of small specialized A’s to a very large number of scattered small C’s for a very large number of handmade unique objects.
ABC The Mediated Marketing Model
We use a two-step method. In the first step, the artisan interacts with the business portal; in the second step, the business portal interacts with the final customer.
( A2B < => B2C ) ==> A(B)C
Within B we incorporate all the functions that have scale economies and all functions made necessary because the A’s are not technologically enabled and not sufficiently savvy about doing business over the Web. We locate within B all the features that are required for the flow of goods, information, and payments between A and C.
At B, the focus is around a very detailed catalog which has a very large set of low-volume items that are available for sale from a wide variety of small producers. A large number of customers who are www-enabled access the web catalog. The catalog is easy to navigate and search along various dimensions. There a few thousand items and each item is specified in detail including pictures, ethnic origin and history, etc. Beside the price and description of the item, it will also have the lead time for delivery, and other relevant information.
Information Flow from A2C: The artists or producers of the handicrafts are not Web-enabled. Their core competency is producing goods. They interact with Purchasing Agents (PA). These are people who scout the villages and identify local special production. The PAs then select a subset of the local production and create a portfolio of goods that they have access to. The PAs aggregate the information from a number of A’s and provides that to Purchasing Masters (PM). The PMs are highly informed individuals who have an understanding of the global market for specialized handicrafts. PMs aggregate the information from the PAs and select those that will eventually get published in the catalog.
Information Flow from C2A: The customers C scan the catalog at B and order items over the www and pay using credit cards. Once the order has been verified, B passes on the order down which eventually reaches the appropriate PA.
Goods and Payment Flow: That PA gets the material from the artisan, does quality check, packages, and ships it directly to the customer C. The goods flow therefore is from A to C using the intermediate PA who does the quality control. Once the goods have been received by C, B releases the funds to the PA and to the artisan A.
Volume of Trade: There must be hundreds of thousands of skilled craftsmen and women in rural India fashioning an equally impressive number of distinct artifacts. One can easily imagine putting online a detailed catalog of thousands of unique items for sale world wide. A few million pieces of high quality goods can easily be sold per month if marketed properly using ICT tools. If each piece were to increase the realised incomes of the artisans by just $10, the cumulative increase in incomes could easily represent a few billion dollars.
ABC addresses the need of an artisan marketplace. The next challenge is to do something similar for the urban artisans the small- and medium-sized enterprises. What is needed is an SME Trade Information Marketplace (STIM).