Converting premium value into social good

January 30, 2013 Editor 0

– From our ambassador Yash in New Delhi –

Outsourcing manufacturing to India and China has been a defining trend of globalization. Once western companies have recognised the price difference, they relocated their businesses in these markets. But that labor cost gap starts to narrow, especially in the urban centres of India and China, where the cost of living has rapidly grown over the last decade. Along with this trend, however, there has been a sub trend. While the developed world outsourced its manufacturing to the developing world, the developing world re-organised its manufacturing by pushing it to lesser and lesser developed areas within their own regions to keep the price difference.

The above-mentioned trend has culminated in what some may call rural outsourcing in India. It occurs when the local companies in urban areas in India outsource different aspects of their businesses to the lesser developed rural areas in order to maintain low labor costs. But Sweetly is a startup that has flipped this model. When most companies depend on lower costs to sell goods, Sweetly introduces its ‘social-good’ model to push sales. And while most companies would collect their profits due to labor arbitrage, Sweetly brings back the revenue generated by labor into the communities it operates in.

Sweetly’s business is simple. Rural women make handmade jewellery items that are showcased on the website and sold in urban markets of US and Europe. Sweetly employs rural women from the district of Dangs in Gujarat, which is one of the most backward and border areas in India, where mobile connectivity is still an issue. Accessible only via a road, it takes many hours to reach this place. I had accompanied the founding team of Sweetly, Jatin and Kunal, during one of the supply drop missions. It is in a team’s duty to deliver materials required to make jewellery as no UPS or DHL services are able to get there. These women have learned over time how to make this jewellery and now they work on it during their free time. And there are no fixed patterns or templates, most of the designs are the result of their genuine creativity.

The Sweetly team exports the jewellery to the markets in US and Europe. However, instead of low-margin products, they sell them at the higher prices, fully informing the customers of the noble origins of their handmade jewellery. The profits they make go back to pay the rural women the money they deserve, and not the money they would have to negotiate. This is the most crucial part of their business. When other companies differentiate their outsourced goods by lower prices, Sweetly distinguishes itself by non-standard, socially relevant attributes. The value that other companies give away for being cheaper, Sweetly captures for being good.

The concept of rural outsourcing is not just promising for local communities, providing them more job opportunities. It is also less frightening and more pleasing to the end customer in the developed markets as it doesn’t represents the evil face of rapidly scaling and uncontrollably expanding industrial mass production but the elegant and unique fruit of human creativity.

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Categories: Business Model

Tags: India and China, labor cost, rural outsourcing, Sweetly, trend