Over the weekend, we had a Facebook fan enquire about our pricing. Here is what he asked:
“I'm curious, what kind of % do the women get relative to the price that the goods are sold for? I'm guessing a "fair market price" in Peru would be lower than the equivalent in a Western/developed country?”
We thought it would be best to answer that question through our blog, so that we could explain in detail how we go about pricing the products that we buy from the women.
The short answer is that the weavers are paid between 25% and 40% of the ebay sale price, depending on the item. And it is true that fair market prices vary enormously from one region and culture of the world to the next. That is what makes “trading fairly” so much more complicated than it seems like it should be.
But in order to answer the question in the most comprehensive way possible, we thought it might be best to outline in detail what we do, as it’s not strictly buying and selling of products. There’s a bigger relationship between TOP and the indigenous communities. And we also thought it might be helpful if we included some of the questions and answers on pricing that were a part of us becoming certified by Green America, as they can give you a better picture of what we’re doing.
Threads of Peru is involved in helping the indigenous women weavers of remote Andean communities to learn how they can take their long-standing traditions to market. This involves helping them to weave products to a level of finish that can compete, and also involves getting the finished products to buyers.
These goals are accomplished through first, educating the weavers on traditional methods which hone skills that have been lost over time to many of them. These methods include aspects of working with the natural fibers of sheep and alpaca (free-range animals that they raise themselves), using natural dying techniques, hand-spinning and weaving. We then provide important training to the women so that their products are high-quality and marketable.
Threads of Peru employs master weavers who are local to the Sacred Valley region themselves and are native speakers of the Quechua language. These master weavers conduct workshops which improve the weavers' understanding of what qualities make marketable products, and what product types people are likely to buy in the marketplaces. Each workshop requires specific raw material, such as wool and alpaca, natural dying material and tools, such as scissors, measuring tapes, needles and sewing machines. Many of these materials are provided by Threads of Peru, but some are provided by the weavers associations (such as wool), as this is in keeping with their custom of sharing investment which is called ayni. Ayni loosely translates as “today for you, and tomorrow for me”. Not only does this approach ensure commitment but it avoids some of the negative impacts seen when foreign organizations are involved in the community and change traditional structures.
When we lay out the product requirements with the weavers at the outset of a workshop, we also make a commitment at that time to buy whatever items meet those requirements when completed. At the end of a work period, we return to the communities for an evaluation. We gather with the weavers and the master weaver, and engage in a dialogue with them. We discuss the merits of each completed item and giving warm recognition of exceptional work, as well as guidance for improvement wherever it is needed. At the same time, we negotiate prices for the purchase of all items which successfully meet requirements. This is done between the individual maker, the master weaver and us, in the presence of the entire group. This way, all members of the weaving association learn from the negotiation. The individual weaver builds her sense of confidence in the value of her work, as well as her ability to communicate that value to a buyer. To this point, we seem to be buying nearly all of the completed work, as very few items fail to meet requirements.
Any items that we do not purchase are left in the possession and ownership of the maker, who may keep the item or sell it to someone else. Also, the workshops we conduct and orders we place do not consume all of the weaver's available working time. Therefore, they do create a variety of items on their own. We purchase many of these items during our visits to the communities as well.
Q - How do you check to make sure the pricing is fair to the artisans?
A - We reach our buy price through the influence of three main determining factors:
• First, is the current rates in Cusco. The city markets there are very strong and Cusco is one of the most important tourist centers in all of South America. Our office is located in Cusco, and this allows us to stay aware of current prices for textiles which use similar methods and materials. Keep in mind, however, that the weavers we work with do not travel to Cusco, so they don't really have access to those markets. Few of the community members have ever been there.
• Second, we employ a master weaver to conduct our workshops in the communities. This master weaver has a deep understanding of current market prices, and what aspects of the woven work contributes or detracts from that market value. These perspectives are openly shared with us and the weavers during product evaluation and price negotiation discussions. Teaching the weavers how to price their items appropriately is an integral part of each workshop.
• Third, we regularly connect with other organizations within the region with similar products and goals. We are aware of their prices and have positioned ours to compliment them. We believe that part of our mission is to help establish and support fair prices for these works outside the region. To that end, we have had numerable discussions with representatives of a variety of other organizations and associations, regarding their processes and expenses and found that they are similar to our own. Our prices are a reflection of what we all are needing to make the work sustainable.
Q - How much do you markup the product?
A - Our sell price for each item varies, but is roughly 2.5 times the buy price on average. This pricing equation is based on what is necessary to cover the costs associated with buying and reselling. These costs include:
- The purchase price to the weaver, (which is paid in full up front).
- Employment of Master weaver to guide the women in producing the items according to specifications (i.e. quantity of items, measurements, colors, etc).
- The costs of materials.
- The costs of traveling to the isolated communities (two of them are several hours walk beyond the end of the nearest road.) This also includes the cost of transportation, one or more porters and at least one translator.
- The cost of product photography.
- The cost of creating online listings for the items (ebay fees).
- Paypal Fees
- The cost of packaging and posting the items for shipment.
- The cost of customer service
- Important Note: Standard international flat rate shipping is included in all of our online prices. We offer “free shipping” on eBay, but of course shipping is never free, so we do have to put a flat rate into our prices. This obviously increases our prices, but our flat rate shipping is much cheaper than if we were to just include regular shipping prices on all items. Shipping from Peru can be expensive, so we are trying our best to make it economical for our customers.
Almost all of our administration is unpaid work which is done by volunteers (including founders), but we do pay 2 local Peruvian staff to assist with inventory, packaging and shipping, and some bookkeeping.
We hope that we will eventually generate enough sales to cover the costs of other activities which include:
- All of the workshops / development projects (We do use income from sales to cover the project costs, but as they are very expensive, we do rely on donations and/or funding to help pay for all of those project activities).
- The cost of marketing efforts.
- Graphic and communication design
- The cost of managing the eBay store (the time doing the listings).
- The cost of continued website maintenance and hosting.
- The cost of communication between partners and locations regarding Threads of Peru activities.
Thus far, with the exception of some development project costs, all of the above activities are paid for by the founders themselves, in both time and money. Our goal is to become more sustainable, and we are confident that a significant increase in volume of sales would cover all of these expenses, without the need for a significant increase in the price of individual products, as the added volume would result in increased efficiency in other areas.
We would also like to get Fair Trade Certified in the near future. But that process is quite costly, so for now we continue to follow Fair Trade principals.
We have a very optimistic outlook for the future of this project, because as the women continue to improve their crafting skills, we continue to increase our sales.
So that’s the long answer. We hope that this helps give you a better sense of what we’re trying to do, and serves to inform others who are interested.
Thanks for caring enough to ask.
Threads of Peru founders: Ariana Svenson, Angie Hodder and Adam Foster Collins