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The Incensum Model, Fair Trade and Ethical Trade Initiative.
This article covers our vision for a new model for fair / ethical trading practice.
Objective of the Incensum Model:
Incensum model seeks to generate increased wealth for the employees of small producers of the developing world.
In the post-production supply chain, Incensum welcomes, participatory, but not mandatory, pay-backs from our customers(importers & stores) 2% percentage of their purchase value to the Incensum Employees Fund. This fund supports employee salary bonuses and festival bonuses.
The Incensum Model proposes that Importers and Retailers return 2% of their respective purchase value to the Incensum Employee’s Fund.
For every $100 worth of Incensum incense exported, $10.00 is returned as salary bonus to the Incensum Employees Fund.
This is how it works:
Pay-back at import stage : 2% 0f FOB Value - $100 = $2.00.
Pay-back at Wholesale stage : 2% of Wholesale Price -$400 = $8.00
Total Market Pay-back = $10.00.
Thus, Incensum employees, who are originally paid higher than normal wages, can further avail a minimum returned wealth of 10.00% of their total shipping value.
The logic of numbers:
Usually, 1 unit of export value in the south, becomes 10 to 16 units (of the same currency) in retail value to the consumer in the developed world (relevant to Gifts and Premium market sector).
This happens due to transportation and logistics costs, customs duties, sales and income taxes, other local taxes, operating expenses like rent, electricity, communications, workers wages etc. and trader’s profits.
In the Incensum model, the export-F.O.B prices are lower rather than otherwise. The producing business will operate at a less than normal operating margin. A low tax regime at the source market offsets the lower than normal operating margins for the producer.
Perspective of the Incensum trader:
Incensum model proposes to maintain a low export price and a relatively uniform retail price at the destination markets.
This results in increased profits for our trading partners, viz., importers, resellers and retailers.
Increased profits act as a major incentive to promote our product, with an added value of supporting a higher cause(Employee welfare, Good Business ethics, Fair trade practice).
The increased profits for our trade partners allow them extreme maneuverability at times of price fluctuations in local Transportation, Real Estate, Financial, Labour and Energy Markets along with changes in the local Tax regimes. Usually these fluctuations results in higher prices for the consumer.
More importantly, these high margins allow our stores and wholesalers to be highly competitive, while enabling them to offer a range of discount options to our consumers.
Perspective of the Incensum Employee:
The incentives of the Incensum Model also helps return an increased productivity from our employees.
Just 2 weeks from announcing the first pay-back bonus, our employees have responded with an increased productivity of 200%.
The same aspect of the human nature of acquiring more wealth and thus a stable future being the primary motivating factor for our employees to deliver optimum productivity.
The sense of pride as the makers of a top global brand adds on to their motivation.
Today, our employees are aware that optimum productivity along with consistent quality will result in more business and thus a bigger Employee Fund.
As a result, our employees produce consistent quality at optimum productivity, with a very good work culture.
Perspective of the Incensum consumer:
As far as the end consumer is concerned, Incensum incense offers an excellent deal of any incense, in terms of value for money and quality of fragrance.
Retail unit : A box of 10 premium incense sticks, each burning for about one hour.
The proposed Maximum Retail Price (MRP) of one unit is $3.00 or €2.00, inclusive of all local taxes.
As a consumer product, a pack of 10 premium incense sticks usually lasts a week and a half for the average consumer.
We propose that, the cost of such a product should be comparable to the cost of a cup of coffee in a decent coffee shop.
Incensum retail outlets can also offer a range of discount options, thus providing our consumers with further savings and yet more value for money.
Following is a popular discount scheme that we successfully tested during our market trials.
We suggest all our retail outlets to provide these schemes to consumers.
Retail Price for a box of 10 incense sticks = $ 3.00 or € 2.00
Discounted (20%) retail price for 3 boxes = $ 7.20 or € 4.80 (Unit price = $2.40 or €1.60)
Discounted (50%) price for 24 boxes = $ 36.00 or € 24.00 (Unit price = $1.50 or €1.00) |
Summary:
Many of us would hate to admit it, but, the desire to acquire wealth usually trumps the desire to do-good if we were to chose just one of them.
Compared to the appeal of the current alternative models, Incensum model prioritizes a baser aspect of human nature (acquiring wealth) while incorporating a finer aspect of human nature (charity).
Thus, in the Incensum Model, both these aspects of human nature compliment each other to create an incentive driven cycle.
This is a new experiment in social entrepreneurship. We have no idea of how it will perform. We will be posting in this site the progress of this program, updated regularly, including funds received via this program and the details of its disposal. The details of all fund deposits will be available for all to view. The success of this program depends upon the co-operation and sincerity of our trading partners. We hope to befriend and work together with all of you.
June 6th, 2007.
Ashok Ravi,
Product Research, & Business Strategy, Incensum Incense.
You can reach me at: ( ashok@incensum.in )
Please do read our FAQ section on the Incensum Model to know more about this programme vis-a-vis Fair Trade and Ethical Trade Initiative..
You may as well choose to post a question or a remark or a crtcique on this topic at our Praise and Critisicm page.
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