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Tuesday, January 24, 2012

Fabindia: An inspirational story

I recently read the story of Fabindia as told by Radhika Singh in her book “The Fabric of our Lives”. For those who are not familiar with Fabindia, it is one of the largest retail companies in India. It was started 50 years ago and is largely credited with the revival of the Indian handloom industry. The beauty of Fabindia goes far beyond their use of local products for upholstery and garments, to their commitment to empowering their suppliers. Since the start of the company, Fabindia has been paying their suppliers fair prices and giving them access to a number of markets. They have reorganized their suppliers into community owned companies where suppliers are given the option to be shareholders. Fabindia’s success is evident in its numbers. In 50 years it has gone from having 3 employees to 850, one supplier (Cottage Industries Emporium) to 40,000 suppliers, and finally Rs 40,000 to Rs 350,000,000 worth of sales. The suppliers have equally benefited from the business, with an influx of cash to invest in materials for their trade, new construction for their homes and workplaces, schools for their children, and most importantly steady jobs, all provided by selling their products.
As a young person starting a social business, the story of Fabindia is one that inspires me to continue to grow my business. People often tell me it’s na├»ve to run a business and keep a social goal at its core, but my answer is always that profits do not need to be made at the expense of the supplier.

A funny thing happened to me earlier this week. I was at the beach in Goa, reading the book on Fabindia when Sarita, a woman selling beads, stopped at my table. I immediately sat up and started thinking of all the necklaces I would design and sell through Sarafina. After I picked out my strings of beads, we started negotiating on the price. Let me just say that I’m a true West African and no one, no one can pull one over me when I’m negotiating. As we continued to negotiate I realized that I had been priding myself for working with suppliers and paying fairly for their work when it came to ready made clothes that I sold through Sarafina and here I was trying to squeeze this woman’s profits from beads I needed to design jewelry on behalf of Sarafina. I quickly retreated and accepted her price. Sarita and I have since become friends and as I was leaving today, she brought me a necklace as a gift for doing business with her. I’ve promised to return next year to buy more beads for my jewelry designs. I learned an important lesson from this, one that it is easy to get swept into profit only mode but also that it is an even better transaction when you know that your suppliers have also benefited from the business.

I have tremendous respect for companies who have succeeded using a social business model. As William Bissell, current Managing Director of Fabindia, said in a Harvard Case Study on Fabindia:  “We are promoting an alternative vision for the future. It is collaborative (with the suppliers) in the true sense of the word; it is participatory (with the customers that share our views); …I believe that the only way to alleviate rural poverty is to generate sustainable employment, and the only way to do that is if we run our business in a profitable manner. It seems contradictory that we pursue both a social goal and profit, but I believe that is the only way to do it.”

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  1. Beautifully written and so accurate! Well done.

  2. This is an excellent blog post. I look forward to Sarafina's Harvard Case Study!