Is Bigger Better?
Image courtesy of Kaufmann Mercantile
This article originally published in the Kaufmann Mercantile Field Notes.
Can small-batch producers stay small?
As local, handmade and artisanal products experience a rapid growth in popularity, this question comes up often. At what point does an artisanal producer shift into being a small business, then mid-sized, then large?
Growth in sales means people enjoy the product, which is a good thing. Small producers can make a living, jobs stay local and increased revenue goes back into further building the company and supporting the community as a whole. At a certain point, however, there is a fork in the road. No longer able to produce an increasingly popular product alone, the maker needs to choose: Stay small, or grow?
This can be an emotional decision. If the maker chooses to stay small, there is a limit to the revenue they can bring in, which may or may not be sustainable in the long run. If they choose to outsource components of the business, how do they maintain the same standards, ethics and production quality they once had complete control over?
If the maker decides to grow, there is also the question of how to deal with the public perception. The customers who chose the maker on account of their commitment to supporting local and handmade goods may not find larger scale production appealing.
We sometimes have a double standard when it comes to product manufacturing: everyone wants to support local small-scale suppliers, but what happens when the maker becomes successful to the point of no longer being small? Where is the tipping point when they become, arguably, ‘too big’?
For retailers that carry these small brands, supply issues inevitably crop up. Having a successful product fly out the door is great — but what happens if 100 orders come in and the product takes six weeks to make 30 pieces?
There is a sound argument for being too popular; it creates a scarcity value for the customer. This long-standing method of increasing sales has been manipulated on a retail level for years. But if that is not the intention, how is the balance between supply and demand resolved?
There are a couple options. Taking a realistic production time into account when setting a delivery date is a good start. There is, of course, a risk of the customer ordering a similar product from a larger company with an immediately available inventory. If the product is one-of-a-kind or extremely unique, this isn’t an issue.
As consumers, how much convenience and immediate gratification are we wiling to give up in order to support our local producers when necessary?
But if you had to wait for a locally made, artisanal version of a mass produced product that can be delivered right away, which would you choose? How many customers can a store retain under that stipulation? The retailer could also solve the problem by switching suppliers to a larger producer who can fulfill orders quickly, thus leaving behind the small-scale company they started out with.
As consumers, how much convenience and immediate gratification are we wiling to give up in order to support our local producers when necessary? As retailers, how do we deal with providing our customers with what they want in a timely fashion while still supporting small business? There are no simple answers to these questions, but they need to be asked.
