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close this bookExport Marketing for a Small Handicraft Business (Oxfam, 1996, 192 p.)
close this folder3 Markets and their characteristics
View the document3.1 The perception of value
View the document3.2 Competition
View the document3.3 Market structures
View the document3.4 The costs of distribution
View the documentSummary

3.3 Market structures

Understanding the customer's psychology increases the chances of success in marketing, but first you have to find the customer. To do this, you have to look in the right place. All markets have structures which are defined by the functions they perform in the distribution of products. So, retailing is a market structure which distributes products to consumers; whereas the function of wholesaling is to distribute them to retailers. Exporters need to understand at what level in the structure the potential customers who might actually buy from them are to be found. Otherwise, they might waste money targeting their promotion at the wrong people.

Hence, it is not an adequate marketing strategy to say, for example, 'I am going to aim for the fashion market', or 'the tourist market'. You first need to know what the point of entry is into these markets for an exporter, according to their structures.

The structures are not the same in all markets, but follow a common pattern, which has evolved in order to distribute products profitably. The total distribution chain in handicrafts starts and finishes with a single person (or family)— the producer and the consumer. For the products to be moved from producers to consumers cost-effectively, they need to be handled in large quantities. In the case of export, they also need to be shipped to the country of destination in large quantities. A lorry or a container usually costs the same to hire, whether you fill them completely or only to half capacity. A typical distribution pattern for export is therefore something like this:


Fig. 6: Distribution structure in the handicraft trade

The functions of the distributors in the producing and the selling countries are exactly inverse. The local trader is bulking up for efficient export; the retailer is breaking down for selling to the individual consumer.

Because handling adds cost, it is in the interests of both producers and consumers that the distribution chain is kept short. In the producing countries it can be reduced if the producer sells directly to the exporter. The producer and exporter are both likely to earn more if the goods do not pass through other traders. Sometimes producers can join together to form their own export organization. This might add only a small markup to cover the cost of handling and shipping the goods, leaving a greater benefit for the producer. Oxfam Trading buys from several exporting organizations which belong to the actual producers - cooperatives, associations or unions.

However, the usual situation is that the producers are not able to export directly- for lack of production capacity, organization, knowledge about procedures, working capital and contact with overseas markets. They therefore sell to traders, though, of course, they may also sell directly to the public in their domestic markets. Nor is it always only one trader who stands between the producer and exporter. The goods may be bought and sold by two or more people before they finally reach the exporter. In such cases, the remuneration to the producer is usually very low. Through working together, producers can often shorten the distribution chain, and thereby improve their earnings.

In the country of sale, variations in the length of the chain also occur. Exceptionally, a wholesaler might stand between the importer and retailer. Wholesaling as a function has lost much of its former importance. This is because retail businesses have grown bigger, and are able to buy in larger quantities. Some are big enough to act as importers themselves, so that the goods pass directly from the importer to the consumer. Oxfam Trading is one example of this shortest possible distribution structure in the country of sale.

Retailing is to be thought of as a function- that of selling to the consumer - and not necessarily as a location, i.e. a shop. There are five main types of retailing organization:

· a single shop or boutique;
· a group, which has branches of the same shop in different towns;
· a trader who sells in a street market or from stalls;
· a mail-order catalogue;
· a business which sells through local representatives, who organise informal sales in people's houses or perhaps in church halls. (This is sometimes called 'party-plan selling'.) In Britain, Traidcraft is an example of an organization which imports handicrafts and achieves a significant percentage of its sales in this way.

Mail-order is an increasingly popular way of selling handicrafts. In Europe it has about 15 per cent of the retail market, so it is still much less important than shops. The business produces a catalogue containing photographs of its product range, with descriptions, dimensions and prices. It mails the catalogue to its existing customers and other potential buyers. The customer sends an order together with the money, and the company sends the products, usually by post. Unlike the other retailing methods, there is no opportunity for the customer to see the actual product before purchasing. This consideration, and the payment in advance, seem strange to many exporters: why do consumers like to purchase by mail-order? The reasons have to do with lifestyles, and alternatives. The advantages of buying through a mail-order catalogue in Britain, for example, might be:

· Most shops close at the same time as people come out of offices, and are also closed on Sundays. Saturday is a popular shopping day, but many people work then, or are engaged in sporting or other activities.
· Women are increasingly working similar hours to men, and so also have little time to shop.
· Parking cars is difficult and expensive in town centres, where most shops are found.
· With the growth of retail groups, there are fewer small individual shops, so the consumer has less choice. Mail-order catalogues may have unusual products.
· There is very little choice available in shops to people who live some distance from towns. Oxfam Trading's catalogue, for example, is very successful in rural areas.
· People who have little mobility, perhaps because they are old or disabled, or have childcare responsibilities, find it convenient to shop from home.
· Mail-order businesses offer money-back guarantees, and accept credit cards, so that the consumer risks nothing and can defer payment.

The exporter's potential customer might be a retail group, a mail-order company, or an importer who does not sell direct to consumers. It is the capacity to import which matters to the exporter.

Knowing where to look for your customer means also going into the right trade segment. Markets define products by their purpose, not by their method of manufacture. Hence 'handicrafts' is not a marketing term. There are few importers who buy the whole range of products which are commonly offered by exporters of handicrafts, because there is such a great diversity of products. Oxfam Trading classifies its handicraft product range according to the following product types:

Product group description

Products within group



Furniture and storage

Linen baskets


Wastepaper baskets


Picnic baskets and hampers


Cabinets


Bookcases and shelves




Tables


Chairs and stools


Magazine racks


Mirrors


Trays

Household

Baskets


Bowls and dishes


Kitchen equipment


Tea towels


Aprons


Tea cosies and oven gloves


Crockery and cutlery


Dusters, brushes and brooms


Tablemats

Candles and incense

Candles


Incense


Holders

Furnishing textiles

Wallhangings


Hanging tidies


Cushion covers


Bedcovers


Floorcoverings


Table linen

Decor and ornamental

Hanging baskets


Mobiles


Boxes and containers


Figurines and carvings


Pictures


Photograph frames


Lamps

Clothing

Skirts and dresses


Trousers


Jumpers and cardigans


Blouses and shirts


Jackets


Dressing gowns


Scarves


Gloves


Hats


Belts

Accessories

Wallets and purses


Bags and luggage


Footwear


Sandals


Slippers



Jewellery

Bangles and bracelets


Necklaces and pendants


Earrings


Brooches


Rings

Toys and hobbies

Puzzles


Games


Toys


Dolls


Musical instruments

Garden

Garden clothing


Planters and vases


Garden utensils


Hammocks


Garden furniture

Stationery

Writing paper and notelets


Wrapping paper


Stationery racks


Pen trays

Greetings cards

Handmade cards


Christmas sundries


Christmas decorations


Calendars

Markets in the countries which import most handicrafts are specialized. The importer who buys basketry will probably not buy jewellery. This is because consumers want to see a good selection of the particular product which they intend to buy. People going shopping for a carpet generally go to a specialist carpet shop which will offer a large range from which to choose. The person responsible for buying for the carpet shop will need to know the carpet trade well in order to stock the shop properly. It is easier to be successful by specializing, because you can become expert at what you do, and make your selection more attractive to consumers. General importers who try to cover a very diverse product range, as Oxfam Trading does, find it extremely difficult to be knowledgeable and successful in all of it. We do it because we have a particular interest in supporting as many types of handicraft producers as possible.

Exporters of handicrafts need to identify into which trade segment their particular products fall, and then approach this at the correct distribution level. The product will be categorized by the market according to its purpose. The importers may often also trade in products within their segment which are made by machine. This would almost certainly be the case with carpets, for example.

This very practical issue of how a market place is actually organised, and hence who the potential customers are, is difficult for new exporters to research adequately. Each country will be a little different. The chances of understanding will be greater if you limit the number of countries in which you try to sell, so that you can visit each country and gradually get to know its markets better.