When a Rug Covers More Than The Floor

September 14, 2007

When a rug covers more than the floor

When Kevin Clark saw the rich, russet-colored carpet hanging in a New York showroom, he immediately was drawn to its deep hues and unique geometric pattern. After learning that the carpet was part of a program to bring the benefits of trade to impoverished Afghan women who weave, the New Jersey-based interior designer was even more excited to buy it for his clients.

“I thought that was just an additional enticement,” Clark said of the program, AfghanMark, which requires companies to provide literacy training and health care to its weavers in exchange for help with market access.

“If you can buy something that is beautiful, fairly priced, and does some good, why wouldn’t you?” Clark said.

Started in February, the label AfghanMark represents a consortium of independent, privately held Afghan carpet companies employing 26,000 weavers. Organized by the nonprofit Afghan Women’s Business Federation, the brand’s goal is to connect large numbers of Afghan producers to wholesale and retail carpet outlets in the United States, the world’s biggest carpet market.

In so doing, AfghanMark hopes to smooth the typically twisted path from loom to living room and get more money into the hands of the women weaving the carpets.

Clark’s purchase is part of a rapidly growing, $200 billion-plus U.S. market for products appealing to consumers “who have a meaningful sense of environmental and social responsibility and incorporate those values into their purchase decisions,” according to the Natural Marketing Institute, a research concern.

To help interested consumers sort through advertising clutter and quickly identify these socially responsible brands, labeling programs have sprouted globally. The umbrella group Fairtrade Labelling Organizations International reports that worldwide sales of certified goods topped €1.5 billion, or $2.08 billion, in 2006, up 41 percent from the previous year. There are now more than 20 labeling initiatives worldwide. Most are in Europe and North America.

Such programs are burgeoning as the idea of buying goods that benefit producers in developing regions catches on in wealthy countries. Establishing businesses that are both socially conscious and financially sustainable is challenging under any circumstances, but it is particularly tough in a place like Afghanistan, where even basic services are lacking and security challenges remain daunting. Efforts like AfghanMark aim to lift economic growth by bolstering important domestic industries.

The OTF Group, a strategy consulting firm specializing in economic development, estimates that 95 percent of carpets made in Afghanistan are exported to Pakistan, where higher-margin finishing activities take place. By selling the carpets directly to U.S. distributors, AfghanMark hopes to enable local producers to capture more value from the country’s largest official export. Opium leads the category of unofficial exports.

The numbers make it clear that the producers could use the assistance.

Carpet weavers, according to OTF, can produce up to one square meter, or 10.76 square feet, per month, earning at most $50 a month, while a “midsize trader” selling 800 square meters a month can earn more than $20,000. “While women do most of the weaving, they do virtually none of the trade,” OTF notes.

U.S. distributors say the program makes good business sense. Alan Meiselman, president of Saxony Carpet in New York, where Clark bought his rug, said that without middlemen to pay, he was able to bring top-quality Afghan carpets into his showroom for about 25 percent less and pass the savings along to his clients.

A typical AfghanMark 9-by-12-foot, or 2.7-by-3.7-meter, area rug, for example, sells for around $3,750 at Saxony, with similar rugs from other sources running about $5,000. At the highest end, an heirloom-quality carpet that size would cost about $10,500, according to Meiselman. A comparable carpet from AfghanMark would price around $7,500.

For now, the U.S. carpet market – with $500 million in annual sales – is the focus of AfghanMark. Once inroads are made there, organizers would like to take the program across the Atlantic to Germany, the second-biggest carpet market, and other European countries. That, however, remains a distant goal as the program works to perfect the benefits and the monitoring systems.

Under the AfghanMark program, carpet producers, who pay $1,000 to participate, commit to paying wages 50 percent above the market rate, along with providing social benefits and promising to avoid child labor. Three inspectors monitor the firms, with three more to join soon.

In exchange for these commitments, the firms receive rights to the AfghanMark brand and a shot at access to the U.S. carpet market through the Afghan Women’s Business Federation’s network of contacts.

Thus far, AfghanMark has sold about 55 rugs, bringing the program about $35,000 in revenue.

Mark McCord of the Center for International Private Enterprise, an affiliate of the U.S. Chamber of Commerce, who helped the Afghan Women’s Business Federation organize the program, acknowledged that building relationships in the carpet industry had been a challenge.

Distributors often have longstanding ties with their suppliers in this closely knit community, making it tough for new entrants to break in.

To tackle this issue, AfghanMark said hoped to invite several U.S. carpet distributors to Afghanistan next year so they could see firsthand how and where the carpets are produced.

“People have seen socially conscious programs come and go,” McCord said. “They see very well-meaning donors support programs like this for a couple of years, and when the donors go away the programs go away. So this is a long process of building trust and building relationships.”

Another hurdle is persuading Afghan producers of the long-term value proposition offered by access to the world’s biggest carpet market.

“We literally are trying to change the paradigm of the carpet industry in Afghanistan to help producers understand that if you offer education and you offer health care and you offer a decent wage, your costs are going to go up but you are going to sell more carpets,” McCord said. “As it is now, they can sell this carpet to someone in Pakistan and take their money and go home, so it is very difficult to change that mentality.”

Then there is the need to prove to consumers that wages and benefits are as producer-friendly as AfghanMark promises. Hiring more monitors to identify problems and work with producers to resolve them helps address this issue.

In working through these challenges, AfghanMark in many ways is following the path of Arzu, an online, direct-to-consumer carpet retailer founded in 2004 by a former Goldman Sachs partner, Connie Duckworth.

Arzu’s focus is women in rural Afghanistan, where many have not yet felt the benefits of reconstruction. Along with paying market wages plus cash bonuses of 50 percent, the program provides literacy and mathematics training as well as health care, even bringing eye doctors to weavers’ remote rural communities. Monitoring teams visit weavers weekly.

As it has delivered on its promises, both social and financial, Arzu has become part of the provinces in which it works. The project now includes more than 700 women in 10 villages who will weave about 800 pieces this year. In 2006 the operation sold more than 200 carpets, generating $520,000 in revenue.

The nonprofit group’s current business model is built on selling carpets directly to U.S. consumers via its Web site, Arzurugs.org. Sales have doubled each year and the firm is nearing break-even in its cash flow.

The ultimate goal is a self-sustaining program that needs neither private donations nor public funds. And that point, say development experts, is often lost in discussions of what, exactly, the concept of “fair trade” means.

“If the market for this ethically produced product were to crash tomorrow, have we given something to [the women weavers] enabling them to continue to function?” said Lorraine Ronchi, an economist at the World Bank.

That is why solidifying the business fundamentals while the public is paying attention is crucial for concerns like AfghanMark and Arzu, said Sophi Tranchell, managing director of Divine Chocolate, a successful British brand of Fairtrade chocolate.

“If you use the opportunity of the labor conditions and the women’s stories to take advantages of the market as it currently is and establish yourself as the purveyor of quality carpets, then whatever comes next you can see where you fit in,” she said. “What you are doing is using a hook into the current market to enable you to sell well into the future.”

At a time when many people are searching for a way to be what Meiselman of Saxony calls “part of the solution,” the women’s stories are indeed proving a powerful draw.

“It is about what women with almost nothing but a craft and a desire to make something can do, and how they can change their families’ life a little bit,” said Kathryn Rabinow, who was so moved by the Arzu weavers’ stories that she organized an exhibition of the carpets in her hometown of Houston. “And it is a story about how people with money can make a difference just by buying something they love.”