Thursday, June 19, 2008

Business Competition in Cambodia

I just got a call from Sipha, one of the women at Bloom. She has been approached yet again by someone wanting to pay her to copy our bags. This time it is someone from Siem Reap. I am aware of this shop at the Center Market (Psar Kandal), which currently carries one piece each of Bloom recycled ricebags. I was unhappy when I came across this shop and had wanted to pick a fight with them because I knew these people had snipped off the Bloom cloth labels which we sew onto each bag, and replaced the Bloom label with the shop's paper tags which they string onto the bag straps. In the end I didn't pick a fight because I thought, well, at least they are buying our bags and they have to sell them at a higher price (they sell between US$3 to US$5 more per bag). In fact, an English couple just told me they decided to buy from us because the bags are exactly the same, yet ours is cheaper. Of course they are, given we are the original manufacturer.

So now, this Siem Reap proprietor is offering Sipha money to copy Bloom bags, the very bags Sipha sews during her work hours. I am really upset because this is not the first time it has happened and I've decided to write about this.

The first time it happened was a few months back, with a silk shop at the riverside in Phnom Penh. The woman proprietor had gone to the Bloom shop at the Russian Market in Phnom Penh and purchased one of our silk bags. She then asked Sipha to make the exact same design for her and pay her for each bag she sews.

I'm fortunate I am close to the Bloom women, so Sipha came to me to discuss this before agreeing to sew the bags (if she was a bad person, she would take on the job without even letting me know). Her point, and the point of the silk shop owner, was that even if Sipha doesn't sew the bag, someone else would (because the silk shop would outsource to another sewer), so why shouldn't Sipha make that extra money instead of another person?

I know the Bloom women are hardworking and want extra income. Because they work 5 days a week, 8 hours a day, weekends are free. Sipha wanted to use the weekends to make extra money.

At that time, I had explained to Sipha that people who pay piece rate can sell the bags cheaper and make a profit, because they do not have fixed overhead costs, such as salaries, the rent for the workshop, sewing machines, electricity etc etc. Bloom is a social enterprise and I want to pay staff a living wage, regardless of whether the bags sell or not. This contrasts with the majority of businesses in Cambodia, which pay workers piece rate. If the bags sell, they hire workers to sew. If they don't, the business doesn't have to worry about fixed costs such as salaries etc. In this way, the business owner reduces his/her risk. Almost all the businesses here operate this way, including a big one near Phnom Penh's Russian Market which supplies to the US, and which claims to be a Fair Trade shop.

It is one of the most frustrating things working in Cambodia. Not the competition, but the lies. I have written about this previously, in the context of NGOs, about how stupid, lazy people just take things at face value, not doing due diligence, not bothering to find out the truth. Are the organisations that claim to be Fair Trade really Fair Trade? How can a company that pays piece rate say they are fair to workers? Piece rate work means no sick leave, no holidays--you don't work, you don't get paid. Which developed country would accept this as fair to its workers? At Bloom, workers get 14 days annual leave (same as Singapore law) plus 16 days public holidays (Chhorvy, the Hagar NGO re-integration manager told the Bloom women that is more than what *she* gets, at an international NGO, which is the 16 days public holiday. I'm sure Chhorvy was just being nice though!).

So what of Sipha? I had allowed her to sew the silk bags, because I was sympathetic to her arguments. This time however, I put my foot down. It is unfair to her co-workers at Bloom if she trains at Bloom and she knows which bags sell well and she liaises with another shop on the outside to copy our bags. If we cannot make Bloom work, I explained to Sipha, everyone will be affected. To be fair to Sipha, she understands everything I say, it is just that she wants to make extra money for herself and her four children. It is not easy on her as well. Now that she has a skill it is only right that she makes more.

Very early on, when I explained the savings plan to everyone at Bloom (how I would subsidise sewing machines for them, if they save for the machines), I said you will then be able to sew at home and make bags for other shops and become small business people--just make sure they are not Bloom's designs! At that time, everyone agreed, but that's the thing about life. We may have good intentions, but truthfully we often do not know how we would react unless faced with the actual situation.

My plan is two pronged. One is to make sure I sell enough bags that I can let Sipha (and the other women) work overtime on weekends and two, keep coming up with new and better designs. We will be so far ahead of them that the competition can just eat our dust!

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