Dear all, below is an idea from a business friend of mine who intends to apply for #diogochallenge funding in collaboration with Edgeryders. If you are interested in local and sustainable food production, you may give it a read (and leave feedback for us in the comments). We’d also be happy to get ideas for collaboration with other Edgeryders-related projects to enhance this application. Thanks everyone! --@matthias
1. How it Works
We propose a collection of organizational and ICT infrastructure that empowers small-scale food producers to sell on the European Single Market. Specifically, we want to create: (1) a pan-European network of small-scale food producers, all represented on (2) an Internet food shopping portal that includes “automagic” human translation of product descriptions into European languages. The network consisting of (3) regional groups (“cells”) of at least 10 food producers each, which offer (4) collection of goods and and their combined shipment to other cells of the network throughout Europe, which then act as logistics hubs for distribution to end customers. Combined shipment can use large parcels or even pallets, making it economically possible in contrast to international shipment of individual small orders of products with a low price-to-volume ratio such as food.
This system will then be joined with our existing food-shopping platform for small-scale producers at www.epelia.com. Like now, the operators of this platform take on the task of ensuring adequate visibility of the offered products on target markets, and are compensated with a 4% commission fee on sales. The low fee, together with a future cooperative based legal structure, is designed to ensure that this idea can grow into a movement rather than being exploited for private gain.
2. How it Helps
Currently, access to the European Single Market is very limited for small-scale food producers: a majority of them is located in Southern and Eastern Europe, where sales on their domestic market mostly have declined since 2008, where the logistics infrastructure connecting them to “richer” Northern European markets is often detrimental (parcel service costs, trucking service costs etc.). Also, richer Northern European food markets, esp. the German one, are dominated by oligopolistic structures: a few large food store chains which simply do not bother to buy from small-scale producers, while the remaining institutional clients mostly do not order enough of one item at once to make an international shipment economically viable.
Now how does this scheme of empowering small-scale producers to access European markets create new jobs, given that it competes on the food market, which is inherently limited in growth? It creates jobs (and secures existing ones) by diverting the food market’s revenue away from big business, where it would only end up as shareholder value and from there in ever more ROI-maximizing “investments” (which today means more often than not, speculation). Instead, by intentionally cutting out all middlemen, the food market revenue ends up directly at the small-scale manufacturers, and then mostly as salary at its workers. And because small-scale manufacturing is less efficient than the highly automated, industrial variant, more jobs are created than lost on the side of big business with which this scheme competes.
And, a “less efficient” job does not mean lower income, also not lower competitiveness: for example, we found that food from small manufacturers in Calabria, Southern Italy, has an exceptional quality, and at a price level that is very low for German standards. This price level can be kept in our scheme, by avoiding any intermediate merchants in the chain of commerce. Also, while big business might be efficient in terms of automated production, but is quite inefficient in terms of waste: as much as 30% of food is wasted at various points of the supply chain before it is eaten. Small business in a system of direct sale to consumers is better at this, since no food will rot in stock or store this way. And finally, even if the created jobs are still less efficient, they are more enjoyable because being located in smaller, human scale, more familiar work settings. So they should fare better than big industry jobs in an index of wellbeing that includes not only GDP but also indicators of human satisfaction and happiness.
3. How it’s Innovative
The idea of combined shipments is not new: it has recently been launched by San Francisco based startup Good Eggs (goodeggs.com) in city scale. And in a logical sense, trucking service providers also do this by combining pallets into truckloads, while we combine parcels into pallets. However, to our knowledge no continent-wide system for combined shipment of parcels exists currently, and also not the cell-based regional infrastructure we invented for its deployment.
However, combined shipment alone is not a recipe for jobs in small-scale manufacturing: it is essential to forward the savings from this to the manufacturers, and also to take advantage of direct shipping by adding direct marketing, cutting out the middlemen. While Good Eggs seems not to do this, and trucking companies certainly don’t, we ensure doing so by giving the enterprise a cooperative structure, thus protecting it from hostile takeovers.
4. Deployment Strategy
Right now, we operate the German food shopping portal epelia.com (existing since 2009), with about 150 small-scale food producers selling there. We want to reuse it as the German marketing and sales channel for the international sellers which are added by deploying the concept propose.
For deployment of a combined shipment system, there is obviously the problem of critical mass: you need enough products exported from the same spot to be combined into pallet shipments at least every week. We will work around this issue with the idea of regional cells: this way, we will only need two regions for a start, which can trade food back and forth, and establish a critical mass of 10 or more food producers in both. The system can then grow by adding one region at a time.
At first we want to focus on Southern Italy (Calabria, Puglia and Basilicata) as regions to find small-scale producers for our system. We have already visited a trade fair in Catanzaro and met with vivid interest in the idea. Later we will gradually extended to other regions, first including Romania and Bulgaria as regions of food producers, and later also adding other sales markets beyond Germany.
5. Business Model
The business model is centered around a sales commission of 4% of net turnover on sales via the epelia.com platform. This is also what we currently charge, making some (while not too much) of revenue already. So the long-term sustainability of the approach hinges on attracting enough business turnover via this food shopping platform. For which we seek knock-on funding for founding the first few regional cells and for public relations to find customers for their products, on the German market for now.
We also leverage the efficiency of our e-commerce portal for sustainability: it is based on a software specifically developed for us that automates everything from sales to invoicing (and later also translations). This allows us to focus on public relations work: up to a size of 10 foreign regions (adding 200-300 manufacturers to the platform), we can manage the platform’s workload with a team of just two or three full-time persons. That team will be supported with freelance “broker agents” who travel their home regions in different European regions to talk about this food manufacturer network and found new regional cells, compensated with a part of the trade commission paid by “their” manufacturers.