In my business career I was always early rather than getting rich. That is, I could -- or at least several times I did -- see how things were going to work out. I was just a few years, in one case a couple of decades, too early.
As everyone in business knows, profit is made by being correct right now, not by being 20 years ahead of reality.
In my job at a think-tank in London -- the Adam Smith Institute -- we are specifically told that we are to be a decade early. We should be those madmen off howling in the forest like wolves.
This would be a good idea, society as a whole should do this or that. The entire point is to be outside, beyond, the current conversation.
Then wait a decade and find out that what we were saying then -- as the madmen -- is now the commonly accepted discussion about.
I'm glad to see that I am maintaining my record of being uselessly ahead of the times.
For when I first visited Bangladesh, it was at the invitation of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). One of the questions I was asked was, well, how do we get out of being low margin mass manufacturers and into being high margin producers? My answer was that it's necessary to climb the value chain.
Take -- as I said -- something like t-shirts. Currently the Bangladeshi industry operates on a mass model. Make 10,000 shirts in the one order, 100,000 perhaps. These then retail at $5 -- say -- and the factory can be paid $1 -- again, say, just example numbers.
Wholly fine t-shirts too, I would note that I am wearing exactly one such as I type and whoever got the Primark contract did an excellent job.
But that's not where the margin -- the gross profit -- is in t-shirts.
The Western world, and most especially the US, is packed with small companies that modify, add value, to such mass production. By silk screening, embroidery, by personalization. This personalization alters that $1 t-shirt into something people happily -- no, joyously -- pay $10 and $15 for. But in batches of 10 and 20, not 10,000.
So, I said that the solution to the BGMEA desire was to be able to compete with those personalization shops.
Now, they knew, know, more than I do about their own industry so they just laughed. For there was no way that anyone could actually ship things in the sort of timescales required. Just the logistics of getting something out of Bangladesh meant that small orders that were time sensitive could not happen.
Oh well, but I was early, not wrong. From this newspaper:
“Bangladesh Bank has opened a new horizon in Bangladesh's export sector. By relaxing foreign exchange restrictions, the central bank has given the country's exporters the opportunity to sell products directly to foreign consumers through international online marketplaces and digital platforms.”
Well, that's the start of it perhaps, not the proof of it succeeding. But that is at least the start of the right idea.
The margin in the t-shirt business is not in making the basic shirt. It's in being able to personalize it for the small group market.
Silk screening, embroidery, these are things that can be done in Bangladesh. If, of course, it's possible to take the orders, turn them around, deliver a sample, and then the finished item in time.
Selling such personalized items on e-Bay, or Amazon -- or even Alibaba -- is not easy, but it is climbing the value chain.
People really will pay $15 and more for what they want. So, why not sell directly to them?
Just as a note to those who want to try this. You'll need to be willing and able to ship an example quickly. You'll almost certainly need to have a base, at least a customs agent, in your target territories.
Language will be a problem and you will need to have a native speaker, at the production point, of whatever territory you try to sell in (and yes, American and English are different languages in this sense). You'll also need to get up to speed with customer service expectations in other countries and societies. This last might come as something of a shock.
But this is to get richer -- climbing that value chain. Mass manufacturing is a nice start but it's personalized delivery that adds more value.
So, if the Bank of Bangladesh now allows this, that's a start. There are other things required, obviously. Like being able to ship in 36 to 48 hours -- delivery that is, not just leaving the airport. Getting the text right on a t-shirt. Customs clearance, language skills. All sorts of details, obviously.
There're going to be a number of people who make their fortunes doing just this. For once the logistics can be dealt with -- the things that made BGMEA laugh at me back then -- then there are very fine margins to be made.
No, this is not a search for a business partner. Just an observation. Oh, and that other little observation, as so often in my life, I was a decade ahead of reality, right?
Tim Worstall is senior fellow at the Adam Smith Institute in London.
