Worldstock.com–the fair trade sister site of surplus retailer Overstock.com–tipped over the $10.5 million mark in revenue this year and actually managed to profit $350,000 this year. That’s unexpected: The outfit is meant to break even. And that profit that is set to triple in 2011.
Worldstock was started by Overstock CEO Patrick Byrne–a former developmental theorist with a PhD in philosophy–who, after years of running Overstock, took a trip to Southeast Asia for some time off. It was there that he realized that local artisans in those countries had the same issues that his clients in the United States were struggling with–access to markets.
That was the birth of Worldstock back in September 2001 and now, amidst a host of other fair trade and pro-social shopping sites such as eBay’s World of Good, BrandAid, and Surevolution, Byrne sees the industry going nowhere but up.
“The American retail system is optimized for everything local artisans aren’t,” Byrne tells Fast Company. He looks at it as Walmart versus craftsmen in huts.
The Worldstock model is simple–they have a small team that scours the world for the best local artisanal crafts, buys them, and sells them with just a slight markup.
Worldstock’s primary differentiator, says Byrne, is its cost structure. Because its goal is to break even, they would buy, for example, an Indonesian mask at $25 and sell at $35, but what he’s seen some NGOs do is actually buy that same $35 item off of Worldstock and sell for upwards of $100. With concerns over financing, NGOs may need to mark up such products, but Byrne’s Worldstock doesn’t have that same requirement. And because Worldstock generally tries to steer clear of NGOs, he says that on average 60-70% of the money goes directly to artisans, as opposed to middlemen organizations.
Byrne calls his model “micro-demand,” having been influenced early on by microfinance and the economist Muhammad Yunus.
So what is Worldstock doing with all that extra money laying around?
Byrne has been independently financing the construction of schools throughout developing Asia and Africa for over a decade and now that Worldstock has this (good) problem of extra funds, the team is getting behind Byrne’s school-financing mission.
Byrne has built 22 schools to date and with Worldstock’s profits expected to reach in the millions in the next couple of years, the number of schools built every year is set to dramatically increase.
From development theory to a tried and true capitalist model in the form of Overstock.com, Byrne has certainly covered a lot of ground and somehow found a happy meeting point along the way.
Follow me, Jenara Nerenberg, on Twitter.