What is ‘Fragmentation of Value Chain?’
Fragmentation of value chain happens when there are different suppliers, component manufacturers and other important factors scattered about in the whole process right from production to sale of a good. In context of the crafts industry a Fragmented value chain would be characterized by:
Little to No Market Linkages
Consumers of craft products are increasing and are widespread across the world. More and more people from the urbanized community continue to buy handmade goods. But artisans have fewer opportunities to reach the expanding consumer base due to lack of proper retail channels and outlets. Local markets are not enough for them to thrive in this competitive scenario and therefore gaining access to relevant retail platforms such as department stores and shopping malls becomes necessary. Further, due to most of these artists belonging to rural backgrounds, they are often unable to access the internet to sell their products online.
The Dominating Middlemen
Exploitation of artisans at the hands of middlemen is quite common. Middlemen are meant to enable market linkages and help artisans gain access to wider markets. It is seen though in many cases that they exploit them by paying them just a fraction of their fair wages or promised price. Artisans due to their lack of industry knowledge and bargaining power often get coerced into ceasing their fair price.
Lack of Organized Aggregation
With crafts production typically being carried out in rural areas that are widely dispersed in a geographical location, it becomes difficult to reach out to urban centers where most consumers are located. These scattered clusters lack organized systems that can efficiently collect and aggregate goods from small producers. Thus there is no means to carry out quality checks and stock quality or approved goods in warehouses. This prevents wholesalers and retailers in urban areas from getting the right products at the right time. Such conditions leave no other choice for them but to depend on select producers which results in losses of a large number of artisans.