Adventures in Global Sourcing

If Indiana Jones were a retailer, he’d have a business model like Earthbound Trading Co. The 76-store, Dallas-based importing and gift retailer has been sourcing product from remote villages around the world for 15 years. What began as a rock and mineral company importing primarily from Brazil has evolved into a global enterprise, with artisan suppliers in Asia, Africa and South America. In addition to attending the major merchandise shows in Europe and Asia, Nick Tillman, founder and president of Earthbound Trading Co., scours the globe recruiting handcrafted items from artists living in primitive huts. On the eve of another international buying trip, Tillman chatted with Chain Store Age senior editor Connie Gentry about the adventuresome paths he has explored while developing his unique retail concept.

Chain Store Age: How do you manage logistics from rural villages across multiple continents to stores in the United States?

Nick Tillman: First we find a partner on the ground in the places where the product is who will act as our agent to gather the items, have barcodes applied correctly and package the product in the right unit sizes so our distribution center in the U.S. doesn’t have to repack it before it ships to our stores. Our import department in Dallas communicates daily with the vendors or agents, typically via e-mail, and we have a graphics department here that can design the packaging. For instance, there may not be the facilities in a small village to produce jewelry cards, so we’ll do that here and ship to them.

CSA: What are the biggest challenges?

Tillman: Inventory flow is always an issue with direct imports, especially if the product is handmade. The craftspeople can only crank out so many at a time, so if an item is hot we do our best to get it here as fast as possible.

CSA: Is it more difficult to achieve the desired value proposition and a manageable total landed cost with the rising costs of fuel and the weakened U.S. dollar?

Tillman: We have a lot of price elasticity in our model because we removed a layer of markup by being a direct importer. At this point, we’ve still been able to offer a strong value proposition and price product according to our business model. The weakening dollar is having an impact. In the short term, we certainly don’t see the traffic in our stores increasing, because of the high costs of food and gas. However, the difference in a $4.95 pair of earrings and a $5.95 pair of earrings has not been a challenge, and it may be a way that we drive up the average ticket in our stores.

CSA: In addition to the impact on consumers, has the weakened dollar had an impact on sourcing product?

Tillman: Absolutely. We’ve actually had instances when during the production of an order the supplier has called and said they could no longer give it to us at the original price quoted. Also, the costs of raw materials have gone up substantially. We’ve witnessed incredible growth in China and as they develop more of a consumer population, as opposed to being primarily a production society, a lot of the raw materials are going to sustain their middle class.

CSA: Let’s talk about your stores: How would you describe an Earthbound Trading Co. store?

Tillman: A shopping safari—we want to give shoppers a sense of adventure and transport them to other destinations.

There’s incense burning and music playing from around the world. The stores are around 2,500 sq. ft. to 3,000 sq. ft. and have about 2,500 SKUs. We sell a lot of jewelry, which is one reason for having such a high volume of items in a store that size. We refer to the merchandise as dorm decor or first-apartment decor, and there are a lot of unique products like wood carvings or bamboo stalks.

CSA: What is the ideal market for your stores?

Tillman: We are primarily focused on the Southeastern U.S., and college towns or one-mall towns have been very productive for us. We’ll continue to focus on that strategy because we see so many opportunities there.

CSA: How have you financed the company’s growth?

Tillman: It’s all been done through internal financing or asset-based lending, which is challenging when the inventory value is lower.

CSA: Where are the greatest opportunities for future growth?

Tillman: We see lots of opportunities to continue to grow our store productivity as well as add units in the Southeast. Although currently all of our stores are company-owned, franchising also may be in our future. In the last couple of years we’ve also begun to shift from decor items to personal accessories, particularly softer items including apparel and handbags that would appeal to a feminine customer. Sixty-five percent of our shoppers are female, between the ages of 18 and 30. We’re also positioned very well to complement the current trends toward organic or green products.

CSA: Are you referring to green products you sell or sustainable practices in your company?

Tillman: Both, actually. Our company newsletter, “One Voice,” is distributed weekly to employees and in it there is a section dedicated to actions that have been taken at the store level and in our personal lives to promote sustainability. We also ask for feedback, and we’re getting suggestions from store managers and employees on green initiatives we might implement. Recently we’ve been running tests on lighting and switched from incandescent to fluorescent spots. We’ve automated our HVAC systems and are recycling more. Recycled materials also fit well with our store design. For instance, old windows have been converted to mirrors for our stores. As for the products we sell, our most popular apparel item is made from recycled sari fabric.

CSA: As you look back over your world travels, do you have any favorite adventures or most exciting experiences?

Tillman: Several. One of my favorites is from our first trip to China. An agent approached us and said he had U.S. treasury bills from the 1940s that had a face value of $100 million and he needed to know how to cash them. We were very excited for about 36 hours, until we found out they were issued by the ministry of treasury, which of course doesn’t exist, and we had to tell him they were totally fraudulent. But all the trips are exciting— on our last visit to Bali we went whitewater rafting and wherever we go, eating the local cuisine is usually an adventure.