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At Caravan Trade we pride ourselves in our ability to supply almost any instant coffee blend or taste profile for flavor industrial purposes that a client requires. Caravan has a thorough knowledge of the coffee business, and understands the important and varied needs of every individual. Our aim is to provide a reliable and personal service that will enable us to meet the specific requirements of every client. Coffee from India is of excellent quality since the growing areas' topography, elevation, climates and soils permit the cultivation of varieties that are classified as being among the world's best. The coffee is grown in the shade with care being taken to protect the ecosystem. India coffee growers, therefore, produce large amounts of oxygen. Caravan trade specialize in coffee in different forms:
Caravan trade has experience trading with the following countries:
SICP Company Profile: Caravan Trade
1. E-Commerce Summary
The CompanyCaravan Trade is a trading house that specializes in business-to-business trade of coffee. The company is privately owned. Even though it generates $2,000,000 in sales per annum the company maintains a staff of just three full time and three part time employees. It is able to reduce operating costs and remain competitive through its strong trading partner relations. As a trading house it does not produce, manufacture, nor ship its commodities; however, the company subcontracts and partners with other companies to deliver these services. It purchases the coffee from farmers, brokers the manufacturing, customs brokerage, and negotiates shipping through logistics and freight carrier companies. Caravan Trade also effectively uses it affiliation with the Trading House Association to lobby carrier companies for significant pricing reductions and defray costs for information technology and systems management. Markets The company trades in large volume, typically in units of shipping containers, which each hold 17,250 kilograms or nearly 40,000 lbs. of coffee. Since it trades in large volume it does not have nor require an extensive list of clients. Currently it counts 7 regular clients for its large volume trade markets. Nearly 60% of all trade is to international trading houses and just fewer than 40% is to coffee manufacturers. Barriers to growth The company cites the greatest barrier to growth as shortage of capital to purchase product from their suppliers. According to Miville-de Chêne, coffee trade is a cash business. Caravan Trade’s competitors are mostly large trading houses with deep cash reserves, which they use to purchase coffee in large volume and with very short lead-time. These trading houses have sufficient capital to purchase product from their suppliers and then collect payment from their clients afterwards. In contrast, Caravan Trade directly uses their clients’ money to purchase the product from their suppliers. Through international bank to bank transactions, their clients provide transferable letter of credits to Caravan Trade who in turn submit transferable letters of credit to their suppliers. The onus upon the client to provide pre-sale financial guarantees is a deterrent for many potential customers. In practice this means Caravan Trade must develop good trust with its clients. If it had greater capital perhaps the importance of personalized service and focus on good will development would not be as crucial to the company’s success.
Develop new services to compete against larger trading housesCaravan Trade can be considered an early adopter of the World Wide Web, Internet and e-commerce. These technologies are part of the company’s core business strategy to trade in competitive international markets. The decision to develop an Internet-centered business was strategic. The goal was to create a new type of service, distinguished from the other trading houses’ offerings. As describedt: “I’m a newcomer in this business, somehow, even if I have been in this business for six years. I’m a new kid on the block. So I have to have an edge that nobody else has. I don’t have a million dollars cash to do this like the companies in New York who have fifty to a hundred million to play with.” In creating an Internet strategy in 1994, Caravan claims they were the first to promote business-to-business large volume coffee trade over the Internet. Opportunities Created For Caravan Trade, marketing was the most affected business function since developing an e-commerce operation. “Properly used the Internet is the best marketing tool there is. E-commerce opens new possibilities in terms of getting clients from different parts of the world where I would have never gone before to offer my goods.” In 1994 when the World Wide Web was very young, the company was uncertain about how much e-commerce would affect their business. Since then Caravan Trade has developed markets all across the world including the United States, Mexico, Russia, France, Spain, Italy, India, Holland, Korea, and Taiwan. Today the fundamental question is no longer whether a market over the Internet exists but rather, what types of advanced services do these markets demand. Caravan Trade believes much of their future success is controlled by their actions. The key to developing their markets is to build useful services, plus design and execute a well-organized online marketing plan. Initial Concerns and ChallengesBuilding services for an unknown marketIn the early 1990’s few of Caravan Trade’s customers, suppliers and distributors were online. Their first concern was if there would be a demand for e-business services and whether their customers, suppliers and distributors would willingly embrace the technology. Despite the lack of people with whom to communicate, the company adopted the Internet as an emerging communication medium and invested conservatively in the development of a web site. They minimized costs by developing their operations in-house rather than through private Internet developers. They acknowledge now that while this strategy reduced costs it extended development time. For the most part, however, this has not significantly degraded the quality of Caravan Trade’s e-commerce operations. Uncertainty of ability to compete in larger marketsA second concern was whether the e-commerce capability that they could afford to develop was sufficient to compete in a larger market. Caravan recalls, “we were concerned that we could make it at a cost that makes sense; that we could take our bag of coffee across the country at a competitive price.” The company did not want to invest heavily in a service only to be undercut by larger, more capitalized competitors. They were attracted to these large markets but unsure if the markets would support their small operation. Securing a Merchant AccountPerhaps Caravan Trade’s greatest obstacle to developing e-commerce capability was securing the co-operation of the banks. Caravan claim that the banks are conservative and unsure about how to enter into these new business models. Banks require personal credit contracts in addition to company commitments, and demanded excessive deposits for “tens of thousands of dollars.”
Office networkIn its office, the company operates a small corporate LAN with PC computers ranging from 486 to Pentium 400 models, along with three printers, and a fax machine. The company does not have nor require an intranet or extranet to conduct its business. It is able to fulfill all its desktop computer needs using the Microsoft Office suite for word-processing, email, contact management and database management. It also maintains a paper filing system to manage much of its data. Web SiteThe company’s web site was first developed in 1994 and is now in its fifth generation. The company hosts the web server on a shared T1 connection with a business Internet consulting company and the Trading House Association. E-Commerce Practices Supply Chain Management To manage suppliers there has not been a need to develop closed networks because of technological and cultural barriers. It is paramount in Caravan Trade’s business to maintain strong relationships with their suppliers. To a certain extent this means accommodating their supplier’s communication preferences. The suppliers are mostly Mexican farmers who prefer to conduct business face-to-face. Caravan claims that part of the purchasing process involves regularly traveling to Mexico, meeting with the farmers, becoming friends with them and gaining their trust. Once this relationship is established he reduces his communication costs by using email to inquire about product availability and status. Although they are willing to communicate by email, they view this form of communication somewhat as a novelty and still require face-to-face communication to maintain good relations. Caravan believes that building an extranet with his suppliers to monitor crop status and availability would be culturally insensitive and fail to accomplish more utility than his current communication system. Customer Relationship ManagementFor customer relationship management email is also a central communication tool. The company’s core markets consist of a few large clients. Most of these relationships were founded in face-to-face meetings. Now that they are firmly established, email is a central communication tool. In a typical scenario customers submit order inquiries via email. In turn, Caravan Trade uses email to contact suppliers, and distributors, inquire about product availability, timing, shipping logistics and cost estimates. Quotes are returned to the customer by email, and the deal is confirmed by telephone. Online MarketingOnline marketing is another e-business operation that Caravan Trade actively conducts. The company regularly uses the Internet to search for competitors to learn what products are being traded, who’s developing new services, and what types of services could be added to Caravan Trade’s operation. The company also develops its own database of customer leads by searching online directories related to coffee production, trade and manufacturing. Leads are manually entered into a database and used in direct email marketing campaigns to draw potential customers back to the web site and specifically to their newsletter about coffee. Part of attracting customers to their site is to supply useful information related both directly and indirectly to their products and services. This content includes general information about Mexican coffee beans; a course on coffee; international pricing data; individual profiles of their suppliers; export data; and crop predictions. Online Transaction ProcessingA recent addition to Caravan Trade’s web site is online transaction-processing. This service enables customers to use their VISA, MasterCard or American Express credit cards to purchase coffee through a secure web server using SSL (secure socket layer) protocols. Purchases are conducted in real-time on a third party server, hosted and operated independently by an e-commerce transaction-processing service. Real-time processing means that credit information is processed on the fly. This protects Caravan Trade because the credit account is debited as the order is confirmed, and it protects the consumer against fraud because the credit data they submit is processed as stateless, which means it is not stored on a machine and therefore cannot be stolen later. To date, the transaction-processing service has not been used extensively, as the primary market for this service is the developing microroaster segment. As this market develops the company expects this service will receive greater use. Online Order TrackingThe company web site also enables customers to track their orders online that are shipped through UPS. This component was simple to implement because it actually redirects the user to the UPS.com site, which then performs all the processing. The order-tracking feature, however, is unavailable for orders shipped through other carriers. To track these orders Caravan Trade contacts the carriers directly.
Development and maintenance costs have been extraordinarily low. The site was developed in-house for less than $2000, using Microsoft FrontPage, Microsoft Internet Information Server, and running under the Windows NT operating system. Caravan estimates that had he outsourced development to a private Internet development company the cost would have exceeded $60,000. He managed to minimize development costs by learning HTML, basic graphic design and programming on his own, and hiring university students and co-op students to help complete the site. The site is currently maintained and updated three days a week by a part time employee. The estimated cost for maintenance, Internet access and operating costs is $30 per month, but this is uncommonly low because services are shared between some of Caravan Trade’s neighboring business partners. The transaction-processing component represents a new level of e-commerce service. Caravan Trade was not charged for this service because they are partnering with Surfnshop E-commerce Inc. in the development of a coffee portal site. As Caravan sees it, “Maybe it’s my talent of negotiating, and associating with the right group of people in order to build this, but we are doing this for nothing.” Even if without this partnership the cost to use the Surfnshop transaction-processing would be slight, because Surfnshop derives their revenue from a percentage of future sales, such as 25-50 cents per transaction, rather than up front development costs for the e-commerce service. Even though the web site is the center of Caravan Trade’s marketing operation, the company has invested little in online marketing. It has not hired online marketing companies, developed an ad banner campaign or purchased email mailing lists. In the summer of 2000 it will hire someone to work full time developing its online marketing plan. All of its online marketing was directed to registration with the Internet search engines and related trade associations. These initiatives alone have proven sufficient to attract traffic to the site.
New business practices adoptedOver time the business has created a need for routine and some degree of automation. For example, normally all the purchase requests and requests for delivery are processed on Fridays so that the shipping company, UPS, can pick up the product at the warehouse Monday morning. Payments are processed live so that when the order is sent for pick up everything is paid and the product can be shipped directly to the client. Other than these routines, Caravan Trade’s e-commerce operation has created few new business practices. Pre- and post- e-commerce indicatorsIn the fall of 1999 the company redesigned its web site. The new site includes much more sticky content (e.g. information related to coffee trade, export markets, the company’s products and their suppliers) that is intended to drive traffic to the site and captivate their visitor’s interest. Since this time they have noticed that the number of requests for information has increased and more importantly the number of serious requests which lead to sales has increased by approximately 20%. Directly through the web site, the company has added three new clients, which for large volume trade translates into a substantial increase in sales. Traffic has tripled in the past six months. Caravan proclaims, “For a site that is that narrow (in content and target market) it is unbelievable! I went from about 2000 hits to 6000 hits. I went from 400 sessions to over 1200 sessions a month.” Short-Term BenefitsThe immediate benefits of Caravan Trade’s e-commerce activity were an increase in new clients and sales. As the Internet became more mainstream and the company improved the offerings of its web site and e-commerce capabilities both its number of clients and sales continued to increase. Much of this is related to timing and the technical/cultural capabilities of their target markets. As the market expands so too does Caravan Trade’s international visibility: “We’re addressing a need that is growing. If I had put that (redesigned web site) up two years ago, nobody would have come to use it or see it. Now, especially the coffee trade people, I have got requests from people in Singapore that are coming to visit us because they saw me on the web.” Long-Term BenefitsBy developing its e-commerce operation, expanding its international markets, and streamlining its core business operations such as shipping, banking, and order processing, Caravan Trade was also able to develop new services and segment its markets further into large volume and medium volume trade. As recent as two years ago it could not support this market: “In the past if I had somebody from Taiwan say, ‘Well I’m interested in this type of coffee, I would consider buying maybe a thousand kilos,’ I would say, ‘We don’t deal in a thousand kilos, how about 20 tones?’” The problem was twofold: the volume Caravan Trade offered exceeded this market’s needs; and this market’s reduced volume requirements represented too little profitability for Caravan Trade. Servicing this market seemed more trouble than it was worth so Caravan Trade ignored this market. However, as the number of requests received through the web site increased the company could see that the demand for this niche market between wholesale and retail coffee trade was significant. Although the individual transactions are much smaller, the total number of transactions adds up to a viable market. Caravan Trade realized that with little customization it could leverage the efficiencies of its original e-commerce operation to expand into reduced volume trade yet still remain competitive and profitable.
Thus far, the transaction-processing component has received modest activity but insufficient to recover the initial return on investment (mostly measured in time commitment). Caravan Trade believes the convenience factor of these payment options will provide a marketing advantage over competitors and should increase the desirability of the service for their customers. The company expects that as the microroaster market develops the transaction-processing component will improve billing efficiency and add value to Caravan Trade’s service. Caravan Trade’s view of the future is both optimistic and cautious. They believe they have developed a good service, streamlined their operation through e-commerce harmonization and positioned their company to compete in an expanding global market. Their e-commerce capability is an important step to open up this new market in medium volume, microroaster trade. The key for them is preparation and the ability to absorb market demand. As company cautions, “We have to be ready. We only have one chance. If we lose them the first time they are gone. We have to be ready.” For Caravan Trade, this strategy means creating their opportunities and planning a manageable success.
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