The February edition includes an interview with Bill Bass of Fair Indigo. Because there has been considerable interest in this company locally, I am posting the entire interview, unabridged, from the moment I turned on my recorder. A far shorter, easier-to-read version appears in the PDF.

Bill: Every time we go, it's always interesting -- you show up, as the CEO, schlepping a camera around, taking pictures, and they're like, "Whoa!" And Rob Behnke, one of the co-founders, does all the interviews there.

He speaks Spanish?

He does, he speaks Spanish. I just went to Spanish immersion last summer. This summer, I'm going to China.

Are you going to do immersion there, too?

I will, yeah. The problem is, it's different from Latin America. Here's China [draws a loose rendition of China on a whiteboard]. This is Mongolia up here, and Hong Kong down here. And most of the clothing manufacturing is is down in southern China, down near Hong Kong. Here, they speak Cantonese. Not Mandarin. The alphabet is the same, but spoken, they're very different. Well, a lot of the people that work in the factories come from out here -- they come in from all the rest of the country. So, in the factories, you have this weird thing where a lot of the people speak Mandarin, but a lot speak Cantonese. It's not as simple as Spanish. If you learn Spanish, you can go anywhere in Latin America. There might be accent differences and stuff like that, but fundamentally, it's one language. So, this is harder, and less useful. [Laughs.] But I want to learn Chinese, because it's nice, when you're in the factories, to be able to talk to people -- at some level.

I used to be in an international position at Land's End, and I'd talk to our companies in Germany, Japan, and the UK. The UK, I didn't have any trouble with. Germany -- I'd taken German in high school and college. I'd go over there, and they'd be talking in meetings, thinking that I couldn't understand. Then I'd go, "No, no, no," and they'd go, "Oh, crap, you understood all that?" [Laughs.] Then in Japanese, I started taking some Japanese. The level of appreciation you get over there for even a two-year-old's language level, even if you just try -- they love it.

So, anyway, these are our offices. Your basic start-up. All our furniture is used. That big whiteboard? $25. New, that would be several hundred. Have you been to our store?

Yes, I have. I went the other day.

The store should look nice. You're not going to look at the store and say, "This is a start-up." So, what you do is look at where you can cut costs. When you try to compete with the J. Jills and the Anthropologies, you gotta have a certain level of quality in the clothes and the stores. But here, a $25 whiteboard works just great.

[We walk into another room.] This is our marketing and creative group. If you've never seen how clothing design happens, this is how it happens. They through a bunch of crap on the floor... [Laughs.] And then, magically, clothes emerge.

Designer: Well, not exactly. There's a little more that goes into it. We just took our wall down -- we had all our fall stuff up there, but now we're on to winter.

What's this? Tell me about this.

Designer: This is the fair-trade soccer ball we'll be featuring in our next catalog. We're expanding quite a bit, and we'll have some kids' products, so this is one of them.

Bill: This is the first fair-trade soccer ball. One of the things we're trying to do is provide more support to the companies that are doing fair trade. But the question is, is a soccer ball too far out of who we are? But, we like these guys, so we're like, "Yeah, let's stick a soccer ball somewhere in the catalog." Give these guys a little jump on their business. But, again, you gotta be careful, when you look at who we're competing with.

Are these your competitors? [Indicating a collection of catalogs from assorted companies.]

Competitors? Yes and no. To a degree. Garnet Hill, yes. J. Crew, to a degree. Patagonia, not really. Sundance, to a degree. Ann Taylor, yes. Anthropologie, that's a little further out there than we're going to be. But -- and this would be an interesting discussion about fair trade in general -- what we're trying to do is be fair trade... It's like hybrid and electric cars.

When electric cars came along, there was a section of the population that said, "I'm willing to make trade-offs in order to drive an electric car." Even if they were the same price -- lower performance, having to plug it in, couldn't go as far -- but pure, because it's an electric car. Then, hybrid cars came along. You're not going to have to plug it in, you'll get the same or better performance, and all the sudden, a lot more hybrid cars got sold than electric cars, even with the price premium. What we're trying to do with fair trade is come up with an option for people to wear fair-trade clothes and not have to settle on quality or style or anything. So, if you shop at Ann Taylor or J. Jill or Garnet Hill, shopping with us, we don't want you to see a difference in quality or style or anything like that. Or price. We want to make it easy for you to say, "I could buy this that was made fair trade, or I could buy this that was not made fair trade." Which one do you want to choose?

The problem is, if we start getting too much in to stuff like this [the soccer ball] because we believe in fair trade -- you would never find a soccer ball carried in Ann Taylor -- and so, you start to dilute why we're here. But, it's a balance, because you also want to help these people, too. That's why it's a discussion, rather than a no-brainer, "Sure, we'll stick it in." Same with a lot of the more traditional fair-trade craft-y stuff. It's out there already, and people have choices for that. What we're trying to do is expand fair-trade out to mainstream consumers. We want to help the rest of fair trade, but you've got to be careful in where you go with that.

This is the warehouse. It's busy now, because the spring stuff comes in in a couple of weeks. Over here is our quality control. Part of this is our heritage from Lands' End. Everything we sell is guaranteed forever. Return it any time, for any reason. When you give a guarantee like that, it's pretty important to get it right. So, everything that comes in, we do quality inspections on. We also do quality inspections at the factories before they get here.

So, this is all our fall/winter stuff that we have. The spring/summer stuff starts coming in a couple weeks.

So, from here, the stuff would go... anywhere?

Yep. We've had orders from all 50 states in our first month. We've had orders from Canada and the UK.

And do I understand that you expect about 50% of your business to be done over the site?

Yeah. We're playing around with it. We have all three channels: retail, phone, web. And we don't care where orders come in from. This would work better if we had the whiteboard, but we'll just pretend: a lot is known about the mix between catalog and Internet, or rather, phone and Internet, for catalog companies. And in that world, over 50% is coming in over the Internet. So, if you have a catalog and a website, a little over half is ordered over the Internet, versus the phone. Now, for us, we also know that a lot of people look at the catalog and then go to the website. We know that's about half our Internet sales.

How do you know that?

Because we ask, if you have a catalog, to put the source code in. Assuming they actually do it, we know for a fact that at least half are people that got the catalog. For us, the difference is that we're also starting off with stores. As best I can tell, we're the first company that's started out multi-channel right from the beginning. We have one store we're staring with, and we'll probably roll out four to five a year. How this all ends up -- who knows?

And how did you decide you were going to roll out four to five?

There's a couple things you look at when you're thinking about this. Store rollouts are very capital-intensive. So, you say, "OK, how much money do we have to roll out stores? And how much human capital?" The people that you have, the management time and attention -- how many stores could you roll out? You know, a place like Penny's or whatever: "We're gonna open a hundred stores this year!" Forget the money -- that's an incredible undertaking, making sure you have 100 store managers, plus staff. So, we thought that for us, four to five was a manageable amount that we could absorb within the company without becoming a huge distraction. And it could be one to two, or things could go great, and we could do eight to ten. As we get into this, we'll either put our foot on the accelerator, or take it off.

The plan is to open one in '06, none in '07, but to look at where the sales are coming from, around the country. That helps you then decide where to put the stores, because you see where your customer base is. I bet you it's going to be Boulder, Colorado; Berkeley, California; Austin, Texas; Cambridge, Massachusetts; Chapel Hill, North Carolina -- you think about places like Madison: college towns, and places with the naturally higher level of social consciousness, because you have an academic environment. If it's not those places, I will be stunned. But, we'll see. This year, we'll actually have some data.

Here's where our phone operators sit. They're not in here, because this isn't a big time for phone sales [9 AM on a Monday]. So, what they do is, they have a little thing that lets them wander around and work on other stuff. If there's a call, they pick it up and come back here. When a customer calls, they have to get somebody every time, and they have to get someone quick. So, they take the call, and then it rolls over to the phones in here. There's a distinctive ring so you know it's a customer calling.

[Back in the conference room.] I've talked to a lot of fair-trade companies now, and most of them don't have this feel. Most are very, very small, even compared to this. Here, you have a running start, because you have the experience doing clothes for other companies. Do you feel that gives you an advantage?

What we're trying to do with fair trade hasn't been done. There's no market right now here in the US for normal clothes made by fair trade. So... that's not an advantage. An advantage would be if we knew there was a group of people interested in what I would call mainstream, kind of nice, work clothes. Because that market doesn't exist, you gotta go out and find those people. Let's say you wanted to start selling model trains. There are well-defined lists of people interested in model trains. In this case, there are no lists of people who like these clothes, and who are interested in fair trade. That doesn't exist. So, you have to start coming up with things where you go, "OK, where do we believe the people who will be interested in wearing fair-trade are? What kind of characteristics do they have?" Because fair trade isn't a characteristic you can plug in. So, we thought, "Well, fair trade is fundamentally socially-conscious. What other types of socially-conscious buying do people do? OK, there are hybrid cars. There are socially-conscious mutual funds." You have things like that. And coffee! Though fair-trade coffee is still a small portion of the coffee sold. Two, three percent. And, when people buy fair-trade coffee, they typically are buying cups, so it's not easy to track those kinds of purchases, because they don't go into a big database, the way cars do.

So, that makes it a little bit harder. Now, the advantages that we have. One, we have a ton of people who all worked together, who believe in what we're doing. And we have enough money that we can afford to put out a catalog that looks pretty nice, and go out to a million people this fall, and try and hit those people who are going to be interested in fair trade. One surprise for me is that you get caught up in fair trade, you're thinking about fair trade -- we had a number of people call up and order from us, and we said, "Hey, thanks for supporting fair trade!" And they said, "What's fair trade?" We said, "Well, that's where you pay people fairly," and they said, "Oh, you guys do that? I just liked your clothes." That was good, actually, because typically with fair trade, you end up with a lot of indigenous designs, a lot of handmade items -- they look craft-y. We have a little bit of that in our accessories, but in our clothes, we're really trying to not have that look. We're trying to let people dress the same, but know these clothes are fair trade.

One other thing that's different about us, because we're going after that section of the market -- that puts you into factories. Factories are not a traditional fair-trade place. They might be considered anti-fair-trade! There are exceptions, but most are pretty far from fair trade. That's just how they are. People from the clothing company show up and say, "Hey, we want you to make clothes for us." They never ask, "Are your workers paid fairly?" They will ask, "Are you meeting all the laws?" And they will try to make sure that they're meeting all the laws. In some places, there's a battle between meeting the laws, and the factory pretending to meet the laws, but not really, and it ends up a game. That was the hardest thing, as we got started, was trying to talk to factories. We had to find factories that were paying their workers fairly -- and there aren't many -- or find factories willing to pay their workers more when we gave them extra money, instead of that being siphoned off to the factory owners.

How do you make sure that's actually happening?

You audit. And... you audit. That's the only way you can do it. The nice thing about our side is that, we're small. We're just talking about a handful of factories. When you go into the factories, you get to know them pretty well. We're in the factories, walking around, taking photos, talking to people. There's one that does pressed shirts for us, and we sat down with them and said, "We're interested in fair-trade factories. We've talked to lots of people, and they've pointed us at you." And the owner spoke up and said, "I gotta be honest. On a scale of 1 to 10, we're about a 5, on fair trade. We do the best that we can, but we're small." They have 60-100 people, which is considered a small factory. He said, "All our business has been sucked over to China. But we pay better than the normal wage, and all our workers are on the books." A lot of times, workers are off the books. That alone differentiated them from the other factories in Peru. We said, "We want to pay extra, so you can pay your people better." And when we walked around, we noticed that the people didn't have cushioned mats. When you're standing at a machine all day, standing on concrete, it's uncomfortable. So, we went out and bought them all cushioned floor mats. So, when you go back, are there cushioned floor mats, or not? That's something you can see. So, when you go back, the workers are like, "Oh, yeah, you're the one who got us the floor mats!" But you still gotta audit. And you gotta trust your auditors. And you talk to the workers.

And do the workers feel comfortable being frank with you?

Depends on the country. In China, no. In Costa Rica, absolutely. It varies. Also, our first choice when we go someplace is to work with a co-op. We love co-ops. In co-ops, the workers own it. There's no management. That's the model we like the best. It takes out management, which takes some of the money off.

You should meet Rob. He started drinking fair-trade coffee, and wanted to wear fair-trade clothes, but couldn't find any.

He's the one whose idea this was in the first place, right?

Right. He and I worked together, and one day he told me -- well his original vision was a small shop down on Monroe St. Don and I looked at this and said, "This is a great idea. This is worthy of much more than a small shop." It's an interesting question how big you want to grown, because the bigger you are, the bigger impact you can have in these other countries.

[Rob comes in wearing the same style sweater as Bill.] Nice to meet you!

Rob: Nice to meet you!

Bill: You'll have to forgive us. In the men's section, there's only like three pages of stuff. [Laughs.]

So, they talked you into something bigger than your original vision?

Rob: Yup. Dang it! [Laughs.]

But how would you have ever pulled that off?

Rob: We wouldn't have. It wouldn't have worked, at least not like this. We would have bought everything from American Apparel and companies like that, and maybe had one or two t-shirts that we tried to develop on our own.

It's interesting you mention t-shirts. Your website says in several places, and you also said earlier, that you're the first company to do this, but I know of several of several other fair-trade garment companies. However, they mostly specialize in t-shirts. So, within this niche, I think it's fair to say you're the first. But you're not technically the first fair-trade clothing company.

Rob: No, no, no. Look, American Apparel doesn't hold themselves out as fair trade, and they have their own factories, so they're not sourcing overseas, like we are. But for all intents and purposes, American Apparel is fair trade. They've got some other things going on there, but when you look at what they're doing for their workers in the factory, they do a hell of a job. But, they are skewed to t-shirts and very casual clothes for young people, not the Ambercrombie set. So, what we were trying to do is be the first to reach out to 30 to 50-year olds. That's our main target. So, how do you describe this? The term our marketing people came up with was "mainstream apparel company." But... I never found that satisfying. But, we're absolutely the first ones going after the 30 to 50-year old, J. Jill crowd.

When they talked you into something bigger, is this what you saw, or did this evolve along the way?

Overall, it's what I saw, definitely, but it's also evolved. We've learned. One of the biggest challenges along the way is that we have great ideas for products, but we kind of have one hand tied behind our back, because we will only work with facilities we believe to be fair trade, which is the toughest part, by far.

And you're the one who went out and found the facilities?

Yes. A few of us did. We started that process over a year and a half ago, now. It was tough. We considered dozens of them.

How did you even know where to start?

Our previous lives were all in the apparel industry, so it was a combination of that and asking our connections, "What have you heard, what have you seen?" And also contacting some of the fair-trade organizations and federations, and frankly, contacting other fair-trade clothing companies and asking about their sources. We took everything we could get our hands on, and then we had to do a second screen and ask, "Can you ensure quantity, can you ensure quality?"

Bill: And we're still doing that. We're starting to do cashmere. I don't think any other fair-trade company is doing cashmere. So, you get into some of the categories we're in, and you quickly go beyond places that have been making things for fair-trade companies in the past. So, you talk to people, and you say, "What are the best factories out there? Who treats their people right?" And names start to show up multiple times. That's how we did it. And there were some that looked good at the beginning, but after a while, we went, "Uh-uh. These guys aren't fair trade. They say they are, but they'll say anything."

Rob: Or you'll hear about a place, and people will tell you it's great, but it turns out that "great" means they're meeting the legal minimum. As opposed to actually cheating their workers. That's not where we want to be. It may be perfectly legal, perfectly acceptable on the books, it's not for us, so we look elsewhere.

And have there been many cases where you've tried to convince them to try to raise their standards further?

Rob: Yes, we have done that in a few of our facilities. Where they're smaller, relative to our size, we can have more influence in the relationship. If it's a place that's big, we're not going to have much impact.

Bill: There's two ways things can be. One, the factory gives the quality you want, but isn't quite there on the fair-trade stuff. That's where we want to pay a bonus, and stuff like that. The other way is, you have a factory -- a co-op, usually -- that does a very good job on the fair-trade part, but the quality isn't what you need. Then you work with them getting their quality standards up.

For example, there's this co-op in Costa Rica. We really like this co-op a lot. Now, does a messy factory mean non-fair-trade? If it's a co-op, if it's the workers choosing to have a messy factory, then... I mean, look at my office! [Laughs.] Anyway, it's a co-op we like, but they weren't meeting our quality standards. So we said, "Let's go down and work with them on the quality." Because we didn't want to drop them. We want to have long term relationships with these folks. So we said, "Let's invest some time and effort and energy into them."

I know you're talking with TransFair. Are you pushing actively to get some sort of certification for clothes?

Rob: Yeah, we are. When we first talked with them last year [2006], they said they were probably several years away from having anything in place, because of the complexity of apparel. None of these fair-trade clothing companies are certified -- we're all just using the term however we choose to define it. Which is a problem.

Bill: Well, the Fair Trade Federation actually does check out the factories. They don't certify you, but you can be a member of them, and in order to be a member, they have to certify that your factories are good. They don't do as rigorous a job as TransFair does, so I don't want to argue that it would be the same. But the Fair Trade Federation is not nothing!

Rob: TransFair, because of the complexity -- there's cotton, there's spinning the cotton into yarn, weaving the yarn into fabric, making the fabric into clothing, washing, dyes, zippers, buttons, thread -- there's so many things that go on that it's really complicated to say that a garment is 100% fair trade. So, what we're proposing to them is a sort of "step" system, or "element" system, where a garment could get up to five seals of approval. One would be for using certified fair-trade cotton. Or whatever source of the fabric. The second one, and what we're focusing on as a company, for the most part, is the facility that cuts and sews the garment would be certified fair trade, meaning they pay living wages, they have all the health and safety things, etc. And so on, so there'd be five. And maybe you couldn't get all five, but you could get one, or two, or three, which is better than none.

Bill: This is kind of along the lines of recycled products, where you've got 100% post-consumer, which would be the gold standard. Then you might have 100% recycled, 30% post-consumer. They realized there that if "recycled" only means "100% post-consumer," then the people who can do that drops almost to zero. So, we'd be able to say to the consumer, "All right, here are the parts of this that are fair trade." But if the standard is either 100% certified fair trade or nothing, that's too binary. The whole thing will come to nothing. It keeps people from trying to push further into fair trade.

Rob: And they've been really open to that, conceptually. But there are a lot of details to work through.

I talked to Bena Burda of Maggie's Organics in '04, and she talked about how there's no certification for clothes.

Bill: One of the things we did is, because there's no certification for clothes, no accepted definition of what fair trade is, you get different people with different ideas. Some people think it can only be done in union shops. Some people think it can only be done Made in the USA. We we said was, "OK, in the absence of third-party verification, we need to come up with our own standards of what we're comfortable with. But we need to be very open about what those standards are." Then people can look at it and say, "Yes, I accept that definition of fair trade." Or, "I cannot accept that definition," and that's fine. That way, you're open, and people can make their own judgment. That's why we have up on our website a fairly extensive discussion: "Do you buy clothes made in China? Yes." Some people won't buy from you if your stuff is manufactured in China. Do we only use union factories? No. Some people think you can't be fair trade without a union.

So, what TransFair is dealing with is, how do you define fair trade when there are a number of constituencies that would like fair trade to be defined one way or another? TransFair is trying to get input from all of them, some of which have competing interests, and it puts them in a little bit of a difficult position, and nothing can happen quickly. But, we're not willing to wait. We'll put up what our standards are, and then let the customer decide. You can end up with a lot of, you know, the vegans attacking the vegetarians as carnivores because they don't adhere to the same rules -- a lot of people on the same side of the fight fighting among themselves. It's something of a waste of time! That's how we decided to just say, "This is what we believe. You're welcome to believe differently. If you believe differently strongly enough, then don't buy our stuff."

Well, let me bring up one thing you've been criticized for, which is not revealing who your suppliers are. You've said in other interviews that you consider that to be a trade secret.

Bill: Well, it's not strictly true that we haven't revealed who our suppliers are. What we've been criticized for is not putting the names of our suppliers up on our website. We've been told that, "If you don't put the names of your suppliers up on your website, you cannot be fair trade." And we said, "We're not going to put the names of our suppliers up on our website, because we have spent a hell of a lot of time and energy finding these people. And I don't want Gap, rolling out their little "Red" thing, going "Hey, we're socially responsible now," to go, "Hey, next let's do fair trade. And look, here's a whole list of suppliers!" We have shared our list with the Fair Trade Federation, so they can check it out as part of our application for membership. We gave them a list, they contacted all our suppliers. The Chicago Tribune wanted to send someone to one of our factories, so we said, "Which one?" They said, "The one in Costa Rica." We said, "OK, here's the address." They said, "Do they speak English?" "No." "Would you contact them for us?" And we were happy to set it up for them! We can be off to the side, or we can be in the middle of it. We said, "Look, take all the pictures you want, talk to all the people you want, but please don't mention the name of the factory. That doesn't help your story."

Now, if you were really interested, we name every city we're in, and the product we make there, so you could go, "Let's see, dress shirt factory in Chorillos, and there's pictures of people who work there..." [Laughs.] And sometimes when people wander around the warehouse taking pictures, the name of the factory shows up on the sides of the boxes! So, it's not a question of us being the NSA. And we'll tell you all you want to know about a factory, and we have information up on the website about why we've chosen it as fair trade. But we once had someone say, "You're worse than Wal-Mart, because you don't list your factories on your website." I mean, do you actually believe that? Because I guarantee you, Wal-Mart doesn't care about its workers. They care about meeting legal minimums, but they're not focused on fair trade. That's not our audience, that kind of person. You know, again, we've shared our list with the Fair Trade Federation, so it's not about trying to hide anything. It's about, if Gap wants to get into this, I want them to do a little bit of work.

Rob: I've visited each factory.

That's a lot of trips!

Rob: Yeah, it is a lot of trips. And more are needed.

Bill: I just got a passport last February, and I'm already out of pages.

Is there a lot of that, though, where companies come in and poach each other's suppliers?

Bill: Ya think?!

I don't know, I'm not in this business.

Bill: It happens all the time. And, you know, it would be a good thing for Gap to get into fair trade! The long-term success of this will be determined by how many companies feel they need to get in to fair trade. And if they do, it will have a huge impact. And someone like Wal-Mart -- a small change in their policy can have massive impacts. So, you get Starbucks selling fair-trade coffee, and even McDonald's, which is a good thing. But you want to establish yourself, so that when they jump in and start doing that, they don't put you out of business. Because, if this becomes big, would they like to put us out of business? Absolutely. And I don't want to make that too easy for them.

You get people who think, "They don't want to post their factories for fear they'll get found out as posers." But we shared it with the Fair Trade Federation. We'll share it with people who want to know if we're posers or not.

So, if some random but intensely-interested consumer said, "I'm going to Costa Rica -- will you give me the name of the factory so I can drop in on them?", would you?

Well, potentially.

If you were satisfied they weren't a corporate spy?

Exactly. You know, there are some other fair trade companies out there we're perfectly happy sharing the names of our factories with.

We anticipate that the fair-trade market will reach 10, maybe 15% of all clothes. In apparel, that's huge. Apparel is about a $150 billion market. So, you're talking about $15 or 20 billion. Gap is about a $10 billion company, to give you some scale. The apparel business is really fragmented. Really fragmented, because there are so many kinds and styles, and no one company covers it all. But fair trade could be a big market -- that people will want to be involved in.

So, you think it will plateau at 10%?

Well, we did a survey of our customers, asking, "Do you care whether the people making your clothes are paid fairly?" 85% of the people said yeah, they cared. Makes you wonder about the other 15%. [Laughs.] But there's going to be some percentage of the population that cares more, and some percentage that doesn't care at all. What we try to do is a little bit different than the coffee world. Because clothes are a commodity, a huge portion of the money spent on clothes is paying for the brand. So, what we try to do is say, "OK, we're going to save money in other areas in order to keep our clothes priced at a competitive level with the non-fair-trade people, so you don't have to pay a premium." We wanted to make it so people wouldn't have to settle on price, quality, or style in order to wear fair trade. If other people adopt that policy, instead of saying, "This is fair trade, so we'll charge more for it," then you're going to get much wider adoption. It becomes a no-brainer.

If that happened, would it threaten the big companies?

Oh, sure! In the late '90s, when the whole Nike/Kathy Lee Gifford thing happened, it scared the bejeebers out of the industry. It was a PR nightmare. What's gone on since then is everybody going, "Let's get our standards up to the point where it won't be a PR nightmare. Meet the legal minimums, or at least make it plausible that we tried." Because you still get cases where someone says, "I audited this company," but it was a wink-wink, nudge-nudge kind of an audit, where you know they can't possibly be doing this. But if a reporter shows up, you can go "Third-party audit -- we're not responsible." There's a lot of that kind of thing going on.

I know you need to go, so thank you very much for your time.