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Handicrafts market


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Handicraft exports out of India is a high growth business. Handicrafts exports touched USD 3.66B in 2016-17, a growth of 11% over FY16 in USD terms. In Re terms exports grew 13.8% to Rs245B in FY17, as compared to Rs216B in FY16. These figures does not include export of carpets, which is another sizeable market by itself.

Over and above the handicraft exports, India exported around USD1.8B of carpets an floor coverings. A major portion of this is handmade.

Growth rates for both – handicrafts and carpets – are healthy. Over FY10-17, handicraft exports have grown at ~15% in USD terms. Over FY97-17, a 20 year period, handicraft exports have grown at 10.2% CAGR in Re terms. Growth rate of carpets is slower, but impressive nonetheless. Exports of carpets have grown at 5% in USD terms over the last 5 years, and 13% in INR terms

Most of the exports go to developed markets like USA, UK, Germany and Japan. UAE is also a key market. USA accounts for 26% of handicraft and 50% of carpet exports. UK, Germany, Japan and UAE all account for 5-10% each.

The healthy growth rate is a good sign for Indian artisans. This sector a large employment generator. According to a study commissioned by National Skill Development Corporation (NSDC), the sector employed as many 9.6m people. It has created over 2 million jobs in the last 3 years according to NSDC data. The sector accounts for 15-20% of India’s manufacturing employment. This includes supplies to domestic market, which though is a smaller and less attractive market compared to exports.

Despite the gains made in export growth, India’s share of global handicraft market remains miniscule. According to a media interview given by a senior official The Export Promotion Council for Handicrafts (EPCH), size of the global market is USD 235B. Of this, some is produced and consumed locally. For example USA itself produces USD44B of handicrafts locally, and most likely consumes that locally. It is estimated that global export market could be in excess of USD100B. China is believed to have more than 30% share of the global trade market.

One reason for the small share of Indian handicraft is the fragmented nature of supply chain. The trade is catered to by around 9000 exporter, with maybe not more than 50 companies with revenues of over Rs 1B (USD15m). Their mode of selling is largely through trade shows. The long tail market, or the small retailer in developed countries is not catered to by the Indian exporter.

The report gives a brief overview of the Indian handicraft export business, the key government agencies and private sector companies involved in the same. It also touched upon the global market and some online companies which are created digital marketplaces for handmades.

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Handicrafts market

  1. 1. Handicrafts Sector Info Review* Sector: Consumer (Handicrafts) April 2017 *IBR’s Info Reviews are not research reports, but a handy compilation of relevant information
  2. 2. What is an Handicraft Item Handicraft Exports from India
  3. 3. Handicraft is a traditional item with religion or cultural significance “Handicraft, also known as craftwork or simply craft, is a type of work where useful and decorative devices are made completely by hand or using only simple tools. Usually the term is applied to traditional means of making goods. The individual artisanship of the items is a paramount criterion, such items often have cultural and/or religious significance. Items made by mass production or machines are not handicrafts.” 3Handicraft Exports from India Source: Handicrafts Market Analysis, USAID
  4. 4. What is an Handicraft? 4 Handicraft Product (Artisan craft) Aesthetic Production Created using hands or tools Process Technique Used Example Weaving Skill Craftsmanship Mode of Expression Motor Skills Handicraft Exports from India Source: Prof. Lydia Arribas
  5. 5. Elements of the Handicraft 5Listed Pharma Stocks in India Basic Elements of an Handicraft Design Drawing, model, mould, pattern, plan or specification to work Material Basic substance as an input Technique Method and process of treating the material Source: Prof. Lydia Arribas
  6. 6. Inter-relationship Between the Elements of the Handicraft 6 Product Material Technique Need Function Form Design Product Handicraft Exports from India Source: Prof. Lydia Arribas
  7. 7. Four Broad Categories of Handicrafts 7 Functional Wares Items made in a workshop or small factory that mass-produces handmade goods such as pottery, tiles, or furniture for national or export markets. This segment falls into the low- end market and is sold through big-box stores. Traditional Art Ethnic crafts marketed locally by creating interest in the culture and by maintaining high quality. This segment falls into the mid-to- high-end markets and is sold by small chains and independent retail stores Designer Goods Sometimes based on local crafts but always redesigned by foreigners to suit fashion trends in the export market. This segment falls into the high-end market segment and is sold by specialty stories. Souvenirs Inexpensive, universal trinkets or simplified traditional crafts made for local retail or sold through international development agencies as tokens of good will. This segment falls into the low- end market and is sold by souvenir and gift shops in resorts and vacation areas. Handicraft Exports from India Source: Prof. Lydia Arribas
  8. 8. Problem / Challenges with the Indian Handicrafts Sector 8 Challenges Challenges Licensing problem Erratic demand High cost of raw material Access to good quality raw material Obsolete tools & equipments Lack of access to export credit High cost of credit Scarcity of skilled labour Labour regulations High excise Poor infrastructure Policy uncertainty Local transportation (up to the port) Shipping problems Airfreight problem Duty drawback reimbursement Low subsidy Income tax Internet connectivity Market awareness Handicraft Exports from India
  9. 9. Indian Market Data Handicraft Exports from India
  10. 10. Indian Handicrafts Exports $ 3.6 bn (Rs 23400 crore) in FY17 10 • Handicrafts exports touched USD 3.66B in 2016-17, a growth of 11% over FY16 in USD terms. In Re terms exports grew 13.8% to Rs 245B in FY17, as compared to Rs 216B in FY16 • Over FY10-17, exports have grown at ~15% in USD terms • Over FY97-17, a 20 year period, handicraft exports have grown at 10.2% CAGR in Re terms. • Apart from sustaining and further consolidating exports in key markets like the US and EU, relatively new markets like Latin America, CIS countries, and Japan also being focusedSource: EPCH 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Handicraft Exports (USD B) Handicraft Exports from India
  11. 11. Indian carpet and floor coverings exports were USD1.8B in 2015-16 11 • Over and above the handicraft exports, India exported around USD1.8B of carpets an floor coverings. A major portion of this is handmade • Exports have grown at 5% in USD terms over the last 5 years, and 13% in INR terms • USA is the biggest market for Indian carpets, accounting for almost half of exports • Germany (9%), UAE (7%) and UK (6%) are other key destinations Handicraft Exports from India 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Export of Carpets and Other Textile Floor Coverings from India (USDm) Source : Ministry of Textile, Govt. of India
  12. 12. Fragmented supply side • The handicraft sector (domestic+exports) employs close to 10 million people, according to a report by National Skill Development Corporation of India (NSDC) • The sector accounts for 15-20% of India’s manufacturing employment 12Handicraft Exports from India Source: NSDC 7.32 9.6 0 2 4 6 8 10 12 2013 2017 Employment in handicraft sector (million nos) Prominent craft centre in the country Region Prominent Crafts Bhadohi-Mirzapur Hand-knotted carpets Moradabad Art Metal Ware Sahranpur Wood Ware Jodhpur Iron/Wood Crafts Jaipur Textiles Narsapur Lace/Crocheted Goods Source: Article by Dr Satya Sundaram
  13. 13. USA Accounts for More than 25% of Handicrafts Export 13 27.3% 26.2% 9.1% 8.9% 7.9% 4.1% 3.2% 3.2% 2.9% 2.4% 1.7% 1.4% 1.1% Country Wise Handicrafts Export Other USA UK UAE Germany France Italy Latin America Netherland Canada Japan Australia SwitzerlandSource: EPCH Handicraft Exports from India
  14. 14. Highly dispersed mix in terms of categories of items exported 14 Source: EPCH 20% 15% 15%7% 4% 39% Key Categories of exported items Artmetal Wares Woodware Handcrafted textiles and scarfs Imitation jewellery Agarbatties and incense Others Handicraft Exports from India
  15. 15. SWOT Analysis of the Indian Handicrafts Industry 15 Large Diversified Potential market Wide range due to diversified culture Cheap labour Low capital investment High production flexibility Lack of infrastructure & communication facilities Unawareness about international trends Very little coordination between government and private bodies Lack of skilled labour Confined to rural areas or small towns Inadequate promotion Rising demand in developing countries Newer countries also opening up Growth in retail & real estate sector driving growth Increasing tourism E-commerce making it easier to access diverse handicrafts Increasing international competition Better & consistent quality from China and South Africa Increased R&D and better technological support Better trade terms offered by competing countries Indian Handicrafts Industry Strength Weakness Opportunity Threat Handicraft Exports from India
  16. 16. Central government agencies involved in handicraft sector Development Commissioner, Handicrafts • The office of Development Commissioner (Handicrafts) is the nodal agency in the Government of India for craft and artisan-based activities. • It assists in the development, marketing and export of handicrafts, and the promotion of craft forms and skills. Export Promotion Council for Handicrafts • Established under Companies Act in the year 1986-87 and is a non-profit organisation, with an object to promote, support, protect, maintain and increase the export of handicrafts Carpet Export Promotion Council • Setup in 1982 by the Ministry of Textiles, Government of India to promote export of Carpets, all types of Handmade / handmade knotted Carpets, Rugs, Floor Coverings & other allied Products from India • Has more than 2500 members across the country 16Handicraft Exports from India
  17. 17. Central government agencies involved in handicraft sector--2 Khadi & Village Industries Commission (KVIC) • A public sector statutory body, setup in 1957, charged with the planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas. KVIC is supported by state level Khadi and Village Industries Boards, Village institutions and co-operatives. KVIC is the apex body for directing central government funds and subsidies. • KVIC also promotes sales directly, through retailers, wholesalers, or indirectly, through "Khadi Bhandars" (Khadi sales outlets owned by the government). In total, there are 15431 sales outlets, out of which 7,050 are owned by the commission. These are spread all over India. Handicrafts and Handlooms Export Corporation of India Ltd • A public sector company, under the Ministry of Textiles, Government of India, established in 1958 with main objectives to undertake exports of handicrafts, handlooms products, khadi and products of village industries from India and to undertake special promotional measure Central Cottage Industries Corporation of India Ltd • Central Cottage Industries was set up in 1952. It has showrooms in leading Indian cities, promoting handicrafts within India, to well heeled Indians and to inbound tourists 17Handicraft Exports from India
  18. 18. Top trade fairs in India The Indian Handicrafts & Gifts Fair • This is the flagship event for handicrafts exports, organised by EPCH twice a year viz. Spring & Autumn • This exhibition, which was initiated in the year 1994 with 313 participants covering a gross area of 5000 sq. mtrs. is now expanded to more than 80,000 sq. mtrs. space with 2000 exhibitors and 8000 buyers from all over the world. 18Handicraft Exports from India
  19. 19. Indian companies in Handicrafts Handicraft Exports from India
  20. 20. The supply side • Most units employing or sourcing from artisans are largely micro enterprises. There are believed to be over a million such units • Registered exporters with Export Promotion Council for Handicrafts number over 9000 • Most of the private sector exporters are quite small, apart from a few exceptions like Fabindia • Some government run organisations have achieved scale 20Handicraft Exports from India
  21. 21. Sample company names – Government Sector • Khadi & Village Industries Commission (KVIC) – Sales of KVIC supported orgnisations and through the Khadi Bhandars (retail outlets) hit Rs 500B in FY17 (~USD8B) according to media reports. Pl note, KVIC is not a company, so this is not KVIC sales, but an estimated number of sales promoted via its activities. There may be some double counting with sales repored by other organisations • Handicrafts and Handlooms Export Corporation of India Ltd – Export focused PSU – Revenues of Rs 19.7B (~USD 300m) in FY16 – This is the only sizeable company. However, part of the revenue is bullion export • Central Cottage Inds. Corpn. Of India Ltd – Domestic retailer – Revenue of Rs 858m (~USD13m) in FY16 21Handicraft Exports from India
  22. 22. Sample company names – Private Sector • FabIndia Oveseas Pvt Ltd – Established in 1960, India’s leading retailer of handmade goods – Closed FY16 with a revenue of USD10.7B (USD165m). – Primarily India focussed, and retail showroom led model. Exports growing well now, up nearly 40% in FY16 to USD18m – Claims to link 55,000 craft based rural producers to modern urban markets • Craftsvilla Handicrafts Pvt Ltd – Has tried to make create a online domestic market for handicrafts, but losing money heavily – Has raised USD54.5m in funding from investors like Sequioa, Nexus Venture Partners and Lightspeed Venture Partners – Claims average ticket size is about Rs 1,300, 60% orders coming from Tier II cities, repeat of 40% – Posted a revenue of Rs 370m in FY2016 with a loss of Rs 1190m 22Handicraft Exports from India
  23. 23. Sample company names – Private Sector • Cottage Industries Exposition Ltd – Revenue of Rs 1.25B (~USD20m) in FY14, largely into export of Kashmiri carpets. • Globe Artwares Impex Pvt Ltd. – Revenue of Rs 383m (~USD6m) in FY16 • GoCoop Solutions and Services Pvt Ltd – Early stage social marketplace for cooperative enterprises – Has received funding of $830,000 from former Infosys vice-chairman Kris Gopalakrishnan and Saha Fund in 2016 23Handicraft Exports from India
  24. 24. Global Handicraft market Handicraft Exports from India
  25. 25. Many Online Players Selling Handicrafts Globally 25Handicraft Exports from India According to EPCH, the world market for gifts and handicrafts is estimated at $235 billion • India’s share is less than 2% • India’s main competitors in the world market are China, Taiwan, Korea, Philippines, Indonesia and Thailand. • China’s share in the world market is estimated to be 30% (Source: Interview of Mr. Rakesh Kumar, Executive Director, The Export Promotion Council for Handicrafts (EPCH)) According to US’s Association of Creative Industries, the US creative (handmade) industry was USD44B in 2016, up from USD30B in 2011. This is domestic production (not consumption, which will include imports)
  26. 26. A few company names • Etsy (USA) – Leading online seller in the US market, founded in 2005, listed on Nasdaq in April’15 – Had 1.75m active sellers as on Dec’16, up 11% yoy, and 45m items listed – Had 28.6m active buyers on Dec’16, up 19% yoy – Achieved GMV of USD2.8B in 2016, a growth of 19% over 2015 – International GMV was 30.4% of GMS in 2016 compared to29.8% in 2015 – Claims Etsy sellers and Etsy buyers are loyal. 32.3% of active sellers and 42.5% of active buyers as of December 31, 2012 continued to be active sellers and active buyers through their fourth year on the platform – In 2016, approximately 41.0% of active buyers made purchases on two or more days in the previous 12 months, up from 40.6% in 2015 26Handicraft Exports from India
  27. 27. A few company names • DaWanda (Germany) – Founded in 2006, is the largest online marketplace for home-made products in Germany – Product range includes clothing, jewelry, accessories, bags, baby items, toys, materials and furniture – Currently more than 360,000 manufacturers and 6.9 million users are registered on the portal. – Total of approximately 5.9 million products are traded, each day around 15,000 new ones are added – Raised VC investments from Vorweck Direct Selling Ventures, Piton Capital, Holtzbrink Ventures, Team Europe Ventures, European Founders Fund and Point Nine Capital – In January 2015, the US investor Insight Venture Partners acquired a majority 55% stake 27Handicraft Exports from India • Creema (Japan) – Founded in 2010, Creema operates a handmade product marketplace that enables creaters to sell their original works and people to buy them works online. – The marketplace, which facilitates the buying and selling process of items, currently features 60,000 creators exhibiting 2.4m original works. – Raised USD10m in May’16 from Globis Capital Partners and existing investor KDDI Open Innovation Fund
  28. 28. A few company names • Pinkoi (Taiwan) – Founded in 2009, Pinkoi is an E-store for designers to sell their wares – US$9 million from Sequoia India and Japan’s GMO Venture Partners in Oct’15 – Curated platform (unlike Etsy which is a pure marketplace) – Over 1.5 million members and over 7,000 active designers offering around 770,000 online items – Claims to have sold more than 3.4 million items to buyers in 88 countries so far 28Handicraft Exports from India • Blisby (Thailand) – Marketplace for handmade goods – Raised USD300,000 of funding in Apr’15 from East Ventures, DeNA and 500Startups • ArtFire (USA) – Founded in 2008, artisan marketplace for handmade, fine art, vintage, supply, design, media and commercial sellers • Zibbet (Australia) – Founded in 2009, marketplace for handmade goods
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