Handicrafts market

www.indiabusinessreports.com
Handicrafts Sector Info Review*
Sector: Consumer (Handicrafts)
April 2017
*IBR’s Info Reviews are not research reports, but a handy compilation of relevant information

What is an Handicraft Item
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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.”
www.indiabusinessreports.com 3Handicraft Exports from India
Source: Handicrafts Market Analysis, USAID

What is an Handicraft?
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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

Elements of the Handicraft
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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

Inter-relationship Between the Elements of the Handicraft
Product
Material Technique
Need
Function
Form
Design
Product

Four Broad Categories of Handicrafts
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.

Problem / Challenges with the Indian Handicrafts Sector
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

Indian Market Data

Indian Handicrafts Exports $ 3.6 bn (Rs 23400 crore) in FY17
• 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)

Indian carpet and floor coverings exports were USD1.8B in 2015-16
• 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
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

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
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

USA Accounts for More than 25% of Handicrafts Export
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

Highly dispersed mix in terms of categories of items exported
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

SWOT Analysis of the Indian Handicrafts Industry
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

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

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

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.

Indian companies in Handicrafts

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

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

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

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

Global Handicraft market

Many Online Players Selling Handicrafts Globally
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)

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

A few company names
• DaWanda (Germany)
– Founded in 2006, DaWanda.com 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
• 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

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
• 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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