Business Description :

To set up a catalog and internet retail business, dealing with handicrafts sourced from Asian markets. This would primarily involve a website, which would serve as the interface between the customer and the business. Provide cataloging service through mails and the Internet. The customers would be able to order the products online.


Business Overview :

The demand for handicraft products is on the rise in U.S. One can benefit from this opportunity and gain handsome returns without investing much. This business needs careful planning. The products that should be included in the product portfolio must be carefully decided. One has to network with producer countries like India and China, among others and product details, including images, have to be listed in the website.

Over the past few decades, USA has been one of the largest importers of handicrafts from India. It was responsible for about 29.59% of the total Indian handicrafts export in the year 2005-06. The products that formed the largest part of the exports were metal wares, wood wares, hand printed textiles & scarves, embroidered and crocheted goods, zari and zari goods, and imitation jewelry.

Though handicraft products are cheaply available in countries like India, China and Thailand, it is advisable to bargain for a better price from the sellers at the time of placing the order. The products need not be purchased and stocked, they can be purchased from suppliers as and when a customer places an order.

Product Service Description :

It would be ideal to have a wide variety of products in the product portfolio. Some popular hand-crafted products include woodwork, basketwork, wickerwork, art metalwork, ceramics, furniture, lighting articles, toys and dolls, glassware, festive craft articles, fur, feather and leather crafts, carpets, imitation jewelry, paper crafts, textile based crafts, worked or carved crafts, etc.

Market Opportunity

The Internet and catalog industry in the US comprises of more than 16,000 companies, and the industry worth is above $160 billion.

The global market for handicrafts is estimated to be around $400 billion. USA is the largest importer of crafts and decorative products. In 2003, the consumption of handicrafts in USA was $50 billion. Following closely, is the European Union, which constituted 40% of global handicrafts imports.

The home accessories sales, through catalog and Internet retailers, grew by 8% to more than $7 billion in 2004.

The primary exporting countries are Asian countries like China, Taiwan, Malaysia, Vietnam, Philippines, Thailand, and India.

Competitive Analysis

Some of the established online businesses, which deal with handicraft products are:

http://www.sundancecatalog.com
www.etsy.com
www.dawanda.com
http://www.tribalmonsoon.com
http://www.worldartandcrafts.com
http://www.andeanshowcase.com

Marketing Strategy

The website can be promoted in the following ways:

1. You can make your services popular by listing your products on various online marketplaces, which charge a nominal rate for their service. Some of the popular marketplaces are eCrater.com, etsy.com, rubylane.com.
2. Online ads with authority niche sites as well as posting messages in various group communities.
3. Acquiring SERPs through search engine optimization.
4.Press release submissions about the new site or product (free and paid), in sites like www.express-press-release.com.
5.E-mail marketing could be used as an important tool for promoting the site.

Sales and Distribution Strategy

Customers would order their merchandise from the catalog and items listed in the website. A virtual shopping bag or cart would store all the items that a customer chooses to purchase. Before checking out, the customer would have to provide details about shipping preferences and payment details.

Since the products are specialty items, they would have to be shipped from the distributor’s warehouse. The shipment could be dispatched in 2-3 days depending on the place, from where it is dispatched.

Operations Strategy

Product sourcing: Countries like China, India, Taiwan, etc. are primary centers of handicraft exports. Artisans in these countries produce these handicrafts, which are then exported by buying agents, exporters, charity organizations etc. to wholesaler importers in the USA. Outsourcing would be expensive for a small business,. So, it would be ideal if someone acquires the required handicrafts from the direct importers who serve as distributors or wholesalers in USA. To get the list of importers/ distributors in USA you can check out the following sites:

• http://www.bizeurope.com/bsr/import/usa_crafts.html
• http://dir.indiamart.com/foreignimporters/h_brass.html

Reaching customers: In order to reach out to your customers, you need to make your promotional activities attractive, since there are large numbers of sellers dealing in handicrafts, such as eBay.com, Amazon, and also, other niche sites. You can also list your business in various marketplace sites like DaWanda.com, etsy.com

Catalog distribution is one of the main sources of generating online customers. For this, the business would need a customer database. While established businesses have proprietary customer databases, such databases can also be bought.

A call center may need to be maintained, to handle customer service calls.

Operations: Certain software would be required to manage the database, for example MIS would be required for efficient management of orders and shipment.

Inventory: Though the shipment of the products would be primarily coordinated with the distribution center or through a third party (based on a sponsoring agreement), a small inventory of popular items would need to be maintained.

Financial projections

 

If the average price of a product is taken to be around $35, then assuming sales of 20 products a day, the revenue would come to around $700 per day. Assuming an average of 300 ordering days in a year, one can manage revenue of $2, 10,000. Discounts can be used as a part of the initial promotion strategy.

 

Category	Year 1	Year 2	Year 3	Comments
Revenue	$210,000	$273,000	$354,900	Growth of 40% in 2nd year and 30% in 3rd year.
Cost of Services	$126,000	$163,800	$212,940	60% of total revenue
Gross profit	$84,000	$109,200	$  141,960
Expenses:
Payroll	$35,000	$42,000	$50,000
Rent	$5,000	$5,000	$5,000	Rent for 400 square foot place.
Advertising	$6,000	$7,000	$8,000
Telephone & Electricity	$9,000	$10,000	$12,000
Other expenses	$7,000	$9,000	$12,000	This includes depreciation for equipments, legal expenses, conveyance charges, etc.
Total Expenses	$62,000	$73,000	$87,000
Net operating Income	$22,000	$36,200	$54,960
Other Income	-	-	-
Net Income / (loss)	$22,000	$36,200	$54,960

Capital Needs Analysis

 

Asset	Year 1	Year 2	Year 3	Total
Equipment	$15,000	-
Staff	$12,000	$15,000	$17,000
Cash	$5,000	$8,000	$12,000
Consumables	$12,000	$15,000	$20,000
Other	$3,000	$5,000	$7,000
Totals	$47,000	$43,000	$56,000	$146,000

Risks and Challenges

• The Internet and catalog industry is quite concentrated, with the top 50 companies driving 60 percent of the sales, so competition is tough. However, dealing in a niche segment like handicrafts may lessen the competition.

• Since hand crafted items can be expensive, ranging from an average of $200 to $300, a slump in the economy can jeopardize the demand for such products.

 

• Manufactured products are beginning to encroach into the demand for products that are bought for their aesthetic and decorative value. This results in competition on the basis of cost, which would cause pricing pressure.

• If shipment and payment issues are not managed carefully, they can lead to negative marketing through word of mouth.

Exit Strategy

Since the business will be dealing with specific handicraft products in the catalog and Internet retail sector, which is a niche area, a good growth prospect can be expected. One does not need to exit the business unless a lucrative acquisition offer is made by a bigger online retailer.

Tips for Success

• Focus on the variety of products.
• Effective marketing (through regular mailing of catalogs etc.) is the key to customer acquisition and success.
• Deliver value through tools like discounts.

Books

ISBN NO	Book Title	Author
B0007E5RUC	The handicrafts of Frances as recorded in the Descriptions des arts et métiers 1761-1788	Arthur Harrison Cole
978-0761528173	101 Best Home-Based Businesses for Women, 3rd Edition	Priscilla Huff
978-0811858366	Craft, Inc.: Turn Your Creative Hobby into a Business	Meg Mateo Ilasco
978-1581803273	Beadwork (Handicraft Manuals)	Donatella Ciotti
B0008CVUPE	Fancy work and house decoration	Emily S Bouton

Web Resources

Resource URL

http://www.iitfonweb.com/info_handicraft.html

http://pib.nic.in/archieve/lreleng/lyr2003/rapr2003/25042003/r2504200333.html

http://www.craftcentral.com/craft-industry.html

http://www.craftcentral.com/trade-associations/

http://www.craftcentral.com/publication/craft-accessories-publication.html

http://www.1-home-based-business.com/handicraft-business.htm

http://www.microlinks.org/ev_en.php?ID=16466_201

http://www.enterprisetoronto.com/index.cfm?linkid=101