Handicrafts Brand : Mera Bhaarat Mahaan

&%' S&MMARY
HandicraIt production is a major Iorm oI employment in many developing countries and oIten a
signiIicant part oI the export economy. With increased globalization, however, products are becoming
more and more commoditized, with artisan producers Iacing increased competition Irom producers all
over the world, particularly in China and other Asian countries.
Although India's exports of handicrafts appear to be sizable, the country's share in the USD
100 billion international handicrafts market is just about 2 %.
The home accessory market, oIten used to estimate the demand Ior handcraIted goods, is strongly
inIluenced by Iashion, consumer purchasing patterns, and economic conditions in end markets.
Keeping up with Irequently changing market trends presents a major challenge Ior handicraIt
exporters, and many observers Iear that the advance oI globalization has intensiIied this challenge and
the precarious nature oI work and existence in artisan communities everywhere. However,
globalization combined with growing markets Ior home accessoriesespecially in the United States,
Canada, and Europealso creates many new opportunities. In particular, the demand Ior 'cultural
goods is projected to grow with rising international tourism and an increasing Iocus on interior
decoration, and as a reaction (notably in upscale markets) to the homogenization oI mass-produced
products. Naturally, new opportunities bring new challenges: handicraIt producers must be more
responsive in adapting designs to buyer requirements, provide timely production and delivery, and
improve quality and eIIiciency in view oI increased price competition and consumer expectations.
This study provides an analysis oI the global market Ior handicraIts and reveals the Iollowing trends
in the marketplace that impact handicraIt producers in developing countries:
There is a growing market for home accessory products, particularly in the high-end
segment. It is expected to grow not only in Western markets but in all regions as middle-class
populations expand rapidly, particularly in China and India. This trend suggests that there are
numerous and expanding opportunities Ior artisans in developing countries to create products Ior
these markets.
China and India-along with several other Asian countries-currently dominate handicraft
production worldwide, and are likely to continue to do so for the foreseeable future. Their
position is based largely on low-cost, high volume, Western-designed goods.
Many buyers and consumers seek unique products made in countries other than China.
While the market Ior purely indigenous designs is limited, 'global styleproducts that combine
ethnic elements with contemporary designsis a growing category and represents an opportunity
Ior handicraIt producers.
Low-end (priority on low prices) and high-end (priority on high quality) markets are
expanding, while the middle (moderate quality at moderate prices) is relatively stagnant.
Whereas competition at the low end is strong and requires signiIicant production capacity, the
'luxury market tends to Iocus more on distinctive designs, higher quality, and smaller quantities
with greater Ilexibility in pricing.
Distribution channels in end markets are shortening. arge and, increasingly, mid-size
retailers are importing directly, while small (and many oI the mid-size) retailers continue to
purchase merchandise principally, or entirely, Irom domestic wholesale importers. As this trend
continues, many wholesale importers are losing important clients and many independent retailers
are struggling to compete in a marketplace dominated by lower-priced 'big-box stores.
However, there is evidence that savvy small retailers can compete with distinctive, high-end
products. It is important to note that the vast majority oI importers, both wholesale and retail, rely
on the services oI Ioreign exporters and agents, which many market experts see as critical to the
success oI handicraIts in developing countries.
The large, direct-import retailers often operate in ways that present barriers to micro and
small enterprises. Their purchase orders typically require high production capacities, strict
delivery dates, and speciIic labeling, packaging, and packing. Advance deposits are unusual,
delayed payment terms are customary, and charge-back penalties Ior mistakes are common.
While similar barriers exist with some wholesale importers, many order smaller quantities, oIIer
prepayments to Iund production with balances paid upon delivery, and have Iewer requirements
that could result in charge-backs.
Buyers of all types prefer multiple product options to choose from, flexibility to make
design modifications, and, above all, reliable partners. There are countless sources oI product
in the world vying Ior attention; what buyers seek most are items that sell Irom a producer who
can deliver.
Home accessories and dcor, gifts, and products for garden and outdoor living spaces are
~hot, with forecasted continued growth, as are products that are simultaneously decorative
,3/functional. These categories present extensive opportunities Ior handicraIt producers.
The handicraIt producers in developing countries should pursue the Iollowing strategies in order to
compete in the global marketplace:
1. Focus on markets and channels in which there is less direct competition with high-volume, lowcost
producers oI 'industrial handicraIts, Ior example, the independent retailer market by way oI
wholesale importers. Rather than competing directly with China, identiIy and sell to market
niches such as high-end home accessories and the importers whose smaller orders are declined by
large craIt Iactories.
2. Develop more products that embrace the concept oI global style in order to both access the large
and growing demand Ior contemporary design and remain distinctive in the marketplace.
Opportunities Ior handicraIts exist in all market segments, but are most abundant Ior products that
Iit comIortably into people`s homes and bring an authentic indigenous element into their lives.
3. ook to local and regional markets Ior opportunities that may have been overlooked and can
serve as a springboard to larger and more competitive markets.
4. Constantly upgrade skills and techniques, including detailed handiwork, quality (especially
Iinishes), product development, and customer service to remain competitive, diIIicult to imitate,
and appealing to work with. Investments to reliably deliver modest quantities oI unique, highquality
goods destined Ior higher-end retail stores are advised over those intended to improve the
ability to compete with low-cost, high-capacity producers.
Introduction:
%he best opportunity for the India exporters of handicraft items exist in the low-end of the
market, as labour costs are generally lower in India. While preparing the export plan, it is
important to keep in mind that the trade structure of the handicraft market in the EU is
highly complex in the sense that handicrafts and wooden gifts are distributed through many
different intermediaries and retailers. %here are hardly any shops selling only wooden gifts
and handicrafts.
Mera Bharat Mahaan is an export organization that deals in woodwork , clay , metal and
other home dcor handicrafts.


Why Germany?
According to Eurostat Statistics :
Though roughly 10 oI India`s trade share comes Irom Germany, it is a market that can be exploited
Iurther. But this 10 Iorms a very miniscule part oI Germany`s trade almost less then 2. The leader
being China & Sri anka (15) Iollowed by Thailand (4). The presence oI Indian handicraIts is almost
negligible and Germany is the right place because in EU it has the largest consumer base Ior giIts and
handicraIts.
The EU giIts and handicraIts market is worth 35 bn .IN 2008 Germany was the largest EU market
comprising oI 24.6 oI the total market share Iollowed by France at 17.2. EU customers value style ,
quality oI construction and Iunctionality oI the product.


In 2005, the total EU consumption of wooden gifts and
handicrafts amounted to 1,251 million. According to
different market research firms, the wooden gifts and
handicrafts market in the EU is likely to increase by 2-
3% annually until the end of the decade.

In 2005 the period total production of wooden gifts and
handicrafts in the EU amounted to 936 million. %he
frames market accounted for 64% of consumption of
wooden gifts and handicrafts in 2005 while the
statuettes and caskets market accounted for 36% of
consumption of wooden gifts and handicrafts during the period.

In 2006, the total value of wooden gifts and handicrafts imported into the EU amounted to
717.2 million. Imports from developing countries grew almost 5% from 2004 to 2006.
Almost 46% of total imports into the EU come from China. %he rest of the imports from
developing countries are supplied by Indonesia 10.8%, %hailand 9%, India 5% and others
0.2%.
The two countries expect to achieve bilateral trade worth t20 billion ($26 billion) by 2012 roughly
doubling the current trade volume between them, which is euro13 billion.
#esearchers have predicted that the German handicraft, wooden and gift article market will
slowly increase until 2009, by approximately 1.8% annually.
In spite oI the subdued German economy, the German market Ior handicraIts and hobby products
is one oI the sectors which are still experiencing some growth. Sectors involving products Ior the
home are increasingly popular. The ongoing recession is encouraging German consumers to
concentrate on activities involving home and Iamily.
There are estimated 3,500-5,000 retailers in this product sector ranging Irom small, specialised
retailers to department stores, DIY stores and toy stores with hobby/craIts departments. An
increasing number oI traditional retailers are also oIIering their customers the chance to buy Irom
their online-shops. Some retailers do not have normal shops/outlets anymore but sell exclusively
online.
German craIters are always interested in new products. These could be Ior already established
craIts such as card-making, rubber stamping, decoupage (plain and 3D), patchwork and quilting,
soIt toy and doll making or beading to mention just the most widely known. CraIters in Germany
are price conscious but more emphasis is put on quality and variety. There is also interest in new
craIting trends.
Specialist consumer Iairs are very important Iorums. The main one oI these is the Creativa an
annual event which, was attended last year by over 400 exhibitors mainly Irom Germany but also
most other European countries as well as America. During its 5-day duration, the Creativa
attracted some 76,500 visitors in 2009 (an increase oI 5.3 over the previous year) who spent
approx. t118 per person amounting to t8.3 million at the Iair. Many exhibitors can also expect
Iollow-up sales via catalogues or online-shops. The next event is Irom 17.03.-21.03.2010 in
Dortmund. Further inIormation can be Iound on the website:
http://www.westIalenhallen.de/5022.php . This website is also available in English.
Another major specialist consumer Iair is the Kreativ Welt, which is held annually in
Wiesbaden. ast year some 50,000 people visited the Iair, spending on average t 150 per person.
ast year some 400 companies Irom Germany, Benelux, Sweden and the Baltic Countries
exhibited. The next event is Irom 28.10.-31.10.2010 in Wiesbaden. Further inIormation can be
Iound on the Iollowing website:
Both oI these Iairs would be excellent venues to introduce products new to the German market
direct to consumers as companies could get a very accurate impression oI how much interest the
product is likely to generate. It must be stressed, however, that German speaking personnel
should be available on the stand.
The main events on the trade side are:
O Fahoba kreativ , which is also held annually in Dortmund. Although a relatively small
event (52 exhibitors and over 2,000 visitors in 2009) it is quite important to this sector.
Visitors are typically owners/buyers Ior specialist retail/wholesale businesses as well as
buyers Ior the larger stores/chains. Products on oIIer cover most hobby and handicraIts
materials and supplies. New trends are introduced through seminars and workshops at the
Fahoba kreativ, where the decision makers can usually try out the new products/trends.
Exhibitors are mostly commission agents, but also some manuIacturers. The next event
will be held Irom 27.08.-29.08.2010 in Dortmund. Further inIormation can be Iound on the
Iollowing website:http://www.westIalenhallen.de/4514.php The website is also available
in English. handarbeit + hobby , held annually in Cologne. This is a very international
event. There were 212 exhibitors Irom 24 countries and 8,788 visitors Irom 54 countries in
2009. Main products exhibited are: Needlework yarns and implements, haberdashery,
tapestry, home-textiles knitting and sewing machines, craIt and hobby supplies. The next
event will be held Irom 26.03.-28.03.2010 in Cologne. Further inIormation can be Iound
on this website:http://www.handarbeit-hobby.de/ The website is also available in English.
Germany`s TV shopping channels (QVC, RT-Shop and HSE Home Shopping Europe) have
also increased the number oI products Irom the hobby and handicraIts sector shown in their
presentations. OI particular interest are rubber stamping, scrapbooking and card-making.

Market Segmentation:
%he German handicraft market can be segmented roughly into upper, middle, and lower
segments. %his segmentation applies both to the retail and other levels (such as wholesalers
and importers) in the market.
O Upper segment: 5-10%
O Upper-middle segment: 20-30%
O ower-middle segment: 30-40%
O ower Segment: 20-40%
Distribution intermediaries
While exporting, choosing the right trading partner is very important. As mentioned earlier,
the trade structure of the handicrafts and wooden gifts market in the EU is very complex.
%herefore it is a must for exporters willing to export to the EU to find out the best trading
partner according to their specific profile, product range and goals. Some main distribution
channels exporter may consider are -
O Agents
O Importers-wholesalers
O Buying Groups
O #etailers
O Export marketing organisations.

Target Market:
O !rofessional Men and Women ( Age :30 - 50 years )
%hey are likely to buy on festivals like thanksgiving and Christmas and also for
housewarming.
O Geographical
Geographically the target market would be situated in high population density areas.
4 Cologne - 11 million
4 Berlin - 6 million
4 Munich - 6 million
4 rankfurt -5 million
O Demographics
4 As stated by Statistisches Bundesamt (ederal Statistical Office Of Germany)
the population of Germany 86,468,000 making it the 14
th
most populous
country in the world.
4 Germany has an aging population with nearly 20% population being over 65
years of age and 64% people in the age bracket of 35 - 64 years. %he
population growth rate is - 0.0333%.


Strengths:
1. India - EU %A likely to come into being end of 2011.
2. %he Broad-Based %rade and Investment Agreement (B%IA) proposed to be signed
early next year will give a fillip to bilateral trade which could increase to 100 billion.
3 AbundanL and cheap labour hence can compeLe on prlce
4 Low caplLal lnvesLmenL and hlgh raLlo of value addlLlon
3 All manufacLurers of handlcrafLs are exempL from obLalnlng an lndusLrlal llcense Lo
manufacLure
6. @here are no resLrlcLlons regardlng Lhe locaLlon of Lhe manufacLurlng unlL
7. %ax holidays.
8. Cheap and abundant labour.

Weaknesses:
1. Currency Fluctuations have tremendous effect on the export business.
%he India handicraft industry was worst hit by the sudden rupee appreciation during
the last year. ollowing rupee appreciation of over 13% against the value of US
dollar in the last financial year, the handicraft sector of the country lost revenues of
around $500 million and could export only around $3 billion, as against the target of
$3.5 billion.

During 2007-08 (April to March), the exports of handicrafts have shown a decrease
of #s.3276.09 crore, from #s. 17288.14 to #s. 14012.05 crore, a decrease of
18.95% in rupees term. In dollar terms, the exports have shown the decrease of US
$ 330.12 millions i.e. the exports decreased by 8.66% over the similar period in
2006-2007.

During 2008-09 (April to August), the exports of handicrafts have shown an increase
of #s. 130.31 crore, from #s. 4302.04 to #s. 4432.35 crore, an increase of 3.03% in
rupees term. In dollar terms, the exports have shown the increase of US $ 8.03
millions i.e. the exports increased by 0.77% over the similar period in 2007- 2008.

O Standardisation and supply chain issues.
O Strong product development skills required.

!romotion:
The organizations who are developing the new and innovative items are required to give publicity
at the international level in order to explore the possibility to market their items. Effective and well
designed publicity drive create awareness amongst the potential buyers as to the strength of the
products ranges being offered by ndia and also help in dissemination of National policies and
information on other issues like Social Environmental, working condition to educate buyers and
consumers. t is, therefore, proposed to launch a systematic publicity campaign through audiovisual/
printed publicity by making video film preparing posters, catalogues, folders, brochures on
ndian Handicraft/Carpet, Road Shows, Catalogue Shows, fashion shows, live demonstration by
crafts persons and such other methods as will create positive image of ndian Handicrafts in the
foreign markets.
With the view to market their products the organizations may like to participate in various
international exhibitions/fairs, Buyer Seller Meets etc., display their items in reputed departmental
stores. n order to create awareness about ndian Culture at the international level it is also
necessary to depute crafts persons for live demonstration during the international
fair/exhibition/Buyer Seller Meet and to organize the cultural exchange programme between various
countries. The market is a dynamic place and situation is ever changing in terms of the potentiality,
taste,fashion and nternational focus. With the increased international competition, market trends are
changing and market segments are becoming more and more country specific as well as product
focused. n order to meet with the challenges and opportunities organizations are required to
participate in fair and exhibitions, conduct market studies etc.
n order to identify the export market and publicize their products the financial assistance will
be provided to the organizations for:
O Participation in nternational fair(s)/exhibitions(s) abroad.
O Participation in Buyers-Sellers Meet(s) in ndia and Abroad.
O Conducting Market Studies Abroad.
O Deputation of crafts persons for live demonstration during various fairs/foreign
Exhibitions/Cultural Exchange Programme agreed between ndia & other countries.
O issuing journaIs;
O organizing promotionaI events;
O organizing trade fairs;
O advertising handicraft' products
O upgrading skiIIs;
O assisting handicrafts in finding market outIets;
O SoIving generaI market outIet probIems.

PRICING

Among Lhe four markeLlng mlx producL dlsLrlbuLlng channels promoLlon and prlce only prlce creaLes lncome and
Lhe oLher Lhree generaLe cosLs rlce besldes creaLlng lncome plays a ma[or role as a sLraLeglc facLor ln developlng
compeLlLlve advanLage ln Lhe markeL @he amounL of lncome and promoLlon of a company regardlng Lhe
poslLlonlng and flndlng a sulLable poslLlon ln Lhe mlnd of cusLomers are relaLed Lo sulLable prlclng ueclslon maklng
for prlclng ls noL an easy Lask and many facLors are affecLlng ln Lhls declslon @he reason for some companles whlch
are noL so acLlve for exporL prlclng ls LhaL Lhey have a good sale ln lnLernal markeL because of Lhelr producL
characLer whlch has good lnLernal markeL or ln some counLrles due Lo llmlLlng lmporL regulaLlon @hese companles
are worrled abouL helr global compeLlLlve poslLlons Loo and need a prescrlpLlon for Lhelr fuLure acLlvlLy because
Lhey also feel LhaL ln Lhe global markeLlng acLlng eLhnocenLrlc wlll noL be enough @wo maln facLors for Lhls
company Lo be consldered are lnLernal markeL condlLlon and Lhe amounL of auLhorlLy granLed Lo exporL managers
for declarlng prlce Lo dlfferenL cusLomers
Environmental factors affecting pricing
Marketers must deal with a number oI environmental Iactors when making pricing decisions. Currency Iluctuation,
inIlation, government controls and subsidies, competitive behavior, and market demand are among these Iactors.
Some oI these Iactors work in conjunction with others; Ior example, inIlation may be accompanied by government
controls.
When currency fluctuation occurs, there are two options Ior pricing: one is to Iix the price oI products in country
target market. In this case, any appreciation or depreciation oI the value oI the currency in the country oI production
will lead to gain or losses Ior the seller. The other option is to Iix the price oI products in home country currency. II
it is done, any appreciation or depreciation oI the home country currency will result in price increases or decreases
Ior customers and no immediate consequences Ior the seller. In actual practice, a manuIacturer and its distributor
may work together to maintain Market share in international market. Either party, or both, may choose to take a
lower proIit percentage. In the long term contracts, both parties agree an exchange rate clause, which allows them to
agree to supply and purchase at Iixed prices in each company`s national currency. In this case iI the exchange rate
Iluctuate within a speciIied range, say plus or minus oI Iive percent, the agreed price will not be changed, but iI
more than that, say plus or minus oI ten percent, then new discussion or negotiation Ior adjusting the prices should
be opened.( Darlin, 1998)
Inflation, or a persistent upward change in price levels, is a worldwide phenomenon. InIlation requires periodic
adjustments. These adjustments are caused by rising costs that must be covered by increased selling prices. An
essential requirement when pricing in an inIlationary environment is the maintenance oI operating proIit margins.
IFO costing method is prescribed by some practitioners under conditions oI rising prices.
Government control can also limit the Ireedom to adjust prices, and the maintenance oI margins should be
compromised. In a country that is undergoing severe Iinancial diIIiculties and is in the midst oI a Iinancial crisis
(e.g., a Ioreign exchange shortage caused in part runaway inIlation), government oIIicials are under pressure to take
some type oI action. Governmental actions in the case oI hard Iinancial problems include use oI broad or selective
price controls, prior cash deposit requirements Ior imports, customs duties Ior imports, value added tariIIs,
proliIeration oI rules and regulations, and subsidization. All oI these controls are against exporting pricing when a
company wants to export products to an importing country which is under control oI the government. In Iact the
more control rendered by a government the more diIIicult to enter in that country market. In this case the availability
oI this market is not so suitable.

Main Factors affecting on pricing for Handicraft:
O The cost oI manuIacturing, distributing and marketing our product.
O The physical location oI production plants might inIluence price. For example, Toyota
have plants in their European market, in the United Kingdom and Turkey.
O Fluctuations in Ioreign currencies aIIect pricing. Due to relatively low US Dollar price
during the 2010s our imports to the United States expensive, but exports relatively cheap.
However Iluctuations make it very diIIicult Ior companies to make long-term decisions -
such as building large Iactories in global markets i.e. costs oI production are cheap today,
but could be expensive in the Iuture, impacting upon the price that the business is Iorced
to charge.
O The price that the international consumer is willing to pay Ior the product.
O The price that competitors in international markets are already charging.
O Business environment Iactors such as government policy and taxation.
Pricing Strategic Matrix based on the quality

P
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Quality
ow High

o
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Economy Penetration
H
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Skimming Premium
Pricing Strategies Matrix

GkCSS MAkGIN 2011 2012 2013 2014 201S
Sa|es (In Luro) 33400 62000 72600 86300 103900
rect Cost of Goods 26830 29330 36074 42600 49830
Cther cost 0 0 0 0 0
1ota| Cost of goods
so|d
26830 29330 36074 42600 49830
Gross Margn 26370 32630 36326 41000 36070
Gross margn 497 326 303 473 327