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E Commerce business for




E Commerce business for Handicrafts

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:


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
3. Acquiring SERPs through search engine optimization.
4. Press release submissions about the new site or product (free and paid), in sites like
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

Growth of 40% in
2nd year and 30%
Revenue $210,000 $273,000 $354,900 in 3rd year.
60% of total
Cost of Services $126,000 $163,800 $212,940 revenue
Gross profit $84,000 $109,200 $ 141,960
Payroll $35,000 $42,000 $50,000
Rent for 400
Rent $5,000 $5,000 $5,000 square foot place.
Advertising $6,000 $7,000 $8,000
Telephone &
Electricity $9,000 $10,000 $12,000
This includes
depreciation for
equipments, legal
Other expenses $7,000 $9,000 $12,000 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.

ISBN NO Book Title Author

The handicrafts of Frances as recorded in the Arthur Harrison

Descriptions des arts et meÌ チ tiers 1761-1788 Cole

978- 101 Best Home-Based Businesses for Women, 3rd

Priscilla Huff
0761528173 Edition

978- Craft, Inc.: Turn Your Creative Hobby into a Meg Mateo
0811858366 Business Ilasco

Beadwork (Handicraft Manuals) Donatella Ciotti

B0008CVUPE Fancy work and house decoration Emily S Bouton

Web Resources

Resource URL