European Union: A promising market for Indian handicraft exporters

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Writuparna Kakati | 19 Sep, 2008
Often considered as a cottage industry, the Indian handicraft industry has outgrown its image to evolve into one of the major contributor for export and foreign revenue generation. Today, it is the second largest employment-generating sector in the country providing employment to more than six million people.

The handicraft industry in India has witnessed a consistent growth of 15 per cent over a decade turning itself into an important suppliers of handicrafts to the world market. The industry is expected to achieve an export turnover of Rs. 39,000 crore by 2009-10 that, in turn, will also create around 20 lakh new job opportunities.

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 %. Despite the existence of a strong production base and a massive workforce, India has not been able to encash the existing opportunities in the handicraft sector. Analyzing the cause behind the small share on Indian handicrafts in the global market, the main factor which comes out is the Indian exporters inability to identify potential overseas market. Indian handicrafts are highly acclaimed all over the world for their large variety and diversified range. But still most of the Indian exporters in this field are unaware about international requirements and current market trends.

Current export statistics
The India handicraft industry was worst hit by the sudden rupee appreciation during the last year. Following 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 Rs.3276.09 crore, from Rs. 17288.14 to Rs. 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 Rs. 130.31 crore, from Rs. 4302.04 to Rs. 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.

During the period, the exports of woodware, embroidered & crocheted goods, shawls as artware, imitation jewellery and misc. Handicrafts showed the increasing trend 11.82%,8.55%,5.36%,4.95% and 3.09% in rupees terms respectively and 9.36%,6.17%,3.06%2.64% and 0.83% in us$ terms respectively whereas art metal ware, hand printed textiles & scarves, zari & zari goods decreased by 0.81%,2.02% and 2.15% in rupees terms respectively and 2.99%,4.17% and 4.31% in us$ term respectively. Overall an increase in the rupee term was 3.03% and in the US $ term was 0.77% .

European Union: A promising market
In 2005, the total EU consumption of wooden gifts and handicrafts amounted to â¬ 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 â¬ 936 million. The 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
â¬ 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. The rest of the imports from developing countries are supplied by Indonesia 10.8%, Thailand 9%, India 5% and others 0.2%.

The 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. There are hardly any shops selling only wooden gifts and handicrafts.

Market segmentation
The EU gifts and handicraft market can be segmented roughly into upper, middle, and lower segments. This segmentation applies both to the retail and other levels (such as wholesalers and importers) in the market.

Upper segment: 5-10%
Upper-middle segment: 20-30%
Lower-middle segment: 30-40%
Lower 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. Therefore 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 -

Agents
Importers-wholesalers
Buying Groups
Retailers
Export marketing organisations.

Some most promising EU markets:

Germany: Consumption of the wooden gifts and handicrafts in Germany was â¬ 180 million (approximately ) in 2005 of which the frames market amounted to â¬ 67 million (37%) while the statuettes (54%) and caskets (46%) market amounted to â¬ 113 million. Researchers has predicted that the German handicraft, wooden and gift article market will slowly increase until 2009, by approximately 1.8% annually.

France: Consumption of the wooden gifts and handicrafts in France was â¬ 134 million (approximately) in 2005 of which the frames market (59%) value amounted to â¬ 79 million while the statuettes (46%) and caskets (54%) market amounted to â¬55 million. According to market researchers, the total gifts and decorative articles market in France is expected to increase by approximately 1.4% annually during the period 2006-2009.

United Kingdom: Consumption of the wooden gifts and handicrafts in United amounted to â¬ 430 million (approximately) in 2005 of which the frames market (68%) value amounted to â¬ 104 million while the statuettes (30%) and caskets (70%) market amounted to â¬47 million during the period. Researchers forecast 7% annual increase the consumption of the UK wooden gifts and handicrafts market.

Italy: Consumption of the wooden gifts and handicrafts in United was â¬ 152 million (approximately) in 2005 of which the frames market (76%) value amounted to â¬ 325 million while the statuettes (50%) and caskets (50%) market amounted to â¬104 million during the period. Researchers forecast that Italy will show steady growth in GDP and population in the coming years and the consumption of the wooden gifts and handicrafts will also increase in the country.

Spain: In 2005, the apparent consumption of wooden gifts and handicrafts in Spain amounted to â¬ 201 million of which the frames market (65%) value amounted to â¬ 131 million while the statuettes (64%) and caskets (36%) market amounted to â¬70 million during the period. The population of the country is projected to increase to 45.3 million by 2015 in parallel with annual increase in GDP of around 7% for the next few years. Therefore, it can be expected that the consummation of the wooden gifts and handicrafts will grow in the coming years.

The Netherlands: In 2005, approximate consumption of wooden gifts and handicrafts in the Netherlands amounted to â¬30 million of which the frames market (67%) value amounted to â¬ 20 million while the statuettes (60%) and caskets (40%) market amounted to â¬9 million during the period. Researchers forecast that Dutch wooden gifts and handicrafts market will grow by 1.5% in the coming years.

Belgium: In 2005, approximate consumption of wooden gifts and handicrafts in Belgium amounted to â¬13 million of which the frames market (62%) value amounted to â¬ 8 million while the statuettes (50%) and caskets (50%) market amounted to â¬5 million during the period. Researchers forecast that Dutch wooden gifts and handicrafts market will grow by 1.5% in the coming years. Researchers forecast that the wooden gifts and handicrafts market in the country will grow by an average of 3% annually to the year 2010.

Opportunities for Indian exporters

Indian exporters may consider partnering with an outsourcing European company. Opportunities in this field include licensing, co-makership, etc.
Indian exporters can target the low end market of the EU as labour costs in India is comparatively low and European manufacturers cannot compete with us on this terrain.
Indian exporters should also consider exporting products with original ethnic value. Products which are handmade, original and artistic are highly acclaimed in the Eu market.

While targeting the EU handicraft and wooden products market in the EU, exporters should keep themselves aware of some potential threats such as European customers' quality consciousness, increasing expectations in terms of design, colours, environmental friendliness of products, etc. As an exporter from a developing country, Indian exporters should also be aware of the EU standards and regulations to which they must comply with while exporting to the EU countries.

Concluding, the EU is a massive market with a huge reservoir of wealthy consumers and, therefore, it is well worth considering it as a highly promising market. Opportunities are in abundance in the EU handicraft market but Indian exporters have to go there to pick them up. The handicrafts and wooden articles market contains a wide range of products, and therefore, it is not possible to define a single best export market strategy for all the exporters engaged in the field. Exporters should do a lot of market research themselves and analyze all the different market segments and criteria very carefully.