E-Commerce Platforms for Craft Products from Emerging Markets 1) The US is currently the global leader of craft imports importing $87.3 billion worth of crafts in 2015. 2) Among craft exporting countries, China dominates exporting $148.6 billion worth of crafts in 2015. 3) Between 2012 and 2015, antiques, paintings, interior décor and toys saw some of the strongest export growth rates from China and India among the different craft categories. 4) During the same period, other arts and crafts (such as candles and artificial flowers), paintings, interior décor and carpets saw the strongest growth in imports in the UK and the US. 5) In 2016, 52.5% of American consumers shopped in-person for handmade products, around 20% 25% shopped through ebay, Amazon and Etsy, and 10.1% shopped from independent websites for handmade products. Deborah Weinswig Managing Director FGRT deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 1
Introduction Most countries have traditions and culture unique to their regions and societies, and this cultural heritage is often manifested through every day physical goods such as clothing, furniture, homeware and toys. While these items tend to be mass-produced for domestic consumers, they are often handmade or produced in small quantities to cater to a niche audience outside the home country as well as to visiting tourists. In our previous report, Online Marketplaces for Handcrafted and Vintage Merchandise, we looked at online craft marketplaces, and examined global leader Etsy s positioning in this segment, as well as how Amazon and ebay compare to it. In this report, we explore several e-commerce sites that sell crafts representative of the cultural heritage of the countries from which they originate. In this report, we explore some regional platforms catering to global markets: these are e-commerce sites that sell crafts representative of the cultural heritage of the countries from which they originate. We also look at some of the key online platforms among the different categories, the markets they serve and some of the challenges they face in getting their product to customers. As many of these crafts need to be produced in the home country and exported to buying countries, we look at some of the countries that lead the trade in crafts. Figure 1. Top Ten Importers of Crafts*, 2015 (USD Bil.) 87.3 Global Leaders in Imports and Exports of Crafts Many consumers in developed economies seek out craft products to add a touch of uniqueness to their home, wardrobe or personality in a way that mass-produced goods cannot. The US is currently the global leader in craft imports. In 2015 (latest available), it imported $87.3 billion worth of craft products, according to the United Nations Conference on Trade and Development (UNCTAD). 36.4 26.9 25.2 18.5 16.9 14.9 9.4 9.1 7.2 US France Hong Kong UK Germany Switzerland Japan Italy Canada China * Crafts include: carpets, celebration merchandise, paperware, wickerware, yarn, architecture, fashion, glassware, interior décor, jewelry, toys, antiques, paintings, photography and sculptures. Source: UNCTAD 2
Figure 2. Top Ten Exporters of Crafts, 2015 (USD Bil.) 148.6 Among exporters of crafts, China dominates the world by a significant margin. In 2015, it exported $148.6 billion worth of crafts, according to UNCTAD. Its closest competitor, France, exported some $31.2 billion worth of crafts, about only one-fifth that of China. 31.2 30.0 25.1 22.3 20.1 16.4 15.9 14.1 8.6 China France US Italy Hong Kong UK India Germany Switzerland Turkey Source: UNCTAD China dominates the world among craft exporting countries, shipping $148.6 billion worth of crafts in 2015, while its closest competitor, France, shipped crafts worth $31.2 billion. What Categories Have Gained the Most Traction? Antiques: China and India have long been known as sourcing destinations for various goods. We reviewed the categories that have seen the highest export growth in these countries. Antiques feature prominently for both countries between 2012 and 2015 (the latest period for which UNCTAD provides data), antiques exports grew 112% in China and 45% in India. Others: Other major export categories include paintings, interior décor, wickerware, toys, celebration products, yarn (such as handmade lace, handwoven and needlework rugs, embroidery, bed linen and materials that are manmade, printed, knitted or crocheted) and other arts and crafts (such as candles, tanned or dressed fur skins, artificial flowers and wood crafts). Source: istockphoto 3
The US and the UK, two of the major importers of crafts, saw the strongest growth in imports of other arts and crafts and paintings. The other key categories of imports for both these markets are celebration products, toys, antiques, carpets, interior décor, sculptures and yarn. Figure 3. Import and Export Growth Rates of Crafts in Select Major Markets, 2012 2015 (%) Top Exports China Antiques 112% Wickerware 47% Paintings 16% Antiques 45% Interior Décor 14% Toys 28% Other Arts and Crafts 13% Celebration 23% Celebration 8% Yarn 12% India Top Imports UK US Other Arts and Crafts 13% Paintings 15% Celebration 8% Carpets 9% Toys 7% Interior Décor 9% Antiques 7% Sculptures 8% Carpets 7% Yarn 7% Source: UNCTAD About 45% of older US millennials (ages 30 39) sold a craft project they made through an online store in 2015, compared to 18% of American consumers overall. While Online Platforms Are Popular for Selling Crafts and Sharing Ideas, In-Person Buying Still Dominates The craft market is not just about imported goods: it includes peer-to-peer selling within countries. Making and selling crafts has become increasingly popular among millennials in the US. About 45% of older millennials (ages 30 39) sold a craft project they made through an online store in 2015, compared to 18% of American consumers overall, according to a Mintel survey. Some 55% of older millennials in the US use online video tutorials to learn a craft skill or technique, compared to about 33% of American consumers overall, according to the same survey. Despite the popularity of e-commerce, many consumers are buying handmade products in-person, at craft fairs, stores and flea markets, according to a 2016 survey of 1,000 American adults by market research firm Ask Your Target Market. 4
Figure 4. US: Preferred Places to Buy Handmade Items, 2016 Craj Fairs 52.5% Flea Markets 39.3% Local Stores Farmers' Markets Ebay Etsy Amazon 29.9% 26.6% 24.9% 24.7% 20.3% Independent Handmade Other Marketplace Sites Other 6.1% 5.4% 10.1% n = 1,000 American adults surveyed in August 2016. Source: Ask Your Target Market While 52.5% of consumers said they shopped in-person for handmade products, some 20% 25% indicated that they bought them through large e- commerce sites such as Ebay and Amazon as well as through handmade products marketplace Etsy. Only 10.1% indicated that they bought handmade goods through independent websites and 6.1% purchased from other marketplace sites, therefore, the audience for independent sites is still quite limited. In 2016, 52.5% of American consumers shopped in-person for handmade products, around 20% 25% bought them through Ebay, Amazon and Etsy, and 10.1% bought from independent handmade product websites. Source: Etsy.com However, there is hope for independent websites. Some 48% of respondents in the same survey indicated they believed handmade crafts shopping has become more popular over the past five years, and 49% believe that it could gain in popularity over the next five years. Furthermore, while 81% of handmade product buyers indicate that they 5
Figure 5. Selected Craft Platforms from India and Africa Platform buy handicrafts because of the uniqueness of the products, 51% indicate they buy them to support small businesses. Overall, 58% of consumers felt handmade products are of better quality than mass-produced items, and 55% thought handmade items are more stylish than factory-made, bulkproduced merchandise. These beliefs have likely given momentum to the emergence of independent craft websites across several regions. While craft marketplaces have been established in many developed countries, the segment is still underdeveloped in the emerging regions, particularly in Asia. We profile two platforms from India and Africa, Jaypore and Zuvaa, following the table below. Business Model Location of Platform Business Description Tjori Curated India Fashion, homeware, jewelry and personal care products. Jaypore Own-brand and curated India Home décor, accessories, jewelry, apparel, gifts and vintage items. Indian Products Unravel India Own-brand India Home décor, office accessories, kitchen and dining ware, and women s fashion and accessories. Craftsvilla Marketplace India Fashion, homeware, accessories and food. Vedique Own-brand and curated UK Sculptures and art décor from India, Thailand, China, Pakistan, Nepal, Australia, South America and Africa. Namaste Own-brand UK Home décor, accessories, jewelry, apparel, gifts, furniture and incense from India. Afrikrea Marketplace France Fashion, homeware, jewelry, bags and art. African Products Zuvaa Marketplace US Women's fashion, accessories, personal care products and homewares. Shoppers can shop by designers, too. Kuwala Curated Canada African-inspired women's fashion and accessories. Luxoca Own-brand and curated Ghana Women's fashion. Sapelle Own-brand and curated UK Fashion, homeware, accessories and gifts. Threads of Peru Curated Peru Ponchos, accessories, home décor and children s accessories and toys. South American Products Caserita Own-brand and curated Bolivia Clothing, jewelry, accessories, bags, toys, home décor and knitting wool. Source: Company websites Tukuru Textiles Curated UK Fabric, clothing, accessories, jewelry and carved gourds, representing Andean heritage. 6
September 5, 2017 Company Profiles Jaypore Source: Jaypore.com Business brief: Jaypore is an online store that sells own-brand and curated home décor, accessories, jewelry, apparel, gifts and vintage items, inspired by Indian culture. Competitive advantage: Jaypore was launched in 2012, initially catering exclusively to US consumers. Within a year, it had expanded to serve the global market. It is an established brand in its segment with a wide product assortment. Some 25% of Jaypore s revenues are from markets outside India. Traction: Some 25% of Jaypore s revenues are from markets outside India, and while the US is its largest market outside India, demand from Europe and Malaysia is growing, according to CEO Puneet Chawla (source: Daily News & Analysis, August 2017). Chawla plans to push further into overseas markets by sponsoring Indian cultural events and partnering with Indian boutiques abroad. Between 2013 and 2015, Jaypore s revenues grew by 5,000%, according to startup tracker YourStory. Funding: Jaypore raised $5 million in series A funding in February 2016. Including seed funding, to date, it has raised a total of $5.38 million. Zuvaa Source: Zuvaa.com 7
Business brief: Zuvaa is a marketplace where vendors and designers of African heritage sell women's fashion, accessories, personal care products and homewares. Since its launch in 2014, Zuvaa has earned over $200,000 in revenue. Competitive advantage: Zuvaa has an established presence in the US, and showcases vendors and designers that have adapted Africa-inspired fashion to cater to both the American and the global market. Founder and CEO Kelechi Anyadiegwu was featured in Forbes s 2016 30 under 30 list in the retail and e-commerce category. Traction: Since its launch in 2014, Zuvaa has earned over $200,000 in revenues, according to its profile on website Venture Capital for Africa. It has over 1,200 customers globally and features more than 40 vendors on its platform who have, on average, doubled their sales since joining Zuvaa, according to its profile. Funding: Zuvaa has not disclosed its funding and is actively seeking further investment. Challenges in the Arts and Crafts Trade Some of the challenges faced by arts and crafts makers are similar to producers that manufacture and export in bulk, while others are unique to this segment of makers. 1. Export Formalities and Quality Control Export regulations and quality benchmarks vary across countries, and complying with these may be rather tedious for a small business. Handmade products may not have the same uniformity and consistency in quality as mass-produced goods, and while the variations in design make them unique, it may be difficult to comply with the regulations of the importing countries, such as health and safety standards for furniture. Source: istockphoto 8
2. Shipping Fees As most handmade merchandise tends to be made by artisans and craftspeople located close to the origin of the products, shipping them across countries adds to the cost of the product. While curated and ownbrand platforms may be able to provide economies of scale by collating and shipping, sellers on a marketplace platform may be at a disadvantage, as shipping costs can vary depending on location and the number of products bought by a single customer. Source: istockphoto 3. Payment To enable customers to transact seamlessly, online platforms need to have globally-recognized payment gateways that can facilitate payments across multiple currencies and countries with varying levels of Internet infrastructure. The sellers on the marketplaces should also be equipped to receive the payments made through the platform. In some African countries, for example, limitations exist regarding the total amount that can be transferred in a single payment. In India, many towns and villages where handicraft makers live do not have the necessary infrastructure to ship goods and receive payments, unless they are part of a handicraft cluster a special economic zone designated by the government to support small industries. Market The market for handcrafted goods is also niche, particularly in countries other than that of origin. Consumers may buy items as gifts or for nostalgic reasons to remind them of their home countries. Maintaining a platform with high costs and few shoppers may become a challenge in the long term. 9
One way independent craft platforms can reach more consumers is by creating a physical presence through stores, pop-up shops and by participating in trade fairs. What We Think While craft platforms may appear to be a niche proposition, the potential for further growth exists. As more people travel across the world and settle in countries other than their home country, e-commerce craft platforms are making products from their home countries more accessible. However, in order to cater to a global audience, platforms need to adapt their products to suit local consumers tastes and styles. For example, many of the African platforms have created western clothing inspired by African culture, whereas, there are few Indian platforms creating Indian-inspired western wear. For small and niche businesses to continue to grow in the long term, it is important that they adapt their products to suit local consumers and cater to a broader audience. Another way craft platforms can reach more consumers is by creating a physical presence through stores, pop-up shops and by participating in trade fairs. A majority of handicraft shoppers like shopping for such goods in-person and it gives the sellers a chance to share how the product is crafted, which raises awareness of this segment. Source: istockphoto Nevertheless, as e-commerce infrastructure becomes increasingly accessible, we believe it will play an important role in helping more artisans, craftspeople and small businesses reach consumers across a wider range of countries, in a sustainable manner. 10
Deborah Weinswig, CPA Managing Director FGRT New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 deborahweinswig@fung1937.com Swarooprani Muralidhar Research Assistant Hong Kong: 2nd Floor, Hong Kong Spinners Industrial Building Phase 1&2 800 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 4406 London: 242-246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 New York: 1359 Broadway, 18th Floor New York, NY 10018 Tel: 646 839 7017 FungGlobalRetailTech.com 11