Marketing For The Coconut Handicraft and Gift Sector - CIPSED

Canada Indonesia Private Sector Enterprise Development
[CIPSED] Project
Marketing
for the Coconut Handicraft and Gift Sector
Prepared by Stan Jung
July 2009
2 MARKETING COCONUT HANDICRAFT PRODUCTS
TABLE OF CONTENTS
1.0.0 EXECUTIVE SUMMARY ……………………………………………… 1
2.0.0 INTRODUCTION ……………………………………………………..… 2
3.0.0 MAIN CATEGORIES OF HANDICRAFTS …………………………… 2
3.1.0 JEWELLERY ……………………………………………………….…… 2

3.2.0 HOUSEHOLD ITEMS ………………………………………………….. 3
3.3.0 SOUVENIRS ……………………………………………………………. 4
3.4.0 HANDICRAFTS ..…………………………………………………….…. 4
4.0.0 TARGET MARKETS ……………………………………………………. 6
4.1.0 DOMESTIC VISITORS ……………………………………………….... 6

4.2.0 INTERNATIONAL VISITORS …………………………………………. 8
4.2.1 Asian Visitors ………………………………………………………... 9
4.2.2 European / North American ………………………………………. 10
4.3.0 INSTITUTIONS ………………………………………………………… 12
4.4.0 OTHER …………………………………………………………………. 12
5.0.0 MARKETING YOUR HANDICRAFT PRODUCTS ………………….. 13
5.1.0 PRODUCT DESIGN AND DEVELOPMENT ……………………….. 13

5.1.1 Elements of Good Product Design .……………………………… 13
5.2.0 PRODUCT PROMOTION ………………………………………….…. 15
5.2.1 Getting the Story Out ……………………………………………… 17
5.2.2 Packaging …………………………………………………………… 17
5.2.3 Displays …………………………………………………………….. 18
5.3.0 PRODUCT COSTING AND PRICING ………………………………. 19
5.3.1 Product Costing Model ……………………………………………. 19
5.3.2 Pricing Strategies ………………………………………………….. 20
5.4.0 DISTRIBUTION CHANNELS …………………………………………. 21
5.4.1 Wholesale …………………………………………………………… 21
5.4.2 Retail ………………………………………………………………… 22
5.4.3 Institutions …………………………………………………………… 23
6.0.0 CONCLUSIONS ………………………………………………………… 24

1.0 EXECUTIVE SUMMARY
This report summarizes the results of a training seminar on “Marketing for the Coconut
Handicraft and Gifts Sector” held on October 27 and 30, 2008, and a Handicrafts Focus
Group session held on January 15, 2009, in Manado, Indonesia. The purpose of the
training was to give local coconut handicraft producers a better knowledge of the
product and market segments for coconut handicrafts, as well as an understanding of
the issues they should consider in order to more effectively market and sell their
products, and ultimately create sustainable businesses.
Coconut handicrafts can be broadly defined as goods made of coconut wood, shell or
fibre that are purchased by the end-user as a souvenir of their visit or as a gift to others.
The four main categories of coconut products are: (i) jewellery items; (ii) household
items; (iii) souvenirs; and (iv) handicrafts.
The main target markets for coconut products are domestic visitors; international visitors
from Asia; international visitors from Europe/North America, and institutional customers.
Handicraft producers should not focus exclusively on one target market or one product
segment. For example, the prospect of sales of high-end handicrafts to international
visitors is real, but producers should also diversify their product portfolio to ensure a
more balanced cash flow.
In order to create “value” in their products, handicraft producers need to pay attention to
additional factors such as marketing. The main aspects include product design and
development; product promotion; costing and pricing; and distribution channels. Good
product design includes the development of unique products, making them difficult to
copy, using local materials, and following market trends. Product promotion involves
interesting packaging and displays, and getting the story out. Product costing ensures
that all of the costs involved in making a product – direct materials, direct labour and
overhead – are captured in the price. The main distribution channels for handicraft
products are wholesale, retail and institutions.
The SULUT coconut handicraft sector is fragmented and operates as a cottage industry
that is capable of producing some interesting handicrafts, but which does not have the
resources to produce large quantities in a cost-efficient manner. However, there is an
opportunity for small-scale producers to work collaboratively – as opposed to
competitively – to share the risks and costs of doing business. By working together,
small-scale producers will be able to develop into sustainable businesses more quickly
than growing their business from the ground up. That is, working as a group will open
up opportunities to achieve more than working independently.
Governments can also contribute to the local coconut handicraft sector by helping to
promote the SULUT brand, and by using its existing programs to encourage the
formation of collaborative groups or clusters.
2.0.0 INTRODUCTION
2.1.0 BACKGROUND
This report summarizes the results of a training seminar on “Marketing for the Coconut
Handicraft and Gifts Sector” held on October 27 and 30, 2008, and a Handicrafts Focus
Group session held on January 15, 2009, in Manado, Indonesia. The Canada-Indonesia
Private Sector Enterprise Development (CIPSED) Program and Dinas Koperasi jointly
organized the activities, with the support of the Ministry of Tourism, Ministry of Industry
& Trade, KAPET, BIMP-EAGA, UNIMA, and the Organizing Committees of the Eco-
Tourism Conference and the World Oceans Conference (WOC).
The purpose of the training was to give local coconut handicraft producers a better
knowledge of the product and market segments for coconut handicrafts, as well as an
understanding of the issues they should consider in order to more effectively market
and sell their products, and ultimately create sustainable businesses. The sessions
covered issues on handicraft product design, display and product promotion, product
costing and pricing, and the various distribution channels for selling their goods.
The training was also intended to prepare the producers for selling opportunities at
some upcoming events, particularly the World Oceans Conference, held May 11-15,
2009, in Manado. Some of the producers participated in the Kayuwatu Exhibition as
guests of government departments, while others participated in the SULUT Handicraft
Consortium, a grouping of ceramic, coconut and textile producers that set up selling
locations in some of the major hotels during the event.
3.0.0 MAIN CATEGORIES OF HANDICRAFTS

Coconut handicrafts can be broadly defined as goods made of coconut wood, shell or
fibre that are purchased by the end-user as a souvenir of their visit or as a gift to others.
Products can incorporate other materials into the design, e.g. ceramic or embroidery,
but coconut remains one of the themes. Larger items such as furniture made from
coconut wood are not considered in this report.
The main categories of coconut handicraft introduced below are not mutually exclusive.
For example, a decorative plate purchased as a handicraft can also be used as a
functional household item.
3.1.0 JEWELLERY
Jewellery items include necklaces,

bracelets, earrings, broaches, hairpieces,
key chains, etc. These items tend to be
small in size, easy to produce, and low-
priced, e.g. Rp 10,000 or less per unit.
MARKETING COCONUT HANDICRAFT PRODUCTS 3
Jewellery tends to be a draw for young

people, especially girls, the “backpacker”
crowd looking for low-priced souvenirs, or for
visitors looking for many small gifts to give to
younger friends and family members.
3.2.0 HOUSEHOLD ITEMS
Household items refer to products that can be used around the home, in particular the
kitchen or dining room. Given the characteristics of coconut wood, it is an excellent
material for making basic items such as cups, coasters, napkin holders, placemats,
tissue boxes and business card holders, to more intricate products like decorative plates
and dinner bowls, and wall/floor tiles.
Household items made from coconut are seen as more than just a basic institutional
item, but can also be decorative in nature given its interesting colour and texture. As a
result, these items also make good souvenirs, while items of a higher quality, e.g.
decorative plates, can also be perceived as a handicraft.
Currently, local coconut handicraft producers have not focused on household items as a
product segment. Some producers have begun working on samples for market testing,
but it still represents a largely untapped market opportunity.
3.3.0 SOUVENIRS
Souvenirs refer to products that commemorate a specific event, e.g. World Oceans
Conference, or region, e.g. Minahasa, North Sulawesi (SULUT). In most cases, the
souvenir incorporates the name or logo of the event into the design of the product.
Visitors purchase souvenirs as a momento of their participation in the event or of their
visit to the region. As well, institutions such as event sponsors or government leaders
often purchase souvenirs to give away as gifts to their guests.
Souvenirs can range from a simple plaque or plate that is placed on a table, to a
functional item such as a clock or penholder with the name of the event or region written
on it. In North Sulawesi, coconut is a good material for souvenirs since it is so
representative of the region and its peoples.
From the producer’s perspective, souvenirs that

commemorate a specific event, e.g. World Oceans
Conference, have a limited lifespan because they
will not be very saleable after the event is finished.
3.4.0 HANDICRAFTS
Handicrafts refer to products requiring “the skilled use of the hands” to produce, i.e.,
they have a higher skill or artistic component than the jewellery, household item, or
souvenir categories. In many cases, handicrafts may be “one-of-a-kind” products that
are not available anywhere else. Shoppers appreciate the creativity and skill that
producers put into making handicrafts, and will often purchase products simply to show
their appreciation.
Local traditions and culture constitute the main inspiration for handicraft designs. For
example, handicrafts such as models of the traditional Minahasa house, the Minahasa
horse cart, or the historical warrior are common. For the most part, the local producers
have focused on these traditional designs for coconut handicrafts.
Handicrafts can, however, have more modern designs and inspiration; they can also be
whimsical in nature. The creativity of the producer is the only limitation. Recently, some
producers have experimented with some new handicraft products such as attractive wall
and floor tiles, innovative “do-it-yourself” masks, and are interested to see the reception
they will receive.
4.0.0 TARGET MARKETS
The technical capacity of the local coconut handicraft industry is credible, and already
covers a broad range of goods. Up to now, however, there has been little consideration
of the target markets for those products and their specific buying behaviours. It is
important for the handicraft producer to understand that each of the target markets have
unique buying preferences in terms of types of products, quality, and pricing.
Additionally, aspects such as presentation, packaging and display also influence the
buying decision.
The target market for the coconut handicraft sector can be broken down into several
segments, most importantly domestic and international visitors. The markets described
are not mutually exclusive in their buying preferences. That is, products targeted at one
market may be saleable in another target.
Handicraft producers should not focus exclusively on one target market or one product
segment. For example, the prospect of sales of high-end handicrafts to international
visitors is real, but producers should also diversify their product portfolio to ensure a
more balanced cash flow. The mass departure of international visitors from Bali
following the bombing incidents in 2002 and 2005 showed the need for local businesses
to diversify their strategy to deal with sudden (expected or unexpected) changes in
tourist traffic.
4.1.0 DOMESTIC VISITORS
Domestic visitors refer Indonesians coming from other parts of Indonesia. In most
cases, their visits are in conjunction with a business- or government-sponsored
meeting. A smaller number of domestic visitors visit exclusively for tourism.
Based on hotel stays, North Sulawesi (SULUT) is not currently a major destination for
domestic visitors when compared to other destinations. However, it is notable that hotel
stays in 2007 experienced an almost four-fold increase from 2006. With the local
government’s plan to promote the region as one of the prime tourism destinations in
Indonesia, it is expected that SULUT will continue to increase its profile among
domestic visitors.
Domestic visitors normally stay for only a few days at a time. They do not bring a lot of
check-in baggage, but they do not mind carrying a lot of carry-on items. During their
visit, meeting organizers may arrange a brief tour for the participants, or participants
may book one extra day off for tourism, but in either case their schedules are hectic and
the time for shopping is hurried albeit necessary.
WHERE DO THEY GO?

Indonesian guests in hotels, by province (‘000) (2007)
Non-
Province Classified Total
Classified
West Java 1,716,900 4,188,141 5,905,041
East Java 1,288,200 3,440,925 4,729,125
DKI Jakarta 3,271,400 1,287,629 4,559,029
Central Java 1,064,100 2,742,352 3,806,452
DI Yogyakarta 619,900 1,837,234 2,457,134
Riau 446,500 1,348,495 1,794,995
North Sumatera 820,100 688,688 1,508,788
South Sulawesi 578,100 902,605 1,480,705
East Kalimantan 295,300 1,019,919 1,315,219
Bali 631,700 666,261 1,297,961
Banten 363,000 759,533 1,122,533
Lampung 80,100 950,028 1,030,128
South Kalimantan 197,700 583,040 780,740
North Sulawesi 80,100 631,304 711,404
Kepulauan Riau 381,200 204,566 585,766
West Kalimantan 135,500 360,536 496,036
South Sumatera 235,700 254,773 490,473
Nangroe Aceh Darussalam 123,300 269,931 393,231
Jambi 97,900 204,730 302,630
West Nusa Tenggara 136,100 177,067 313,167
Other 272,600 2,040,795 2,313,395
TOTAL 13,113,200 24,558,552 37,671,752
(1) Classified Hotel
(2) Non-Classified Hotel
Source: Statistics Indonesia
Domestic visitors tend to buy many small items like jewellery or souvenirs as gifts for
relatives and friends back home. They also often buy food items since there are no
customs restrictions for domestic travel, so handicraft products that incorporate fresh or
packaged food items are also popular.
Domestic visitors are less interested in functional household items.
Some domestic visitors also look for larger items to purchase as house decorations.
They appreciate Indonesia’s diverse culture, and often look for things that reflect the
local traditional culture of the place they are visiting. In SULUT, for example, items like
the model of the traditional Minahasa-style house or traditional horse cart are popular.
For domestic visitors, the main issue affecting the buying decision is (low) price. Other
issues such as packaging, presentation and durability are less important than it is for
international visitors. Also, domestic visitors are less concerned about the size or
fragility of their purchase, since they tend to carry most of their belongings onto the
plane, as opposed to checking it into their baggage, and have a shorter distance to
travel than international visitors.
4.2.0 INTERNATIONAL VISITORS
International visitors refer to foreign visitors coming from outside Indonesia.
WHERE DO THEY COME FROM?

International Visitors to Indonesia, Jan-Aug 2008 (1)
Country Visitors % Growth
Singapore 638,834 + 4.34
Malaysia 441,523 + 14.71
Japan 337,277 + 9.15
Australia 243,931 + 48.48
South Korea 190,240 + 1.94
China 183,995 + 61.24
Taiwan 140,582 - 4.94
United States 103,234 + 26.39
India 75,270 + 37.61
Thailand 32,421 - 11.08
(not disaggregated)
Europe & Russia 308,814 + 24.64
Middle East 32,518 + 29.62
(1) Visitors entering via the 15 main gates from January and August 2008, based on nationality.
Source: Indonesian Ministry of Culture
Visitors from Southeast and East Asia make up the greatest number of international
visitors to Indonesia, followed by visitors from Europe and North America. With the
exception of the local ferry routes between Singapore and the Riao Islands, most
international visitors travel to Indonesia by air, and bring more check-in luggage than
domestic visitors.
North Sulawesi is not currently a major destination for international visitors when
compared to other destinations. But with the government’s plans to promote the region
as one of the prime tourism destinations in Indonesia, it is expected that SULUT will
increase its profile among international visitors.
Since overweight charges on the airlines are high, international visitors tend to be wary
of taking large, heavy and/or fragile items back to their home country. As a result,
issues of product size and fragility play a much bigger role in the buying decision than
for domestic visitors. It is also important that the products meet the customs restrictions
of the shopper’s home country. Most food products, for example, are not allowed into
their home country. As well, any products that may be used as a functional household
item should be made with hygienic materials and processes.
WHERE DO THEY GO?

Foreign guests in hotels, by province (‘000) (2007)
Non-
Province Classified Total
Classified
Bali 1,561,300 877,928 2,439,228
Kepulauan Riau 745,600 57,061 802,661
DKI Jakarta 785,100 11,302 796,402
East Java 131,800 18,668 150,468
North Sumatera 124,000 22,451 146,451
West Java 95,600 26,737 122,337
DI Yogyakarta 96,600 13,231 109,831
West Nusa Tenggara 43,100 43,241 86,341
Central Java 61,100 17,044 78,144
Banten 53,800 156 53,956
South Sulawesi 37,500 7,079 44,579
West Sumatera 32,000 4,658 36,658
East Kalimantan 23,500 3,882 27,382
East Nusa Tenggara 2,800 23,407 26,207
Riau 18,100 639 18,737
West Kalimantan 11,200 4,257 15,457
Nangroe Aceh Darussalam 11,200 1,630 12,830
North Sulawesi 5,600 2,202 7,802
Papua 2,400 3,891 6,291
Other 20,300 6,895 27,195
TOTAL 3,862,600 1,146,359 5,008,959
(3) Classified Hotel
(4) Non-Classified Hotel
Source: Statistics Indonesia
International visitors are also interested to learn more about the places they visit, and
often use their shopping experience as a way to capture their learning. Thus, using local
materials like coconut and local icons are appropriate for local handicrafts. But it is
important to note that “local” design does not necessarily mean “traditional” design.
Creative modern designs can also be unique to the region and convey the local culture.
Marketing aspects relating to product display and presentation, especially those that
facilitate the “learning” experience for the international visitor, are also important in the
buying decision. In addition, international visitors are attracted to additional themes such
as the use of eco-friendly materials and production practices, or fair-trade to ensure that
the workers have earned a fair wage for their work.
4.2.1 Asian Visitors
Visitors from Southeast and East Asia make up the largest proportion of international
visitors to Indonesia. The largest group is from neighbouring Singapore, followed by
Malaysia, Japan and Korea.
With the exception of Australians, who exhibit behaviours closer to European/North

American visitors, a greater proportion of Asian visitors tend to be male and travelling
on business or some professional capacity than those from Europe or North America.
On average, their length of stay is one week or less, and they tend to spend less per
visit than European or North American visitors.
A Profile of Selected Travellers to Indonesia (2007)

Singapore Malaysia Japan Korea Australia
Total Visits 1,352,412 891,353 508,820 327,843 314,342
Sex
Male 1,102,706 650,176 250,454 183,462 171,916
Female 239,706 241,177 258,366 144,381 142,516
Age Group
Less than 24 76,499 87,177 80,372 31,570 64,287
25-54 1,140,070 709,588 351,366 246,298 201,047
Older than 54 135,843 94,588 77,082 49,975 49,098
Occupation
Professional 361,580 278,207 83,469 67,763 112,740
Business 898,417 445,169 208,895 121,564 87,704
Student 34,630 46,216 45,621 21,580 33,687
Other 57,785 121,761 170,835 74,936 80,301
Purpose of Visit
Holiday 764,960 460,636 395,112 170,238 234,551
Business 563,483 369,602 93,117 138.343 69,995
Convention 10,590 14,919 13,155 3,797 4,518
Other 13,397 46,196 7,436 15,465 5,368
Avg Length of Stay 5.18 4.96 6.13 6.28 11.64

Avg Expenditure
Per day (US$) 114.43 118.17 120.89 148.04 102.84
Per visit (US$) 593.02 585.99 741.00 930.07 1,196.98
Source: Indonesian Ministry of Culture & Tourism
Asian visitors also tend to buy many small items like jewellery or souvenirs as gifts for
relatives and friends back home. They may also buy packages of food as gifts, but
unlike domestic visitors they must pay attention to customs regulations that may restrict
the transport of fresh goods.
Asian visitors also are also interested in functional household items. For example,
teapots made of whole coconut shells are popular with Japanese visitors to hold sake.
Given the physical qualities of coconut wood, products like chopsticks may also be an
opportunity for coconut handicraft producers for the Asian market.
4.2.2 European / North American Visitors
Visitors from Europe and North America do not constitute a significant proportion of
international visitors to Indonesia, but they tend to stay longer and spend more than the
other target markets. The largest group is from the United States, followed by the U.K.,
Germany and the Netherlands.
European/North American visitors tend to visit Indonesia for holidays. If business is the
main reason for coming, then they will add a holiday into their travel plans after their
business is finished. As one would expect for visitors coming from further away, they
stay for longer periods of time than Asian visitors, on average 10-17 days.
By far the biggest tourism draw to SULUT is the diving opportunities. But at the same
time, visitors are interested in learning a little bit about the region, its people and its
culture. Thus, they seek out supplementary opportunities to visit other places of interest
where they can achieve their “cultural” objectives.
A Profile of Selected Travellers to Indonesia (2007)

U.S.A. U.K. Germany Netherlands Canada
Total Visits 155,652 121,599 112,160 106,987 32,343
Sex
Male 98,683 70,405 61,365 58,150 18,465
Female 56,969 51,194 50,795 48,807 13,878
Age Group
Less than 24 12,544 13,078 10,191 12,462 3,651
25-54 115,899 88,272 83,893 66,392 23,008
Older than 54 27,209 20,249 18,076 28,133 5,684
Occupation
Professional 77,998 54,842 40,653 48,357 15,845
Business 47,679 37,365 29,606 23,318 8,877
Student 10,245 8,854 10,212 6,368 2,379
Other 19,730 20,538 31,689 28,944 5,260
Purpose of Visit
Holiday 73,523 67,918 72,676 66,581 13,530
Business 72,724 42,611 34,661 34,222 14,429
Convention 2,662 2,310 1,017 1,853 609
Other 6,743 2,000 3,806 4,331 3,775
Avg Length of Stay 11.69 10.47 13.30 17.17 10.13

Avg Expenditure
Per day (US$) 121.47 107.38 88.56 80.08 108.54
Per visit (US$) 1,462.74 1,354.18 1,177.91 1,375.16 1,098.99
Source: Indonesian Ministry of Culture & Tourism
European/North American visitors tend to be less interested in low-end items like

jewellery and souvenirs. Rather, they tend to shop for unique household items like
bowls, serving spoons, candle or incense holders, etc. However, it is important that the
products be of a design and quality consistent with a western setting.
European/North American visitors are also interested in quality handicrafts to use as

conversation pieces in the home. They often use the shopping experience to learn more
about the local culture and traditions of the region, thus it is important for producers not
only to make interesting handicrafts using local materials and designs, but also to feed
the shopper’s desire to learn about the producer and the local culture through
interesting presentations and displays.
European/North American visitors tend to be willing to pay a higher price for products
than the other target markets, but at the same time it is important that the price of
products is “fair.” International visitors are not willing to pay “any” price for handicrafts.
One important important factor in the buying decision of European/North American

visitors is the ease of packing into their luggage. For example, they tend to shy away
from fragile items for fear that they will not make it back to their home country in one
piece. Thus, issues like (secure) packaging play an important role in the buying
decision. Additionally, they are wary of buying large items because they will not be able
to fit them into their baggage.
4.3.0 INSTITUTIONS
Institutions refer to businesses or government departments that buy gifts for special
guests, or event sponsors who buy gifts for speakers and/or event participants. For
example, many local government offices, from the Governor’s Office to the various
regencies, regularly buy gifts to give to their guests. As well, organizers of events such
as the Cocotech meeting (APCC) or the World Ocean Conference (WOC) have sought
goods to give away as gifts.
While not a “tourist” segment in the formal sense, institutions are an important target
market for handicraft producers. Coconut handicrafts are popular for such gifts because
of its strong connection to North Sulawesi.
Institutions normally purchase in bulk, e.g. at least 50 units at a time, and require quality
souvenirs with a logo and/or labelling that promotes the event, department or the region.
Thus, the products made for this market segment are customized to the buyer’s
requirements and are not normally saleable to anyone else other than the institution.
Since the souvenir is intended to be a momento not only of the gift-giver but also the
region, institutions demand that the souvenir be representative of the local culture, be
made of local products, and be tasteful in quality and appearance. In order to maximize
the impact of the gift, attractive product packaging is also important for this market.
4.4.0 OTHER
Exporting opportunities such as selling over the Internet provides an opportunity to

make your products available to a considerably larger (domestic and international)
market. The main products available on the Internet are household items that are mass-
produced in order to achieve lower costs and higher quantities. Some of the competitive
factors include
• Up-front capital investment for Internet infrastructure

• Development of “brand” recognition
• Production capability, e.g. equipment, to meet large-sized orders
These conditions present a challenge to local producers, who operate on a labour-

intensive cottage industry basis.
5.0.0 MARKETING YOUR HANDICRAFT PRODUCTS
The biggest challenge facing handicraft producers is how to create “value” in their
products in the eyes of the buyer. This section will discuss the main elements of
marketing that will contribute to product value, thereby enhancing the experience for the
shopper, and raising profits to the producer.
The importance of marketing varies according to the value of the product: lower-value
products such as jewellery items may not require as much attention to marketing, while
higher-value handicrafts may require more attention.
5.1.0 PRODUCT DESIGN AND DEVELOPMENT
Product design refers to the generation of ideas and concepts for souvenirs and
handicrafts. The easiest source of design ideas is to copy existing products in the
marketplace. But a true handicraft artist should not gain any satisfaction from copying,
nor will they gain any reputation in the local handicraft sector. Instead they should
create and develop their own unique ideas.
5.1.1 Elements of Good Product Design
Handicraft producers will enhance product value by incorporating elements of good

product design:
Unique Products. Developing products that are unique, or different, is key to

attracting the customer’s attention.
Handicraft producers can look to local
history and culture as one source of
unique design. Icons such as the
Coelacanth fish, Tarsier monkey or the
Cakalang warrior are very distinctive to
North Sulawesi.
It is also important to consider the many

levels of “uniqueness” as well. While
domestic visitors would only consider
local SULUT symbols as “unique,”
international visitors would also consider
symbols from other regions or of
Indonesia as a whole as “unique.” In the
Peninsula Hotel in Manado, for example,
many of the decorations are not from
SULUT but are from other regions such
as Kalimantan. Yet they still represent
“Indonesian” style in the eyes of the
hotel’s guests, who are mainly
international. Therefore, handicraft producers should also consider general

“Indonesian” design elements as well as local ones.
Product design should also come from

the artists’ personal inspiration. While
there are a limited number of local
SULUT icons, the artist’s interpretation
of those icons should be their own,
resulting in a wide variation of products
available for sale.
Finally, products need not always have

a strong cultural connection. Funny or
cute objects that may have no relation
to the local culture are also very popular
items.
Difficult to copy. Making your product

difficult to copy is another key aspect to
good product design. Producers should
pay attention developing unique
products (see above), using higher different or higher quality materials, or
incorporating a higher level of workmanship to make the product.
Local Materials. The use of locally available raw material is important in creating
a distinctive local design. North Sulawesi is known as the “land of waving
coconuts,” thus it is a natural extension to promote coconut wood and shell
handicrafts.
Coconut handicraft producers generally use material that is no longer needed by

other stakeholders in the coconut value chain. That is, the best wood for
handicrafts comes from older, non-productive trees, e.g. 50-60 years old, while
coconut shells have no other function
other than as charcoal for cooking.
One local producer makes handicrafts
out of sawdust from a local coconut
furniture facility. Thus, there is a strong
eco-friendly element to coconut
handicrafts.
Handicraft producers can also

incorporate other non-coconut material
into their products, e.g. ceramic,
embroidery, bamboo, or other waste
material.
Market Trends. Market trends refer to trends in the marketplace that affect the
shoppers’ buying decision. One of the most important global trends is a greater
awareness of environmental issues and personal health. This affects the
handicraft sector in many ways. For example, visitors, particularly international
visitors, are attracted to products made of recycled or renewable material, non-
toxic lacquer and paint, or materials with no preservatives or chemicals added.
Handicraft products made in SULUT from coconut shell and wood are perfectly
suited for this trend, as the
resource is plentiful and is
essentially a waste product
at the end of the coconut
value chain.
QuickTime™ and a Another market trend to

decompressor pay attention to is colour
are needed to see this picture. and texture. Generally,
international visitors prefer
more natural colours, with
only a light finish, while
domestic visitors prefer
bright colours with a
heavier lacquer finish.
Coconut handicraft producers should continuously monitor global trends and then
design appropriate products. For example, a greater awareness of personal
health, particularly among international visitors, means that items like ashtrays
may not be as popular as expected. As well, all products should be finished with
non-toxic finishes. Household items that may be used to serve food need to be
food-grade.
Most local coconut handicraft producers will not have much knowledge of global
trends or the preferences of international visitors. But it is still possible to gain an
insight by regularly visiting local gift and souvenir shops, domestic and
international hotels, and resorts. Talk to the staff and ask what types of products
are most popular with shoppers, and what kinds of questions they ask. Producers
should also ask themselves, “Can my products fit into the design and standards
of this location?”
5.2.0 PRODUCT PROMOTION
Promotion involves communicating interesting aspects about the artist or the handicraft
to enhance product value and to entice shoppers to purchase the product.
Visitors, especially international visitors, like to learn some interesting anecdotes about
the places they visit, such as facts about local history and culture. Such knowledge
makes the visit more interesting and fulfilling, and enables them to tell their friends
about their experience when they return to their home country. In many cases, visitors
go shopping for handicrafts for the purpose of taking home a reminder of their
experience or of the interesting things they learned. That is, visitors will take a greater
interest in buying local handicrafts if they have a greater interest in the place(s) they
visit. Thus, handicraft producers play a key role not only in making local handicrafts, but
also in tourism promotion.
Some examples of what visitors may be interested in:
About Coconuts. Many international visitors have never seen a whole (green)
coconut before, let alone know how important the coconut is to the local SULUT
economy. Thus, interesting facts about the coconut value chain (all of the
products that can be made from the coconut) may be of interest to shoppers.
Shoppers will also learn that coconut handicrafts are made the end of the value
chain – old wood and shell – thereby adding value to an otherwise low value
item, is also interesting.
About the Product. Many handicraft products are based on local cultural or
historical icons, e.g. bendi, cakalang warrior, tarsier. Yet visitors from outside the
region know little if anything at all about their historical or cultural significance.
Having a greater understanding of these icons will give them a greater
appreciation for the handicrafts. Local government departments such as the Dept
of Tourism can greatly assist producers in this aspect of promotion.
About the Artist. Shoppers will be more likely to purchase handicraft items if
they feel a connection to the artist. The shopping process becomes more
interesting if they know that the person behind the display is the actual artist or
producer as opposed to an employee or a re-seller.
Production Techniques. The coconut handicraft sector in SULUT is a cottage

industry made up of many small-scale artists/producers. In most cases products
are handmade using traditional or small-scale equipment, and many pieces are
one-of-a-kind. Shoppers will take a greater interest in buying handicraft products
if they know their purchases are unique and made using traditional methods (as
opposed to a mass-produced product.)
Social Responsibility. Many international visitors are concerned that the

products they buy are not damaging to the environment, and that the proceeds of
their purchase go to the artist who made/designed the product. Social concerns
such as “fair trade,” which tries to ensure that workers are paid fairly for their
labour, or “organic,” which ensures that no artificial or toxic materials were used
to make the product, are high on the minds of many shoppers. As a result, these
aspects of the coconut handicraft sector are worthy of promotion.
Three aspects of product promotion are discussed below: getting the story out; product
packaging, and display.
5.2.1 Getting the Story Out
Handicraft producers cannot just focus on making products; rather, they must try to
weave a “story” around their products to make them more interesting to shoppers. One
of the easiest ways is to attach a small information card to explain the item’s historical
and/or cultural significance. Material can be in both Bahasa Indonesia and one other
language, most likely English.
An important aspect of promotion is to create a “brand” image. Shoppers are more likely
to buy products that they know or recognize, as opposed to generic products that they
know nothing about. Product promotion and branding helps the producer to create an
identity that will differentiate your products from the competition. One easy way to start
creating a brand image is to create a logo and then attach a small sticker of your logo
on each of your products. The sticker should be professionally made (not hand-drawn)
and be eye-catching. Additionally, all promotional material such as information cards,
business cards and display material should also display the logo.
Product promotion and branding is important even for small-scale producers, but it can
also be expensive. Thus, small producers may consider working together to share
promotional costs. Small-scale handicraft producers may consider working under an
umbrella organization such as the SULUT Handicraft Consortium, which was formed to
sell handicrafts during the World Ocean Conference in May 2009.
5.2.2 Packaging
Packaging refers to the wrapping or bag used to deliver the handicraft product to the
shopper. While it is not part of the actual handicraft, packaging serves some important
functions, all of which increase product value:
Protect fragile items. An important factor in the buying decision for many
visitors is, “Can I get my purchases home safely?” This especially applies to
high-value or fragile items; while a shopper may place a great value on an item,
he/she will not buy it if they do not feel they can get it home in one piece. Thus,
fragile items should include packaging consisting of a protective box or case. It is
possible to incorporate the protective box into the design of the product.
Enhance the product’s appearance. Packaging can make generic products

more attractive in the eyes of the shopper. Many Asian visitors purchase items as
gifts for their friends and family, thus they look for items that are already
attractively or conveniently packaged. For example, a simple product like coconut
coasters (for drinks) can be turned into an attractive gift by bundling them with
wrapping paper or string, or a painting or print can be made into a collector’s item
with an attractive picture frame.
Ease of carrying. Packaging can also be used to help shoppers carry away their
purchases. In some cases, shoppers may want to buy many items but will not do
so if they cannot carry their purchases away conveniently. Thus, something as
simple as a shopping bag should be considered in the packaging mix.
Adding packaging into the product mix gives producers an opportunity to brand their
products by placing their logo on the packaging.
While packaging plays an important role in the buying decision, producers should
balance the need for packaging with being environmentally responsible. Therefore,
producers can consider using natural material, e.g. banana leaves, or recycled material
for packaging. They could also incorporate this social responsibility it into your
promotional strategy.
When sending products to retailers or to exhibition organizers, producers should deliver

their goods in a “ready-to-sell” format, with whatever packaging and promotional
material accompanying the products. In some cases, it may be necessary to train the
store/exhibition attendants on how to maintain the product, especially fragile products,
and also to visit the location on a regular basis to make sure your goods are displayed
in an appealing manner.
5.2.3 Displays
Exhibitions, meetings and conferences are one way for local handicraft producers to get
their products into the marketplace and to sell their products directly to the end-user. In
SULUT, many government departments reserve booth space at major events, and then
invite local handicraft producers to display their products. However, some producers
have commented that these booths do not present good selling opportunities, as they
tend to promote the government department rather than the handicraft producer. For
example, observers at the Eco-Tourism Conference that was held in 2008 commented
that the handicraft exhibits looked “busy” and “very crowded.” Handicraft products from
various producers were thrown together with no organization or identity, which made the
exhibit look generic, messy and not very “shopper friendly.”
In order to make displays work well, it is important that they be arranged in an eye-
catching manner that focuses on the handicraft products and producers. Items should
not be casually thrown on the table, but should be arranged in an attractive manner.
Producers can create an identity with the use of large (banner) and/or small (table-top
sign) signage.
It may also be possible to bring the exhibit to life by doing some simple production on-
site to enhance the shopping experience. Many visitors, particularly from overseas,
have little knowledge of how handicrafts are made and do not make the connection
between the products on display and the workmanship required to make them. Doing
some work on-site will help make that connection.
5.3.0 PRODUCT COSTING AND PRICING
Handicraft producers should receive a fair return on their investment and labour from
selling their goods. When they set the price for their goods, they must not only recover
their product costs, but also make a reasonable profit that will enable them to earn a
living. At the same time, the price should be comparable to the perceived value of the
product in the eyes of the buyer. But what is the appropriate price to charge? The first
step to answering the question is to understand the cost(s) to make your products, as
well as the prices of comparable products in the marketplace. From this analysis,
producers will be better able to set the price of their products, and better able to control
their costs of production.
The complexity of your costing and pricing analysis will vary from business to business.
For example, a small-scale producer working from his/her home will have a much
simpler cost structure than a multi-product business with employees.
5.3.1 Product Costing Model
All of the costs to make a product fall into one of the following three categories:
Direct materials refer to the cost of materials used to make one unit of product,
e.g. coconuts, wood, paint, etc.
In some cases, the artist may obtain material like coconuts for free, but generally
you should assume the market price for all materials in the event you must
purchase it in the future to fill a larger order.
Direct labour refers to those wages paid to workers hired to produce

handicrafts. If a worker is paid by the day, you must estimate the productivity of
your workers, e.g. 5 units per day, etc. The estimate should reflect a reasonable
level of productivity that is reasonable under the current conditions. Sometimes a
business will pay their workers by the units produced, in which case determining
the direct labour costs is simple.
Overhead refers to those costs that cannot be directly attributed to a single unit
of production, e.g. salaries for managers, depreciation of equipment, electricity,
phone, etc. In order to obtain the true cost of your product, a portion of these
costs must be charged to each unit of production, which is normally done through
a process of allocation.
For a single-product facility, the simplest way to calculate overhead is to divide

the total overhead costs by the number of units produced in the period. For a
multi-product facility, it is necessary to allocate overhead according to a cost
driver, e.g. labour hours. To determine the amount of overhead for each unit of
production, divide the total overhead by the number of hours of direct labour
hours used in the period to arrive at the overhead rate. For each product, multiply
the overhead rate by the number of hours it took to make the product.
We can determine the total cost of your product by adding the three costs:
Direct materials per unit

+ Direct labour per unit
+ Allocated overhead per unit
= Cost to make one unit of production
From this analysis, handicraft producers can determine the total cost to make their
product(s). This number is important because it is the minimum price that they can
accept to sell their product without incurring a loss; any less and you will lose money on
each sale; any more and you can earn a profit.
5.3.2 Pricing Strategies
There are two basic methods for setting a price for your goods. For both methods, it is
important to first understand your product costs.
Cost-Plus pricing is based on the product cost of your goods as calculated in

Section 5.3.1, and then multiplying it by a percentage markup. The percentage
markup represents the producer’s profit from making the product, and generally
ranges from 100% or more, depending on the value of the product. Note that the
100% figure is only an example. The actual percentage markup may vary upward
or downward due to competitive or other pressures.
Market pricing refers to setting your price that is comparable to similar products
in the marketplace. In order to determine the appropriate price point for your
goods, producers should visit local souvenir shops, hotels, and resorts on a
regular basis to see what types of handicrafts and gifts are for sale, which ones
are selling, and at what price point. You should not only compare the prices of
coconut products, but other comparable handicraft products including but not
exclusive to coconut, e.g. ceramic, textile, stone. When visitors go shopping, they
do not consciously look for coconut handicrafts, but for handicrafts in general.
The final pricing method will most likely be a combination of the two. First, use cost-plus
pricing to calculate your “break-even” price, or the lowest price you can accept in order
to recover your costs, as well as the “best case” price, or the price you would charge
assuming your preferred mark-up. Second, visit the stores and retail outlets to test
whether the price point you have chosen is appropriate for the marketplace. Using your
understanding of your product costs, you can decide your next course of action:
• If your best-case price is lower than comparable products in the marketplace,

then increase your price.
• If your best-case price is higher than comparable products in the marketplace,

then (i) reduce your price, but only to your break-even price; (ii) re-analyze your
product costs to see if you can achieve greater cost savings in order to further
reduce your price; or (iii) increase the perceived “value” of your product using
packaging and other promotional strategies.
Before making a decision to buy a handicraft, all visitors will compare the price of the
product with their perception of its value. International visitors will tend to be willing to
pay a higher price for products than domestic visitors, but it is still important that the
price be “fair.” International visitors will not pay any price for handicrafts; they will still
equate the price of the product with its perceived value.
5.4.0 DISTRIBUTION CHANNELS
There are several ways for producers to sell their products to end-users. The main
methods, which will be discussed below, are wholesale, retail, and institutions.
WHOLESALE BROKER / RETAIL

RETAIL OUTLET
RETAIL
PRODUCER END-USER
INSTITUTIONS
5.4.1 Wholesale
The easiest way for a producer to sell their products is to use a broker or retail outlet.
But at the same time it results more participants in the distribution chain, and less profit
to the producer.
Retail outlets include local hotels, souvenir shops and/or resorts where visitors
may go to shop for souvenirs. The retail outlet is responsible for the operating
costs of the outlet, marketing and promotions (if applicable), and any intangibles
associated with the specific outlet, e.g. high-end hotel/resort. For this the retailer
expects to recover their costs and also earn a profit from the sale of goods.
Brokers are individuals that represent many producers. They work on their
clients’ behalf to place their clients’ products in the retail outlets. The broker is
responsible for overhead costs associated with visiting the various outlets and
developing relationships with the owners/managers. For this the broker expects
to recover their costs and also earn a profit from the sale of goods.
The business relationship with brokers or retail outlets is almost always on a

consignment basis. First, the producer and broker will negotiate the wholesale price, or
the price that the producer will receive for each sale. The price can take one of two
forms: (i) the broker will take a percentage commission from the price charged to the
retail outlet; (ii) the broker will pay the producer a set price for the goods, but has the
flexibility to negotiate the price charged to the retail outlet. In North Sulawesi, the most
common form is the latter. Next, the producer will supply the goods at no cost to the
broker, with no money exchanged at this time. Finally, when the retail outlet sells the
goods, they will pay the broker, who will in turn pay the producer the wholesale price.
The biggest challenge with selling your goods wholesale is that the producer loses
control of the distribution chain. For example, a common complaint of local handicraft
producers is that brokers negotiate the wholesale price to the lowest price possible, and
then add a large mark-up to the retail price, thereby shifting more profit to the broker.
The producer has no say in the final retail price, and often complain that brokers set it at
an exorbitantly high price point. Also, producers that sell wholesale have little or no say
in how the products are displayed in the retail outlet.
5.4.2 Retail
Retail refers selling directly to the end-user by setting up a retail outlet. The greatest
benefit of retail selling is that all of the profits go to the producer, as opposed to a broker
or retail outlet. As well, the producer will have more control over how their products are
sold, e.g. end-user pricing, product display, etc. But at the same time a retail outlet is
expensive to set up and maintain, and entails greater risk to the producer.
There are two ways in which producers can sell retail:
Permanent location. A permanent location refers to a retail store with a known

address where visitors can go during business hours. The outlet should be
centrally located to maximize visitor traffic, fully stocked with inventory, and also
staffed with workers. Setting up a permanent location requires significant upfront
financial costs and, in most cases, is not a feasible option for small-scale
handicraft producers. Producers can sometime set up a display area in their
home where visitors may come, but that is not very feasible unless their home is
centrally located. In other cases, tour agencies may arrange for their guests to
stop at selected locations, e.g. Keramic Pulutan, but it does not result in
significant traffic levels.
Temporary location. A temporary location refers to booth space at special

events such as the World Ocean Conference, or participation in trade fairs such
as the SULUT Fair in Jakarta. SULUT will host several major events in 2009, and
preparations are being made to make temporary locations available for handicraft
producers to sell their goods. In many cases, the local government is preparing
the space at no cost to the producer, while other programs facilitate participation
in trade fairs at low cost. As well, the Governor has encouraged the major hotels
to make display space available to local handicraft producers as well, resulting in

more opportunities to set up temporary locations.
Setting up a temporary location entails fewer up-front costs than a permanent

one, but it is still not free. Producers must also pay attention to issues of product
promotion (see above), and make sure the location is well-maintained and
managed.
Given the high cost of setting up a permanent location, or the time commitment needed
manage a temporary location, the potential for a cluster or group of local producers to
work together under one umbrella is great.
5.4.3 Institutions
Institutions refer to event sponsors, all local government offices, and private
corporations such as commercial banks that purchase special gifts for their guests.
While not formally a “tourist” market, institutions should be considered an important
market for local producers since they order in larger quantities and, in most cases,
producers will have greater confidence of getting paid.
Many institutions maintain an ongoing inventory of gifts on hand, while others may
purchase gifts for special occasions. For example, many institutions placed orders for
local handicraft products in advance of the World Oceans Conference. (Given the low
production capacity of local producers, these orders took precedence over preparation
for retail sales, and actually resulted in less stock available for retail sales during WOC.)
To penetrate the institutional market, producers must be prepared to make “cold calls,”
or visits initiated by the producer, to potential customers. They should provide samples
of the types of products they are capable of making, and should also be prepared to
discuss issues like production capacity, pricing, and delivery and payment terms. In an
Indonesian context, the higher the person is in the organization you can contact to make
the cold call, the better. Finally, in some cases an institution may contact you directly to
discuss a potential order. Therefore, producers should always have some samples of
their product line on hand to show.
5.0 CONCLUSIONS
Although North Sulawesi does not have a reputation in Indonesia for handicrafts, and
despite a lack of exposure to new trends and ideas from outside the region, the design
capacity of the North Sulawesi coconut handicraft and gift producers is credible.
The production capacity, on the other hand, is low because most producers are very
small-scale in size with little, if any, fixed assets. It is easy for local artists to start a
basic coconut handicraft operation because raw materials costs, e.g. coconut shell and
wood, are low. Combined with a penchant for people to work for themselves rather than
to work for somebody else, it has resulted in a large number of very small producers. As
a result, the sector operates as a cottage industry that is capable of producing some
interesting handicrafts, but which does not have the resources to produce large
quantities in a cost-efficient manner. The fragmented nature of the sector is one of the
main factors inhibiting its development.
The goal of handicraft producers should be to develop their small-scale operations into
sustainable businesses that will enable them to accumulate savings and support their
families. Such businesses differ from most of the existing small-scale operations in a
number of ways, including but not exclusive to:
• Broad product line (jewellery, household items, souvenirs, handicrafts) that is suited
to multiple markets (domestic visitors, international visitors, institutions);
• Sufficient fixed assets (equipment) to produce larger quantities in a cost-efficient and
timely manner;
• Access to a pool of trained labour;
• Resources to undertake marketing and promotional initiatives to create value for
their products.
• Administrative systems to manage the business as it grows in size and sales.
The onus on developing the handicraft sector lies in the private sector. However, there
is an opportunity for government to support and facilitate the sector through its existing
programs. Following are some comments on the potential roles of the private sector
(producers) and government.
ROLE OF THE PRIVATE SECTOR
Coconut handicraft producers that want to develop their operations into sustainable
businesses need to invest a significant amount of human and financial resources. But
this can be a challenge for most stakeholders. Thus, there is an opportunity for small-
scale producers to work collaboratively – as opposed to competitively – to share the
risks and costs of doing business. By working together, small-scale producers will be
able to develop some of the characteristics of a sustainable business mentioned above
more quickly than growing their business from the ground up. That is, working as a
group will open up opportunities to achieve more than working independently.
Perhaps the biggest area where working collaboratively may pay dividends is in
marketing and product promotion. Not only will a cluster or group be able to share the
extra costs of developing a marketing plan, but they may also be able to project a
greater presence than on their own. A collaborative marketing approach under a central
“SULUT” banner may attract more attention than several smaller ones, and be easier for
visitors to remember.
The SULUT Handicraft Consortium, a loose grouping of handicraft producers formed to

sell their goods in the local hotels during the World Oceans Conference (WOC), was a
case in point. The consortium enabled the hotels to offer a broad line of coconut,
ceramic and textile products to their guests, while only dealing with one contact person
that represented the whole group. The hotels stated this was a much more appealing
arrangement than dealing with individual small-scale vendors who only represented
themselves.
The experience of the World Oceans Conference showed that there was a huge
demand from institutional customers (mainly government departments) for large orders
of souvenirs. But very few suppliers in SULUT had the capability to fill those orders in a
timely manner. Of those, they were fully stretched to their capacity to fill the orders,
leaving no time to work on handicraft products for general sale. The suppliers would
have been able to better serve their customers by sharing the orders with their fellow
suppliers. Sub-contracting is not a favoured means for small-scale producers to work
together since the contracting party normally charges a significant premium on the sub-
contracting party’s price. Thus, a more equitable “production sharing” arrangement may
be more appropriate to encourage more cooperation.
ROLE OF GOVERNMENT
There are several government initiatives designed to support small-scale businesses,

and coconut handicraft producers should make every effort to take advantage of those
opportunities. But the private sector should not rely on government to grow their
business. Instead, government programs should be seen as an extra “boost” to their
business, rather than a “requirement” for doing business.
One of the more important areas where Government can support the private sector is to
promote the SULUT brand, thereby addressing the lack of reputation for handicrafts.
This program would not only promote handicrafts but the region as a whole, its history
and its rich cultural heritage. For example, many visitors from outside of SULUT do not
recognize the region’s cultural icons and therefore do not see the significance of, say,
the Tarsier monkey portrayed in so many souvenirs. Some examples of the types of
initiatives that may help:
• Help get SULUT products into displays outside of the region, e.g. UKM Gallery in
Jakarta, operated by SMESCO Indonesia Co.;
• Additional representation at exhibitions such as the SULUT Fair in Jakarta;
• Publication of an attractive “catalogue” of products available from SULUT that can

be distributed to domestic and international visitors;
• Administration of a website to promote SULUT products.
Local handicraft producers have had little exposure to trends and ideas outside of
SULUT, and no means to gain that knowledge themselves. Although many government
representatives travel outside the region on a regular basis, and ask producers for
samples to take with them, many producers have stated that they themselves have no
opportunity to travel outside the region. Direct participation in some events outside the
region will have multiple benefits: (i) they will be able to market their own products, and
talk directly to potential buyers on business or how to improve their products; (ii) they
will be exposed to new designs and products, and learn about the handicraft sector in
other parts of the country; and (iii) they will meet other producers, potentially resulting in
networks outside of the region and further enhancing exposure to new trends and ideas.
Government, through its existing programs, can facilitate the creation of collaborative
producer groups. For example, some departments provide funds to purchase
equipment. Given the low level of capitalization among most producers, even a small
injection can have a large incremental impact on production capacity. The Regency of
Minahasa did this for some of its stakeholders, resulting in a large increase in the local
capacity to produce bigger quantities of handicrafts. However, rather than provide small-
scale equipment to one or two producers (thereby creating internal competition), provide
some larger-scale equipment on the condition that several producers agree to work
collaboratively under a single umbrella. As well, rather than award a large order for
souvenirs to one producer (again creating internal competition), award the order to
several producers who agree to work collaboratively to fill the order.
Finally, it is vital for government at all levels to express their strong support for the local
handicraft and gift sector. On many occasions, representatives have voiced their lack of
confidence in the local sector to design and produce interesting products, and have
even pondered the need to order products from Java and other handicraft centres. One
simple way for government to support the local sector is to order their souvenirs/gifts
from local producers.

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Canada Indonesia Private Sector Enterprise Development

Prepared by Stan Jung

1.0.0 EXECUTIVE SUMMARY ……………………………………………… 1

2.0.0 INTRODUCTION ……………………………………………………..… 2

3.0.0 MAIN CATEGORIES OF HANDICRAFTS …………………………… 2

3.1.0 JEWELLERY ……………………………………………………….…… 2

4.0.0 TARGET MARKETS ……………………………………………………. 6

4.1.0 DOMESTIC VISITORS ……………………………………………….... 6

5.0.0 MARKETING YOUR HANDICRAFT PRODUCTS ………………….. 13

5.1.0 PRODUCT DESIGN AND DEVELOPMENT ……………………….. 13

6.0.0 CONCLUSIONS ………………………………………………………… 24

3.0.0 MAIN CATEGORIES OF HANDICRAFTS

Jewellery items include necklaces,

Jewellery tends to be a draw for young

3.2.0 HOUSEHOLD ITEMS

From the producer’s perspective, souvenirs that

4.1.0 DOMESTIC VISITORS

WHERE DO THEY GO?

Domestic visitors are less interested in functional household items.

4.2.0 INTERNATIONAL VISITORS

International visitors refer to foreign visitors coming from outside Indonesia.

WHERE DO THEY COME FROM?

WHERE DO THEY GO?

4.2.1 Asian Visitors

With the exception of Australians, who exhibit behaviours closer to European/North

A Profile of Selected Travellers to Indonesia (2007)

Avg Length of Stay 5.18 4.96 6.13 6.28 11.64

Source: Indonesian Ministry of Culture & Tourism

4.2.2 European / North American Visitors

A Profile of Selected Travellers to Indonesia (2007)

Avg Length of Stay 11.69 10.47 13.30 17.17 10.13

Source: Indonesian Ministry of Culture & Tourism

European/North American visitors tend to be less interested in low-end items like

European/North American visitors are also interested in quality handicrafts to use as

One important important factor in the buying decision of European/North American

Exporting opportunities such as selling over the Internet provides an opportunity to

• Up-front capital investment for Internet infrastructure

These conditions present a challenge to local producers, who operate on a labour-

5.1.0 PRODUCT DESIGN AND DEVELOPMENT

5.1.1 Elements of Good Product Design

Handicraft producers will enhance product value by incorporating elements of good

Unique Products. Developing products that are unique, or different, is key to

It is also important to consider the many

international. Therefore, handicraft producers should also consider general

Product design should also come from

Finally, products need not always have

Difficult to copy. Making your product

Coconut handicraft producers generally use material that is no longer needed by

Handicraft producers can also

QuickTime™ and a Another market trend to

5.2.0 PRODUCT PROMOTION

Some examples of what visitors may be interested in:

Production Techniques. The coconut handicraft sector in SULUT is a cottage

Social Responsibility. Many international visitors are concerned that the

5.2.1 Getting the Story Out

Enhance the product’s appearance. Packaging can make generic products

When sending products to retailers or to exhibition organizers, producers should deliver

5.3.0 PRODUCT COSTING AND PRICING

5.3.1 Product Costing Model

Direct labour refers to those wages paid to workers hired to produce

For a single-product facility, the simplest way to calculate overhead is to divide

Direct materials per unit

= Cost to make one unit of production