Jan 29, 2001

Developing World Artists’ Dot-Com

by James Craig

Craftsman Cerapio Vallejo sells his traditional rugs and tapestries from his home in Lima, Peru, through Novica.com.

Lima, Peru – Driven from his highland home by Peru's guerrilla wars 18 years ago, Cerapio Vallejo struggled to keep the ages-old weaving skills of his Andean forefathers from dying out.

The master weaver was forced to take on other jobs to supplement his income from tapestry and rug making. That was until the Internet revolution arrived in the Lima slum where he took refuge, giving Vallejo access to a worldwide market and enabling him to double his sales.

``We had to combine with other things and even gave up weaving for a time,'' said Vallejo. Now, he employs about 20 family members ``brothers, nephews, in-laws,'' he said.

The change in Vallejo's fortunes came through Novica.com, a Los Angeles-based Internet sales site that specializes in art and handicrafts made by artisans in developing nations.

Last year, his first with Novica, Vallejo sold $34,000 worth of textiles, more than doubling his revenue and enabling him to buy better wool and other materials. He purchased a computer and even hired an accountant to help organize the company's finances and pay taxes. ``Things have gone well,'' said the 37-year-old father of three, whose tapestries line the walls of his unfinished home in Lima's poor Villa El Salvador district.

Novica says that, by cutting out middlemen, it can pay craftsmen more than they would normally receive and charge buyers less than they would normally pay for the items it offers over its Web site: http://www.novica.com.

The association with artists like Vallejo has been a boon for Novica, which saw sales jump fivefold last year at a time when many of the world's dot-coms and e-commerce sites hit hard times.

Many of those companies have seen their stocks plunge in the past year as a lack of profits or a failure to meet earnings expectations prompted steep sell-offs of Internet stocks.

Privately owned Novica hasn't been immune to the industry's difficulties. An initial public stock offering to raise between $25 million and $40 million that was planned for later this year was postponed until at least early 2002.

``We basically have to wait,'' said Novica President Roberto Milk. ``We have the finances to wait. We have our investment banking relationships in place.''

The site is financed through private individuals and institutions. Its venture capitalists are Rust Capital LLC, Scripps Ventures LLC, record industry veteran Chris Blackwell's Island Trading Company and National Geographic Ventures.

Milk doesn't expect to see e-commerce initial offerings this quarter, though he expects the market for such offerings to recover gradually through the year. Even so, the market for Internet stocks is unlikely to repeat the boom of 1998 and 1999 when investors rushed to invest in the securities, he added.

``I don't think it will ever come back to the way it was for e-commerce companies,'' said Milk. ``They're really going to have to be profitable.''

The Novica site is free for artisans, charging no listing fees. The company typically raises the artist's price by up to 50 percent over what the craftsman could get locally and then prices the product ``seeking a major savings for international clients over their respective local prices,'' Milk said. Novica gets the difference between the markup and the selling price, he said.

``As a result, we're creating an efficient market in one of the most inefficient markets and creating a win-win situation for all involved,'' he added.

For its part, Novica.com, which in September broke into the Media Metrics 500 ranking of the world's most-visited Web sites, expects to be turning a profit by mid-year.

``We're cash-flow positive in about half of our regions,'' said Milk. ``We're not profitable yet, but we hope to be by summer.''

The company's financial concerns may be lost on many of the more than 1,700 artists -- from Bali and Java to West Africa, Central America and the Andes Mountains -- featured on the Novica Web site. However, the Web site's growth and its teaming up with National Geographic magazine are not.

``This alliance with National Geographic reaches beyond any dreams or expectations I could have imagined,'' said Leoncio Tinoco, who weaves tapestries at his shop in San Pedro de Cajas in Peru's central Andes Mountains.

Tinoco, who like Vallejo has grappled for years with a weak market and derisory prices, now sells to a world market willing to pay hundreds or even thousands of dollars for his works.

"Novica has been a miracle for me -- that's how I feel about it,'' he said.