RUGS
Wool rugs (originally called serapes and now called tapetes), made in the Zapotec communities of Teotitlán del Valle, Santa Ana del Valle, and Díaz Ordáz, are ubiquitous in Oaxaca. But I have no favorite shops as I have always bought directly from the weavers themselves. Buying from the source doesn't necessarily give you any advantage in price, but it does create a personal connection with the producer.
The villages are also the place to go if you are interested in rugs and wall hangings woven with natural dyes and unique designs. For superb quality, visit Isaac Vásquez García in Teotitlán - one of Oaxaca's premier weavers and a leading expert in the use of natural dyes. (Hidalgo 30, Teotitlán del Valle. Tel: 524-4122)
However, if you haven't time to go to the village, or if you fear the choice will be overwhelming (it is!), there are several rug stores on Macedonio Alcalá, García Vigil, and 5 de Mayo, as well as rug stalls in the Mercado de Artesanías on J.P. García. Note, however, that most of these stalls are operated by vendors, not by the weavers themselves.
Many rug vendors will swear to you that their tapetes are colored with natural dyes. Be skeptical! Nowadays synthetic dyes are much more subtle in shading than they used to be, and it is increasingly difficult for the untrained eye to distinguish them from natural dyes. Price is one factor to help you judge; natural dyes are more laborious and complex to prepare and use, and cochineal and indigo are costly. So rugs dyed with natural tints are more expensive given their size and design. The fame of the weaver is another factor to consider; weavers who specialize in natural dyes are well-known and anxious to maintain their reputation. If you visit their workshop, they will gladly explain and demonstrate the dying process. For anyone eager to buy a tapete colored with traditional dyes, this is another reason to make the trip out to Teotitlán and/or Santa Ana.