Feria Artesanal Lillo is the waterfront craft market south of the port, good for Chiloé woollens, carved wood, baskets, and small souvenirs that actually look local. It is more useful than polished: stalls vary, prices are fair, and the best finds are simple things made for island weather.
Pair it with a walk along the waterfront and the nearby food market if you want a quick look at Castro's everyday trade.