China continues to lead the global leather bag and wallet industry. After a 32 percent increase in export value in 2004, the country shipped out US$2.3 billion worth of leather bags and wallets in 2005, up 34 percent from the previous year.
While export sales have risen since we last reviewed the industry in June 2004, it is important to note that growth rate in terms of volume has declined, from 30 percent in 2004 to 20 percent in 2005.
The sustained rise in export value despite the drop in volume growth shows that many suppliers have increased export prices, mainly to account for higher raw material and operating costs.
The growth trend also denotes that more makers in China are increasing exports of higher value leather bags and wallets, to avoid price competition in the low end.
The following are some of the key trends we see in China's leather bag and wallet industry:
• More suppliers are expected to produce midrange and high-end designs in 2006. Fierce competition in the low end and design copying are the two main factors propelling the move to produce more value added models.
• But because the industry is still largely OEM-oriented, leather bag and wallet output overall will remain mostly low end and midrange as per buyers' requirements.
• Most suppliers will be increasing export prices in 2006, mainly due to higher production costs.
• Synthetic leather bags and wallets will remain popular and continue to lead production. Aside from the lower cost of materials, makers can offer a wider range of styles and colors compared to genuine leather.
• In line with the upscale trend, buyers can expect more eye-catching design effects on the latest models as this is the key R&D focus of most makers.
This report covers China suppliers that produce handbags, shoulder bags, small travel bags, portfolios and wallets that come in genuine or synthetic leather.
The Products & Prices section details both current and continuing trends for leather bags and wallets. The features and prices of each type are discussed according to low end, midrange and high end. The different materials used and where they are sourced is detailed in this section.
The Manufacturing section provides descriptions of the different processes involved in production and QC, discussing how these differ in small, midsize and large companies.
This report profiles some of the leading leather bag and wallet makers in China, a number of which were also featured in our 2004 report.
Wanlima is one of the top makers of leather bags and wallets in China. The company's annual sales of these products have grown 54 percent to US$46 million since we last profiled the company.
The report also profiles well established companies such as Guangdong Apples, Peng's Keyuan and Ningbo Finestar.
To produce this report, Global Sources surveyed a wide range of suppliers. Rather than focus simply on high-profile makers, we profiled a representative sample of large, midsize and emerging manufacturers. This includes companies that produce for well-known OEM brands, retail brands and small importers.
Industry Overview
A saturated low-end market and intense price competition is pushing China's leather bag and wallet suppliers to move upmarket. But while the percentage of high-end models is expected to increase in coming months, low-end designs will continue to comprise the majority of exports.
A large number of companies focusing on low-end models in 2004 began offering midrange and even high-end designs in 2005. The trend is more evident among makers producing synthetic leather models. Many of these suppliers have already stopped or reduced the use of PVC in their products, and switched to the more environment-friendly PU or semi-PU.
In addition, a few companies have decreased their output of synthetic leather models and switched focus to genuine leather designs, which are more profitable. Some have stopped the production of synthetic leather products altogether.
One of the main reasons for this upscale shift is intense price competition. With a highly saturated low-end market, companies that cannot afford to lower quotes of mass-produced designs are trying to distinguish their products through value enhancement.
Another major factor is design copying, which over recent years has become even more rampant in the industry. It takes counterfeiters only a short time to reproduce new releases. This has prompted many companies to come up with more elaborate, upscale designs that are more expensive to make and not too easy to copy.
Even with the upmarket trend, most makers are not very optimistic about export sales in 2006. Suppliers are generally concerned about the combined effects of the possible appreciation of the yuan and the further reduction of export reimbursement rates.
The export reimbursement rate was reduced from 15 to 13 percent in 2003 and further to 11 percent in 2004. The yuan, on the other hand, appreciated by 2 percent in 2005. There is speculation that the government will let the currency's value continue to appreciate and reduce the export reimbursement rate further this year. While this remains to be seen, suppliers are nonetheless cautious and have become less optimistic about 2006 prospects.
Because of these factors, total export volume is expected to increase by only up to 20 percent in 2006, lower than the 30 percent average growth recorded over the past two years.
Suppliers have also been affected by other challenges such as higher production costs and labor shortage. With oil prices continuing to fluctuate, the cost of leather is also increasing. Over the past year, the cost of raw materials has risen about 6 percent. Although this increase may seem marginal, it is noteworthy in view of the fact that makers are running on wafer-thin margins. For this reason, a large number of companies will be increasing product prices between 5 and 10 percent in 2006.
Supplier Profile
Chonggee Enterprise Co. Ltd
Taiwan-invested Chonggee produces1.3 million pieces of leather bags and wallets annually, of which 90 percent are exported. Asia is the company's main market, accounting for 55 percent of exports. Overseas shipments also go to the US, France and other countries in Europe. OEM orders take up 90 percent of exports, with customers that include France's Pierre Cardin and Playboy from the US.
The company registered total sales of US$11 million in 2005. Products include leather bags, wallets,briefcases, computer bags and organizers.
Products
Midrange and high-end designs dominate Chongee's output, with wallets taking up 60 percent and bags, the rest.
Midrange wallets are from US$0.80 to US$3 per piece and bags are US$6 to US$28 each. Wallets are made from imported genuine leather off-cuts. All products are azo-free.
High-end leather bags are priced from US$28 to US$35. These designs usually have more elaborate details such as metal buckles and brand-name zippers.
Upscale models also have more features, including durable nylon lining, mobile phone and business card pockets, penholders and key hooks.
Seventy percent of raw materials are sourced locally. Metal buckles are purchased in Guangdong while zippers are from Xiamen and Jinjiang. Genuine leather is mainly from Fujian and Guangdong. High quality fabric and leather are imported from Taiwan, South Korea and Japan.
Among Chonggee's new releases is a genuine cowhide leather women's handbag with a brown metal zipper, two buckles, a metal logo, and provisions for mobile phones and business cards. Price is US$10.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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