Leather garment exports from China have been decreasing over the past couple of years and are expected to continue declining through 2007. In spite of this, the country continues to lead global exports of the product.
According to statistics from the United Nations, China manufacturers captured a 64 percent share of world leather garment exports in 2005. Decreasing overseas shipments, however, are resulting in consolidation of the industry and a shift to other markets and product lines.
In the first eight months of 2006, leather garment exports from the country dropped 24 percent to US$1 billion and 21 percent to 28 million pieces, compared with shipments made in the previous corresponding period. Exports are anticipated to continue falling by at least 10 percent in 2007.
More than 80 percent of the country's leather garment exports are shipped to OEM and ODM buyers, with the balance sold under suppliers' own brands.
Russia is the largest importer of China-made leather garments, purchasing more than 12 million pieces worth US$984 million in 2005. This constitutes about 43 percent of China's total exports in the line.
The US is the second-largest importer with shipments totaling 21 million pieces at a value of US$627 million.
The following are some of the key trends we see in China's leather garments industry:
• The industry is expected to consolidate further within the next two years. Low demand, rising costs and the changing business environment have made it difficult for smaller companies to compete against midsize and large suppliers.
• Many suppliers will implement minimal price increases over the next two years. But companies are expected to raise prices significantly once the industry stabilizes.
• An increasing number of companies that used to focus on Russia are now expanding to the US and the EU. Stricter regulations in Russia have resulted in declining exports, especially from manufacturers in north China.
• More suppliers are also expanding their product lines. Some companies are offering products made from off-cuts such as leather bags, while others are diversifying into other apparel lines, including denim and knitwear.
This report covers jackets, coats, skirts and pants made of genuine and synthetic leather.
The Products & Prices section in this report details the features and price ranges of leather garments made in China. Trends in material types and finishes are discussed in the R&D/ Design section.
The Manufacturing section explains the processes involved in the production of leather garments and how these differ in small and large companies.
The Industry Overview analyzes the country's supplier base, highlighting the key characteristics of small, midsize and large makers.
The majority of leather garment suppliers in China are privately owned and a few are foreign-invested. Reflecting the industry structure, 80 percent of suppliers featured in this report are China-owned and 19 percent are foreign-invested.
Production is concentrated in the provinces of Hebei, Zhejiang, Shandong and Guangdong, which together account for 74 percent of all leather garments exported from China.
The majority of companies in this report are from these main manufacturing centers, with 38 percent from Zhejiang, 16 percent based in Guangdong, 13 percent from Hebei and 12 percent from Shandong.
Industry Overview
The leather garments industry in China is in the process of consolidation. Many small companies are expected to stop operations in the next few years as various industry challenges are making it more difficult for them to compete against midsize and large suppliers. In addition, exports are expected to continue their downward slide.
To survive, a number of leather garment manufacturers in China are expanding their markets and diversifying product lines.
China is said to be the largest volume manufacturer of leather garments in the world. It is difficult to obtain the exact number of leather garment makers in the country, but industry estimates reach up to 10,000. The majority of these suppliers are small companies, some of which have only 40 to 50 sewing machines at their workshops.
The fickle nature of the fashion industry has hit makers hard. Demand for leather garments, particularly coats and jackets, peaked a few years back, encouraging many suppliers to join the line. But with fur now leading fashion forecasts this season, a number of these companies are experiencing dwindling sales. Low demand for leather coats and jackets is intensifying competition in an industry with a large supplier base.
In 2005, the industry suffered an 8 percent drop in export volume sales. Exports have continued to fall, going down 21 percent in the first eight months of 2005 compared with the previous corresponding period.
Apart from the large supplier base, Russia's strengthened crackdown on illegal tax and customs practices is another reason for China's dwindling exports. Most leather garment enterprises, particularly those in north China, export to Russia. Many of them ship to the country via Russian companies that charge foreign businessmen certain fees so that the latter do not need to pay high import taxes. This practice has been causing Russia large tax revenue losses.
The majority of companies that used to focus on Russia are now expanding to the US and the EU, which they believe are more lucrative markets for their businesses. Exports to these markets, however, are also slowing, with consumers preferring fur to leather.
Further, in 2006, the China government reduced the export rebate for finished leather from 13 percent to 8 percent and textiles from 13 percent to 11 percent. Companies engaged in low-value finished leather and textile products now have to speed up their technical innovation to boost their competitiveness.
Because the industry is experiencing such a fluctuating business environment, China's leather garment exports are estimated to continue decreasing though 2007, by at least 10 percent.
Suppliers are diversifying into other product lines in response. More than 50 percent of companies interviewed for this report now have a secondary line to leather garments. A number of these suppliers used to stop production during the off-season. Some of them even close their factories and go on vacation for up to a month.
Some large makers have ventured into the manufacture of other product lines, including leather bags. For instance, Nanhai Yashan, one of the profiled suppliers, began producing leather bags in early 2006. It is now planning to focus on increasing capacity and output of the product in 2007.
Supplier Profile
Beijing Longfuqi Industrial & Trading Co. Ltd
Established in 1992, Beijing Longfuqi is a midsize maker of genuine and synthetic leather coats and jackets, as well as fur garments. Its peak production months are from July to December. During the off-season, the company produces knitted apparel.
OBM orders account for 90 percent of exports. The company markets leather garments under its Elansi, Pretty Pile and Meilirong brands.
Beijing Longfuqi posted 30 percent growth in export sales in 2005. About US$3.5 million worth of leather garments were shipped, mainly to Russia. The company also exports to the EU.
Products
Leather garments account for close to 90 percent of total sales. The company focuses production on midrange leather coats and jackets
The type, quality and amount of leather and fur trimming used in designs determine product prices. Higher-priced garments come in genuine leather and fur and are priced between US$150 and US$200 each. Midrange models with faux fur trimming are from US$80 to US$100. PU leather coats and jackets with faux fur trimming and polyester lining are between US$40 and US$50.
The company sources goat and sheepskin from the provinces of Hebei and Shandong, and genuine and synthetic fur from Shandong and Shanghai. Accessories such as buttons and zippers are purchased in Fujian, Guangdong and Beijing.
Even with increasing material and labor costs, the company will keep its product prices stable in the next six months.
The company has two designers who use Adobe PhotoShop and CorelDraw in product development. It takes them two or three days to prepare a new model. During the peak season, 20 to 30 designs are made in a month, but only 10 go into mass production. About US$50,000 is spent on R&D annually.
In 2007, Beijing Longfuqi plans to concentrate on fur garments instead of leather apparel because of growing demand for the product.
Manufacturing
The company operates an 8,000sqm factory that houses its executive offices, warehouses for leather, fur and accessories, and workshops for R&D, sample production, cutting, sewing, finishing and packaging.
Before production, six sample makers produce mock-ups using nine sewing machines, three ironing machines and 11 cutting tables.
The cutting section has 44 workers and separate areas for leather, and genuine and synthetic fur. Aside from ironing and cutting tables, it is equipped with a Lastar brand fusing machine from South Korea and automatic cutters.
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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