Leather Goods Market in UK

Product Segmentation

Leather goods HS 4202

Business Other small

Suitcases Handbags Belts
cases leather goods
 Leather goods market in UK
Share of product segments in total sales for 2009 (in %)

Suitcases Rs. 28.2 billion

17% 7% 31%
Business cases Rs. 4.55 billion

Handbags Rs. 36.39 billion

Belts Rs. 15.46 billion

5%
40%
Other leather goods Rs. 6.37
billion

Total size of the UK leather goods market (in 2009) : Rs. 90.96 billions
 Segment wise market size (€ millions) &
annual growth rate (in %) for UK market
700 20%
19%
18%
600 588.8

16%

500
14%
456.32

12% 12%
400

10% 10% 10% Market size

Growth in %
300
8%
250.24

6%
200
5%
4%
103.04
100
73.6
2%

0 0%
Handbags Business cases Suitcases Belts Others
• Handbags is the largest product segment
• Handbags market growth rate is 10%
• Suitcases form the 2nd largest segment
• Suitcase market grew a healthy 19% annually
for the past 5 years
 Market segmentation
• Demographic segmentation
• Lifestyle segmentation
 Demographic segmentation
% of UK population
17% 16%

13% 0-14
15-24
25-49
18% 50-65
65+

36%

Proportion of consumers in UK who have purchased in the last year

Age Handbag Purse/wallet Work bag Luggage Agree accessories are
important

15-24 71% 37% 19% 5.8% 48%

25-34 56% 27% 14% 7.2% 35%
35-44 57% 21% 17% 8.7% 32%
45-54 61% 26% 16% 9.5% 36%
55-64 51% 23% 11% 7.9% 39%
65+ 40% 14% 1% 4.3% 51%
Average 55% 24% 12% 7.2%
 Lifestyle segmentation
• Achievers – are ambitious, wealthy, seek power and status, are self-
interested and want to look good.
• Traditionalists – respect differences between the sexes, they respect
their elders, their heritage, culture and religion.
• Survivalists – are thrifty, modest, hardworking and aspire to a simple life.
• Nurturers – believe in family and friendships, they help others and have
stable relationships.
• Hedonists – tend to be younger, look for excitement, having fun and
enjoying life.
• Social-rationalists – are socially responsible and tolerant, open-minded,
they are interested in learning and knowledge and believe in equality.
• Self-directed – believe in freedom, authenticity and self-reliance.
Product segments to concentrate
• Handbags
• Largest segment and growing at 10% annually
• Ladies handbags - Women likely to use different bags for different occasions
• Handbags with multiple pockets preferred
• Brand consciousness on the rise
• Trend towards ethnicity and coloured leather products
• Eco-fashion - environment friendly products
• Suitcases
• Smaller suitcases are more in demand
• Soft cases more preferred
• more variety in suitcase models, sizes and colours
• Luggage security
• Belts
• Men’s belts are functional in nature & ladies’ belts act as accessory
• Sales of belts are linked to trends in women’s clothing
 Imports into UK
• UK is the world’s 7th largest importer of leather items
• China has a substantial market share of 51% in UK for leather items
• India is a distant 2nd with8% share of the market
• The growth of exports from China has been lower than that from India
• Hong Kong is another major exporter
• UK is the biggest national market for leather accessories exports from
India.
• The exports have been at a rate of 9% annually since 2005, but
experienced a decline of 19% in 2009.
• UK accounts for roughly 19% of Indian exports of leather items
• India’s exports to UK have been growing at a rate of 9% that far outpaces
the growth rate of UK’s imports from the world.
– Favorable terms of trade between India & UK
 Imports into UK – Product segments
• Handbags
– 61% of total leather imports by UK (€ 1.7 billion)
– bags accounted for
– Much cheaper than local brands
– 16% y-o-y growth
– Imports from China accounts for 42.3% followed by India
with 3.3%
• Bulk intra EU trade
– Imports from India grew 10.6 % as against 10.4% from China
– Imports from Turkey registered a phenomenal 23.6% growth
• Customs Union duty applicable for Turkey
• Suitcases
– 19% by value of total leather imports (€ 247
million)
– China accounts for 51% share, Vietnam – 12.8% &
India- 1.8%
– The growth rate is maximum from India (23.9%)
• Signals increasing demand for Indian goods
 Trade Analysis
• RCA Analysis for HS 4202 from India
– The comparative advantage for HS 4202 is comfortably above 1
– But the trend has been negative in the past years, as the
advantage has been shrinking
• Trade Intensity Index Study
– India has the highest trade intensity when exports to UK are
considered
– For exports to EU, TII for India is 0.89 compared to Vietnam’s
1.04
– For exports to Germany, Hong Kong has a distinctive advantage
over India
 Comparative duty structures for exports from
India
Equivalent ad valorem tariff Equivalent ad Equivalent ad valorem
Product Code Product Label applied by United Kingdom valorem tariff applied tariff applied by
to India by Spain to India Germany to India

'420221 Handbags with outer surface of leather 0 0 0

'420231 Articles carried in pocket or handbag, with 0 0 0

outer surface of leather
'420292 Containers,with outer surface of sheeting 1.3 1.1 1.3
of plas or tex materials,nes
Handbags w outer surface of sheetg of
'420222 1.1 1.3 0
plastics o of textile materials
Trunks,suit-cases & similar containers with
'420211 0 0 1.1
outer surface of leather
'420239 Articles carried in pocket or handbag, nes 0 1.2 1.2

'420299 Containers, nes 0 0 0

Trunks,suit-cases&sim container w/outer
'420212 1.2 1.1 0
surface of plastics/textiles
Containers, with outer surface of leather,
'420291 0 0 1.1
nes
Handbags, of vulcanised fibre or of
'420229 0 0 0
paperboard
'420232 Articles carrid in pocket/handbag,w/outer 1.1 0.6 0
surface sheetg of plas/tex
Trunks, suit-cases and similar containers,
'420219 0.6 0 0.6
nes
 Non tariff barriers
• Convention on International Trade in Endangered Species (CITES)
• UK directive on liability compensation to person and property caused by a
product that turns out to be not as safe as expected
• Legislation governing use of azo dyes, Pentachlorophenol (PCP), chromium
and disperse dyes.
• Environmental, quality and consumer health and safety related issues
• Social requirements – IOL convention norms on minimum wage, minimum
age of workers, non-discrimination, freedom of labour organization
• Environmental conditions under BS 7750 and ISO 14001to be satisfied
• Quality management system under ISO 9000:2000 series
• Label for consumer health & safety
• occupational, health and safety aspects of the production of leather goods
like tanning chemicals
 Inferences on Importing
• Handbags can be imported from Turkey
• Suitcases can be imported from India