Trade Fair Reports

APLF: Adapting to the Post ‘Volume Order’ Era

What happens after the big orders that fueled Asian manufacturing are gone? Right now, that’s the challenge that all manufacturing sectors are facing as consumers in the world’s top consuming nations (US, EU and Japan) shift from binge buying to more thoughtful (which translates as ‘fewer’ and more ‘selective’) purchases.

The machine that drove apparel, footwear and accessories sales (as well as other consumer categories) has continued to show a steady decline in year-on-year growth of both revenue and unit sales for over five years.

U.S. footwear imports fell 5.6 percent from 2.48 billion pairs in 2015 to 2.34 billion in 2016, while the value of imports dropped 4.8 percent from US$27.1 billion in 2015 to US$25.8 billion in 2016, according to statistics from Footwear Distributors & Retailers of America (FDRA).

Interestingly, while the volume of U.S. footwear imports (in number of pairs) fell 2.8 percent from 2.41 billion pairs in 2006 to 2.34 billion pairs in 2016, the value of footwear imports rose 35 percent to US$25.8 billion in 2016, from US$19.1 billion in 2006 in part due to consumers trading off quantity in favor of better quality.

While price pressures have kept retail prices fairly stable, it’s been brutal for suppliers’ margins.

At APLF (Hong Kong:  March 29-31, 2017) suppliers told Inside Fashion that in mature markets, the volume business is just about gone. There are now only a few players dominating the big volume sector, while the rest of the suppliers either have to move up market or are being forced to exist.

“Compared with ten years ago, it feels like another world. Back then, buyers came to us, we didn’t need to worry about selling the products. Now we have to travel all over the place to meet the buyers and try to get the business, ”said Alex Ng, managing director at Soon Heng Reptile Trading SDN. BHD, a Malaysia based leather tanning and trading company, that for more than 20 years has supplied quality skins to fashion brands and retailers.  “It is hard to believe that we were complaining that margins wasn’t good back then. Now we would be opening champagne to celebrate if we even got near those margins,” Mr. Ng told Inside Fashion.


New Markets for New Business

Despite the challenging market situation, suppliers are still very optimistic about the future. Most suppliers said they expect sales to stabilize or even increase a little this year. The optimism is driven by the increasing demand from emerging markets.

“During the past three years the market went down quite a bit. I think it has hit rock bottom and will now start to grow again,” said Turgay Yetisgin, manager at Sevra Leather, a Turkish tannery that sells leather to shoe and handbag manufacturers.  Mr. Yetisgin sees great opportunities in Russia and the EU market.  “Russia used to be a huge buyer of leather products. For the past two years it went completely off the grid as a result of its economic problems. Now we see it coming back online…the orders are slowly coming back. In the EU, Germany and Italy are also doing nicely. Overall, we expect our business to grow 10 percent this year.”

“No doubt the overall demand is still growing,” said Prince Zhang, marketing manager at Zhengwei Leather Industrial Group Limited, a China-based tannery that supplies pigskin products to shoe manufacturers. “The demand has gone up a little bit in certain markets however the problem is that there is so much excess capacity. The number of tanneries might be getting smaller, but each one has expand too much in the past, causing an over supply situation in the market. We are now in the aftermath of the over-expansion that has happened during the past decade,” Mr. Zhang told Inside Fashion.


High-end is the Better End

The almost three-decade long shopping frenzy that took place in key developed markets has come to an end. Most consumers already have more clothes in their closets than they have time to wear so in order to compel them to buy something new (other than to replace something that is worn), the product needs to be very special.

As consumers the ‘buying less, buying better’ trend, the better end of the market is starting to outperform the lower end of the market.  This is not to say people are not buying cheap, mass-market products, however, the volume in this sector has hit a ceiling, and that ceiling will continue to get lower.

“We are targeting the higher-end market. People who use more synthetic materials are in the lower-end sector and that’s the sector we are trying to avoid. The market is slow, but we will be much better off focusing on selling high quality products to buyers who are willing to pay the price,” said Eric Averous, manager at Avec Peaux, a French goat leather supplier.

One advantage that leather products have over synthetic materials is that genuine leather is more durable and has a much longer life span than artificial materials like PU. Its superior quality and comfortable hand feeling is exactly what consumers are looking for today.

“It’s the perfect material for consumers who want to invest in quality. PU products have one-tenth of the life span of genuine leather. In general, PU can last one or two seasons, whereas a pair of good leather shoes can easily last for years or decades,” said Isfar Ahmed Nari, managing director at Shoeberry, an India-based tannery specializing in producing semi-finished leather for shoes and bags manufacturers. The company is a LWG gold rated supplier and a SATRA member.

“Leather is more expensive, however, one can get much more use out it than from synthetic products. That’s how people justify paying a higher price for leather goods. The value for money it offers is what appeals to knowledgeable consumers, Mr. Nari told Inside Fashion.


Chrome-free Leather in Demand

As consumers and governments become more environmentally conscious, the leather industry is under much stricter scrutiny nowadays. According to suppliers, sustainability has become a must – with buyers pushing for more sustainable products. One of the biggest trends is the request for chrome-free leather.

“There is a lot of demand for chrome-free products. Chrome-free product are around 10 percent more expensive than regular products, and it takes a little longer for us to produce them. However, buyers are willing to pay a higher price for this, because they want to look sustainable,” said MD. Hedayetullah, director at Apex Tannery Limited.

“Yes, buyers are willing to pay more. Many brands are pushing us to make our regular lines into chrome-free lines. It is a trend that growing very fast,” said Mr. Yetisgin at Sevra leather.

“Three years ago, none of our product is chrome-free product, now 10 – 15 percent are in our chrome-free line,” she told Inside Fashion, explaining that their chrome-free collection sells for US$2-2.5 /sq-ft, targeting mid to high-end brands and retails.

Apart from chrome-free, sustainable products like veg-tanned leather also got a lot of positive market feedback.

A changing market challenges everyone to increase creativity, develop new products that meet new market demands and look for new customers.  It’s not always easy, but change is a constant part of doing business and in the end, the race is always won by those who are able to adapt.

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