Leather Goods Market in UK

Product Segmentation

Leather goods HS 4202

Suitcases Business cases

Handbags

Belts Other small leather goods

Leather goods market in UK

31%

5%40%

17%7%

Share of product segments in total sales for 2009 (in %)

Suitcases Rs. 28.2 billion

Business cases Rs. 4.55 billion

Handbags Rs. 36.39 billion

Belts Rs. 15.46 billion

Other leather goods Rs. 6.37 bil-lion

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

Handbags Business cases Suitcases Belts Others0

100

200

300

400

500

600

700

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

588.8

73.6

456.32

250.24

103.04

10%

12%

19%

5%

10% Market sizeGrowth in %

• 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

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%

15.70%

12.50%

36.40%

18.40%

17.00%

% of UK population

0-1415-2425-4950-6565+

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

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

'420221 Handbags with outer surface of leather 0 0 0

'420231 Articles carried in pocket or handbag, with outer surface of leather

0 0 0

'420292 Containers,with outer surface of sheeting of plas or tex materials,nes

1.3 1.1 1.3

'420222 Handbags w outer surface of sheetg of plastics o of textile materials

1.1 1.3 0

'420211Trunks,suit-cases & similar containers with

outer surface of leather0 0 1.1

'420239 Articles carried in pocket or handbag, nes 0 1.2 1.2

'420299 Containers, nes 0 0 0

'420212 Trunks,suit-cases&sim container w/outer surface of plastics/textiles

1.2 1.1 0

'420291 Containers, with outer surface of leather, nes

0 0 1.1

'420229 Handbags, of vulcanised fibre or of paperboard

0 0 0

'420232 Articles carrid in pocket/handbag,w/outer surface sheetg of plas/tex

1.1 0.6 0

'420219Trunks, suit-cases and similar containers,

nes0.6 0 0.6

Equivalent ad valorem tariff applied by United Kingdom

to India

Equivalent ad valorem tariff applied

by Spain to India

Equivalent ad valorem tariff applied by

Germany to IndiaProduct Code Product Label

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