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Leatherbiz Market Intelligence executive summary: • • • •
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Any discussion on the use of leather always ends with an argument about cost With leather, it is not only about the price of the material itself, but also the costs involved in its further processing China will be the key to further development along the supply chain, simply because the size of the consumer market there The same may also apply to India in the foreseeable future, but, from the point of view of consumption of leather, this will probably take some time If consumers elsewhere are not made aware of the functional properties and benefits of leather, it will be extremely difficult to reverse the trend in the use of the material It remains essential for leather as a product that manufacturers clearly accept the material in terms of fashion, function and marketing Without this, the demand for leather will continue to shrink and leather as a material will increasingly be pushed back into the corner of speciality and exclusive materials.
MARKET INTELLIGENCE
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here are always phases in which there is little to report along the supply chain in the leather industry, or simply nothing particularly new or exciting happens. We are currently in such a phase, which is not particularly surprising, as the new year is only just starting in the western world and people in Asia are preparing for the Lunar New Year celebrations (January 29) and the long break there. In times when business is going well and producers are planning for the future with vigour and ambition, these interruptions are not always noticed. For some time now, we have been in a phase in which the leather industry is still looking for a clear strategy for its material. It cannot expect much support from finished product manufacturers and major brands. Leather as a material has lost much of its prestige. For industrial production it offers few advantages, one could even say it presents more disadvantages. We have covered the topic of what leather has to offer as a material in the various finished products often enough here. In our opinion there are no new arguments. This leaves the question of whether there can be any development at all that could push the material back into the centre of demand. These topics have already been discussed sufficiently and all aspects from all sides have been scrutinised. An increase in interest can hardly be achieved from the bottom up in the supply chain. The impetus, if any, must come
from the top down. Even though it may be boring, it is worth recalling the recent success for athletic footwear brands of retro models made from suede. This wasn’t about the material at all; it was simply a coincidence. They wanted to produce the original shoe and its features in every respect and offer them to the market. It is indisputably a very positive side effect that if you talk to users and buyers of these shoes today, they often confirm that they are very comfortable to wear, definitely more so than their plastic predecessors. However, the problem remains that very few people attribute this to the material. If you talk to the most young buyers and users, most of them don’t even realise what material their new shoes are made of. There are also very few people who can show and explain it to them, which means that even with this great success, leather as a material can only benefit very little, if at all. If you want to look for other possible ambassadors for the material, you can mention the Birkenstock company, for example. Of course there are others, but as an arm of a prominent luxury group (it is majority-owned by L Catterton) it is acceptable to quote their strategy. The model range has been expanded considerably and, fortunately, the company has not focused on plastic. Rather, we are seeing more and more shoes made of leather and it is astonishing that the buyers of these shoes are well aware of the material their shoes are made of and, in their opinion, should continue to be made of. From the old days and the old standard
models that Birkenstock produced, which were so often bought by people who have to stand and walk a lot and for very long periods, people simply expect the footwear to be longlasting and comfortable. If you ask potential buyers of Birkenstock shoes today, it is rarely only the fashion aspect, but often the certainty that you will get quality and longwearing properties. Of course, this is not to deny that the growth of the brand also has a lot to do with the fact that it is currently perceived by the public as particularly fashionable. If you look at today’s high-quality trekking and outdoor footwear, you will notice that although leather is still the dominant material, it is obviously being cut wherever possible for supposed cost reasons. Of course, the customer hardly notices this at first, but in the higher-price categories, the customer still expects to receive the same quality and the same hard-wearing characteristics that used to be so familiar. It is not certain whether this will continue to be the case with the new models. If not, the question naturally arises as to whether the customer will attribute this to the reduced use of high-quality leather. The answer to this will only emerge in the future. Any discussion that centres on the use of leather always ends with the argument of cost and price. Although often lamented, it is unfortunately still the case that costs and savings are still the dominant factors in the decision-making process of manufacturing companies. With leather, it is not only about the price of the material itself, but also the costs involved in its further processing. To process leather, you still need qualified personnel, both in the assessment and in the tannery. Added to this, of course, is the fact that processing is becoming increasingly expensive owing to a lack of labour and rising costs in Europe. We hear almost daily of further production operations being relocated to Asia. There is little news of re-shoring. This also makes the production of high-quality leather with the corresponding technical properties in Europe increasingly difficult because the clients of the leather manufacturers are moving away. The bottom line is that as long as consumers are not made aware of the material and its properties and functional properties are not a central argument in marketing, it will be extremely difficult to reverse the trend in the use of materials. The situation is not much better in the other leather processing sectors either. This has also been sufficiently discussed. It remains the case that the manufacturers of furniture