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Leather, Accessories Makers Target Emerging Markets

Exhibitors at the Fashion Access fair look to Southeast Asia and shift strategies to focus on either the high or low end of the market.

HONG KONG — With U.S. and European markets still sluggish, leather and accessories producers at the Fashion Access fair are setting their sights on emerging markets such as Southeast Asia or becoming more specialized in order to expand or stay afloat.

For some suppliers, such as Mumbai-based Maliks Export, that has meant coming up with unique designs and shifting away from mass market to the luxury and low ends of the market.

“The markets have changed a lot from what they used to be. Now you go a little up market or a little bit low market. Middle market is kind of slow,” said Ashish Vijh, manager at Maliks Export.

“Markets are all down. You’re not going to buy another new product to put in your store but if it’s something different and something unique, you’ll buy it,” he continued. 

Akshun Lall Ramnath, director at Ramnath Exports Pvt. Ltd., also played up design. The New Delhi-based accessories maker, which exports mostly to Europe, recently hired a second designer in order to target the U.S. market.

“The designs are different,” Ramnath said, pointing to a fringe bag that he said wouldn’t sell in the U.S.

One upside to being an Indian exporter, he said, has been the appreciating Chinese yuan and the weak Indian rupee. Products that are made in India now are more competitive versus China. “Customers are very happy [with the price],” he said.

Several suppliers said they were eyeing consumers in Southeast Asia, where a growing middle class has been driving strong growth in domestic consumption. Franco Yeung, founder and designer of Hong Kong-based shoe designer Volare, said he’s been expanding primarily into Indonesia, Thailand, Cambodia and Malaysia.

“They still got money. Europe, the orders are very small,” he said, adding that the orders he got at two trade shows in Europe were so small that they weren’t enough to cover his travel costs to the fair.

Volare currently sells shoes and bags in Hong Kong, Southeast Asia, Japan, Korea and Taiwan. Yeung said he’d like to sell his shoes in Mainland China as well but doesn’t yet have the volume needed. Meanwhile, e-commerce isn’t an attractive outlet to reach the middle- and upper-middle-class customers because sites such as Taobao sell mostly discounted or cheap, commoditylike goods. Besides, the middle class does most of its shopping outside of China, he said, citing a Bain study that found that 60 percent of Chinese luxury spending was done outside of Mainland China last year.

Lawrence Long, sales manager for bag and accessories maker Guangzhou Weini Fur Co., also said that Southeast Asia has been a big area of growth, with sales to Thailand and Indonesia, in particular, on the rise.

Sales to China are “OK,” he said, adding that the company has been more focused on exports to markets such as Brazil and Russia.

By contrast, U.S. buyers can sometimes be difficult, Long said. The company has had to turn away some U.S. customers because they couldn’t come to agreement on price.

“Prices [that U.S. buyers are willing to pay] get lower and lower and our costs are increasing,” he explained.

Overall, suppliers said U.S. demand has been fairly steady and showing signs of improving. Even with the rising prominence of Asian brands and Asian consumers, the U.S. market still looms large. 

“We’d like to get more into the U.S. this year,” said Vishal Pohoomull, director at Valor Fashions, a Dong Guan-based shoe and bag manufacturer.  “It’s difficult as a trading company to sell to China. Brands in China that would maybe buy from us are maybe more inclined to go directly to factories,” he explained.

“Everyone is looking for better prices at high quality,” Pohoomull said, but with labor costs on the rise, doing business in China is getting tougher. Valor, like others, has been getting squeezed, he said, adding that a margin squeeze of even 2 percent can be quite significant. The company works with partner factories in Dong Guan, Wenzhou and elsewhere in China but hasn’t worked much with factories in Southeast Asia because it would be more difficult to maintain the quality control from China.

Mireia Alemany, a buyer for Alemany Costa SL in Barcelona, said she was surprised by the prices and had expected them to be much lower.

“It’s not much cheaper than in Spain,” she said.

It seems unlikely prices will decline or even level off. Labor prices continue to rise in China while wages in Southeast Asia have been increasing as well. Meanwhile, leather industry executives warned that leather prices would continue to increase, driven by strong demand for hides, particularly from the luxury sector, as well as shortages caused by recent droughts in the U.S.

Foot traffic at the Fashion Access and accompanying Materials, Manufacturing & Technology trade shows was steady. APLF, which runs the giant trade shows, said there were 524 exhibitors from 22 countries at Fashion Access and 1,193 exhibitors from 53 countries at MM&T. According to fair organizers, there were 18,467 buyers at MM&T and 11,829 buyers at Fashion Access. That is a decrease from a year ago, when there were 19,089 buyers at MM&T and 12,901 buyers at Fashion Access.

Suppliers displayed lots of leather and synthetics in neutral, rich dark colors and a few bright neon hues. Metal trims and metallic accents were a common sight. Structured handbags, often in rich tones, were popular as well.