The leather goods market is expected to grow at a CAGR of 4% during the forecast period. Increased spend on personal goods, drivers.2, and drivers.3 are some of the significant factors fueling leather goods market growth.
Increased spend on personal goods
The key factors that drive the growth of the global leather goods market are customer fashion-consciousness and rising spending on luxury goods. Customer awareness about the latest and unique designs of leather goods is rising due to increased spending power, evolving lifestyles, and the augmenting penetration of smartphones. Vendors are constantly introducing new designs and patterns, owing to intense competition and increasing customer demand because of rapid changes in the fashion industry. Customers prefer leather goods due to their durability and premium look.
The increasing number of marketing campaigns as well as product and brand promotion activities also drive the growth of the global leather goods market. Vendors make significant investments to market and promote their products. They focus on customer engagement, the reinforcement of brand relevance, increasing brand awareness, and guiding customers to stores or shopping websites. Vendors use various methods to improve brand equity and promote their products. Direct marketing, which includes e-mail, print advertising, catalogs, and brochures; in-store events; celebrity endorsements; and mobile marketing are some strategies used by the vendors. They also use social media platforms, such as Facebook, Twitter, Pinterest for brand promotion. For instance, in January 2019, KERING, one of the key vendors, promoted its Gucci brand and products in the Spring Summer 2019 collection through Singin’ in the Rain, a Hollywood movie that featured a tote bag from the brand.
Trade wars are also a challenge for the growth of the market. For instance, the Government of the US has imposed approximately a 25% tariff on the import of leather goods from China. China, in turn, has imposed a tariff between 5% and 25% on the export of hides, skins, and leather goods to the US. Such tariffs will increase the cost of production for vendors, which will affect their profit margins. However, they also create growth opportunities for leather exports from other Asian countries, especially countries such as India, Vietnam, and Indonesia.
The wide availability of counterfeit leather goods affects the sales and pricing strategies of vendors, as it dilutes their market share and hampers their reputation. Furthermore, social organizations such as People for the Ethical Treatment of Animals (PETA) have been taking various initiatives against leather manufacturers and the use of leather by spreading awareness among people about the ill-treatment of animals and discouraging them from using leather goods. In September 2019, members of PETA protested during the London Fashion Week against the hazardous waste generated by the leather industry.
The presence of stringent governmental regulations for the procurement of raw materials also affects the growth of the global leather goods market. Tanning companies must follow various regulations related to the production of leather, the disposal of waste, the use of chemicals, environmental protection, and recycling. These regulations and restrictions imposed on the leather industry increase the costs borne by vendors and hinder their production processes.
In addition, the extent of the coronavirus outbreak, popularly named as COVID-19, was so huge that it was declared a pandemic by The World Health Organization. This pandemic is indeed a tragedy for humankind; nevertheless, it has a far-reaching impact on industries as well. As this pandemic continues to expand, both manufacturing, as well as the services side of various industries, are expected to realize the hit in terms of economic slowdown/gain. Some of the major industries that have been impacted by the COVID-19 outbreak are household durables; textiles, apparel, and luxury goods; and hotels, restaurants, and leisure facilities. The supply chain around the world has been disrupted due to the COVID-19 pandemic, owing to which the global leather goods market is facing immediate decline.
Despite these challenges, the demand for leather goods is expected to increase, owing to emerging market trends. For instance, the demand for leather tanned from exotic animals, apart from traditional leather, to make leather goods has grown during the past five years. The increased demand for leather goods at airport retail stores is another trend that will drive the growth of the market during the forecast period. Globally, the number of passengers traveling by air is expected to increase every year. Travelers generally prefer purchasing luxury and premium products from the duty-free stores in airports, as such stores offer products at lower prices than local retail stores.
