In May, domestic prices for top-grain cowhide and sheepskin raw materials rose slightly throughout the month. Small and medium-sized leather processing plants specializing in genuine leather women's bags and business belts focused on upgrading their cutting processes to reduce material waste and offset raw material costs. Simultaneously, the industry tightened pricing for genuine leather bags and belts, both at the factory and retail levels.
Looking at raw material prices, domestic tumbled and full-grain cowhide (the main material for women's bags and regular business belts) saw a month-on-month increase of 4.2%-6.8%, while belt-specific cowhide rose by as much as 7.1%. Italian imported calfskin and Togo pebbled cowhide saw spot prices rise by approximately 5%, domestic sheepskin by 3.5%, and imported lambskin by 5.3%. The price increases stemmed from a reduction in domestic cattle slaughter, increased environmental protection costs at tanning plants, coupled with tightened exports of raw hides from South America and Australia, and higher import shipping costs. Genuine leather bags account for 45%-55% of the production cost per item, while genuine leather belts account for 42%-50%. Rising raw material prices directly squeeze the original net profit margin of small and medium-sized factories by 8%-12%.
To offset the pressure of rising prices, over a thousand small and medium-sized leather goods factories in core production areas such as Guangzhou Huadu and Wenzhou have implemented two loss reduction solutions: Firstly, they have purchased AI-powered intelligent vibrating knife cutting equipment. Relying on the system's intelligent layout, the utilization rate of cowhide raw materials has increased from 70%-73% to 81%-85%, and the utilization rate of sheepskin from 65% to 76%-79%. Factories without equipment purchase budgets have optimized pattern layout, utilizing gaps in the cut pieces to produce small accessories, increasing the secondary utilization rate of genuine leather scraps from 5% to 16%. The investment in a single intelligent cutting machine ranges from 38,000 to 65,000 yuan. Thanks to cost savings from material savings, belt and genuine leather bag manufacturers can typically recoup their investment in 3-5 months.
Product pricing is being adjusted in stages: prices for full-leather products are increasing, while prices for semi-leather products are being slightly adjusted to stabilize orders. The ex-factory price of business-grade full-leather cowhide belts is increasing by 3%-4.5%, and imported high-end cowhide belts by 5%-6%. The ex-factory price of domestically produced full-leather women's bags is increasing by 3%-4%, and sheepskin luxury women's bags by 4.8%-6%. Offline retail prices for full-leather belts are increasing by 4%-7%, and full-leather commuter bags by 5%-8%, with brands mostly adopting a phased pricing model. Prices for export orders to the Middle East and Southeast Asia are uniformly increasing by 3.2%-5%, and large-scale overseas orders are being postponed to observe the market outlook.
The industry is showing signs of polarization: leading large leather goods companies have locked in prices and stocked up in advance, seizing outflowing orders by maintaining low-priced inventory without adjusting prices; small and medium-sized factories are controlling losses through a combination of process optimization and slight price increases; workshops producing handmade vegetable-tanned genuine leather small bags and slim belts are facing the heaviest cost pressures, with retail prices rising by 7%-9%, and some workshops reducing their full-leather product SKUs. Industry leather traders predict that domestic cowhide prices are expected to stabilize in June, while imported high-end cowhide prices will remain high. Factories will continue to optimize product designs, shifting towards lightweight and material-saving styles.
Industry Notes at the End: This article's data is based on on-site surveys of the leather goods industry in Guangzhou and Wenzhou, focusing on the genuine leather handbag and business belt sub-sectors.
