5 May 2016
Travel Goods and Handbags Industry in Hong Kong
Hong Kong’s travel goods and handbags industry benefits from the production skills developed in other light manufacturing industries, such as clothing, leather goods, plastics and metal. Hong Kong companies produce good quality, middle- to low-priced luggage and handbags on an OEM basis. Although most of the production is carried out on the Chinese mainland, Hong Kong maintains an active role in administration, quality control, market development, product design and production planning.
Chinese mainland tourists are the fastest growing group of international travellers in the world. Due to closer economic ties with the rest of the world and rising affluence, ever more Chinese people are planning to travel overseas for either business or leisure purposes, offering a huge market potential for luggage bags and other travel goods as well. This offers huge opportunities for Hong Kong companies.
Hong Kong companies export a wide range of travel goods and handbags. Major products include leather handbags (37%), cases for binoculars, cameras, musical instruments and spectacles (23%) and wallets, purses, cigarette cases etc (18%).
Many Hong Kong manufacturers have relocated their production bases to the Chinese mainland. Domestic exports now account for only a very small share of total exports of travel goods and handbags. With a good cluster of supporting industries, the competitiveness of Hong Kong exports in terms of productivity, quality, reliability and delivery has been enhanced. Many handbags and luggage fittings (like clips and buckles) are supplied by nearby factories specialising in metal and plastic parts. Some Hong Kong and mainland manufacturers are vertically integrated, which further enhances quality control and flexibility in production and creates synergy.
Facing keen competition from suppliers on the Chinese mainland and in developing countries, some local manufacturers have shifted to high-end/niche markets. Others have developed their ODM/OBM business and domestic sales on the Chinese mainland.
The worldwide luggage market encompasses a wide range of products with marked differences in product quality and prices. At the top end are high-quality, full-featured products that have prestigious brand-names, higher prices and selective distribution. Beneath this ‘‘luxury’’ market is a broad middle market in which products are differentiated by features, brand name and price. Within this market, product sales are largest at the mid- and low-price levels. Product differentiation decreases while the breadth of distribution increases at lower price levels. At the lower end, unbranded or private label products with few differentiating features are sold in significant volumes and at low margins, competing primarily on price.
Performance of Hong Kong’s Exports of Travel Goods and Handbags^
In 2015, the value of Hong Kong’s total exports of travel goods and handbags dropped by 10% and totalled HK$37 billion. The US was the largest export market for travel goods and handbags (accounting for 25% of the total), followed by the EU (20%) and China (13%).
Much of Hong Kong’s travel goods and handbags are exported under OEM terms with overseas manufacturers. Buyers usually provide product specifications and designs. Yet, Hong Kong manufacturers are increasingly involved in product design and development, engineering, modelling, tooling and quality control.
Apart from OEM customers, some Hong Kong manufacturers also have in-house R&D undertakings to develop new models and to produce their own branded products. However, due to the difficulties of reaching individual sellers, most local manufacturers prefer to sell to overseas importers and distributors, who in turn market to wholesalers and retailers.
Apart from online shopping, retail channels for the travel goods and handbags industry primarily include department and specialty stores, national and mass merchant retailers, warehouse clubs, and company-owned retail stores.
In order to establish connections and explore market opportunities, travel goods and handbags manufacturers and traders can join trade fair missions organised by the Hong Kong Trade Development Council (HKTDC) and participate in various international trade fairs such as Style Hong Kong, Tokyo International Gift Show and JFW International Fashion Fair (IFF) in Tokyo. HKTDC also organises, from time to time, study or match-making missions for Hong Kong manufacturers to explore business potential and establishing new business relations.
Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products that have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rules of origins being agreed and met. For more information about country of origin, please refer to the Trade and Industry Department’s CEPA web page.
Sales of travel goods are largely influenced by the number of trips people undertake. With rising income and easy access to travel visas/permits, Chinese tourists have become the fastest-growing group of international travellers in the world. According to China National Tourism Administration, China had 120 million outbound visitors in 2015, an increase of 12% from 2014. Due to closer economic ties with the rest of the world and rising affluence, more Chinese people are planning to travel overseas for either business or leisure purposes. Yet, most of them are looking for value-for-money luggage and other travel goods, which represents a huge market potential for Hong Kong manufacturers. Meanwhile, many airlines have stringent allowance restrictions for both checked luggage and hand baggage, and many travellers are looking into more lightweight travel goods.
Trade Measures Affecting Exports of Travel Goods and Handbags
The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an international agreement aimed at ensuring that international trade in species of wild animals and plants does not threaten their survival. The trade is diverse, ranging from live animals and plants to a vast array of wildlife products derived from them, including food products, wooden musical instruments and exotic leather goods. Currently, 182 countries have signed the agreement. Many of Hong Kong’s exports markets, such as the US, the EU, Japan, South Korea, Canada and the Chinese mainland, are the signatories to CITES.
Under CITES, Appendix I applies to species in immediate danger of extinction. Commercial traffic in those species or products made from those species is prohibited. Appendix II is related to those species requiring strict international regulation to prevent the danger of extinction. Appendix III is applied to those species that any party identifies as being subject to regulation and as needing the co-operation of other parties in the control of their trade. For all products falling into either Appendix II or III, importers must present an export certificate and a certificate of origin issued by the Management Authority of the exporting country.
Hong Kong’s handbags and briefcases manufacturers also face challenges from the regulatory environment overseas. For health reasons, the EU has adopted a Directive aimed at prohibiting the trading of leather articles that contain azo-dyes, from which aromatic amines may be released. The Chinese government is also increasingly concerned about environment pollution caused by the leather tanning process. It appears likely that in the future more stringent regulations on environmental protection could be put into place.
According to Travel Goods Association in the US, with the development of advanced technology, “smart suitcase” with built-in technology may become standard features in the new generation of luggage. These features include biometric scanner which allow owners to unlock the case with the touch of a fingerprint, GPS tracking for the location of the suitcase, anti-theft system which alerts owner when the suitcase is out of range.
Demand for cases for electronic gadgets such as smart phones and tablets is increasing significantly. Cases with different designs and in different materials have become a life-style item among the younger generation. Besides the consumer market, many companies will give them as corporate gifts, creating a new market niche for the industry.
With people travelling more frequently than before, demand is up for high-quality travel gear with built-in, innovative, anti-theft technology for backpacks, leisure bags, photography bags and other travel accessories, such as straps, cables and locks. For example, many credit cards contain RFID chips that carry their personal information. RFID-blocking accessories (such as waist-wallets and hip packs) have been designed to stop personal information from being accessed by identity thieves.
Meanwhile, ergonomically designed items continue to be in high demand. New items include luggage with handle systems that can be alternated for left-handed and right-handed people; products with weight-bearing, push-button retractable handles and four swivel wheels that allow bags to pivot 360 degrees; luggage with a shock-absorbing wheel system that adjusts to surface changes for smooth rolling; and a collection that features a removable wheel and handle system for numerous travel options.
For handbags, styles and colours are closely aligned with trends in the fashion industry. Current trends in handbag design include: handbags made out of lamb/deer skin; denim and wool that almost imitate clothing; the use of unconventional materials like canvas; an emphasis on delicacy in details; leather bowling bags; handbags made of faux fur; and vintage designs with beading and embellishments. As handbags become treated more as fashion accessories, their life cycles have shortened, and new items are introduced all year round.