production costs and intense competition in the
low-end and OEM markets have considerably cut profit
margins of computer bag suppliers in China. Many of
them are therefore moving to more upscale
manufacture where profit margins are higher, and
some are also experimenting with alternate materials
that can provide the same quality and durability at
a lower cost.
Computer bag suppliers in China face rising
production costs that are widespread in nearly all
manufacturing industries in China. Raw material
costs have increased 10 percent in 2003 and as much
as 25 percent in the first 10 months of 2004.
Companies have also had to increase migrant workers'
wages up to 15 percent to keep workers from moving
to the inland provinces, where economies are
improving. In all, total operational costs have
increased an average 20 percent in the past year,
but suppliers have been able to pass only 10 percent
of these additional costs to buyers.
The majority of computer bag exports from China
are for OEM orders. While this has helped suppliers
enhance their design and manufacturing capabilities,
and boost quality, it also translates to minimal
In addition, profit margins have also been
affected by intense competition in the low-end and
OEM segments, which most of China computer bag
suppliers specialize in.
Makers are therefore taking steps to increase
their profitability, mainly by moving away from the
low-end segment. Some are developing inhouse brands
and aggressively marketing their products under
these labels. Although only a few China suppliers
have taken this step, those that are exporting
computer bags under in-house brand names have been
able to raise prices. Branded computer bags from
China usually start at about US$3 each for basic
nylon or polyester shell models. The same type of
models can be sold for as low as US$1 each on OEM
In this report, Jiahua Luggage, Magicase, Top and
Best, and Yuyao Freelife are actively promoting
their in-house brands in international markets. OEM
and ODM work comprise only 10 to 30 percent of
export business at these companies.
In addition to building brands, makers are moving
to the manufacture of products that can give them
higher returns. One is the use of synthetic and
genuine leather for the shell, instead of the
standard nylon or polyester. Another is to increase
the production of casual and fashion computer bags
and backpack models. These emerging product lines
have strong growth potential but are made by
relatively fewer companies.
Suppliers are also researching the use of
alternative fabrics that cost less but perform as
well as nylon or polyester. The cost of synthetic
and chemical fibers has surged by as much as 40
percent over the past year, and inflation is
expected to continue well into 2005.
Bamboo fabric is one such alternative. The fabric
is durable, has a soft hand and smooth finish, and
can be dyed in various patterns and colors. It also
costs less than nylon or polyester.
China is home to more than 500 computer bag
exporters, 95 percent of which are privately owned
enterprises and the rest state-owned. Of the private
enterprises, 74 percent are wholly China-owned and
the remainder are foreign-owned or invested. Some
companies, such as Anhua Zhouli, have acquired
licenses to use patented versions of bamboo fabrics.
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