Women's Handbags and Purses

SIC 3171

Companies in this industry

Industry report:

This classification includes establishments primarily engaged in manufacturing women's handbags and purses of leather or other materials, except precious metals. Establishments primarily engaged in manufacturing precious metal handbags and purses are classified in SIC 3911: Jewelry, Precious Metal.

Industry Snapshot

The women's handbag and purse industry produces all women's handbags and purses of leather and other materials, except precious metals. Approximately 66 percent of the domestic handbags shipped in the United States in the mid-2000s were made of leather. Handbag shipments declined steadily from the late 1990s into the early twenty-first century due mainly to competition from imports. Shipments were $287 million in 1997, $246 million in 2000, and $210 million in 2002. However, revenues rose during the mid-2000s and by 2005 shipments were $440 million. Total industry employment for all leather manufacturing, including luggage, women's handbags and purses, personal leather goods, and other leather goods, declined from 16,208 workers in 2002 to 15,673 workers in 2005. The total value of women's handbags and purses that were exported by the United States in 2006 equaled only $226 million, while the value of imports totaled nearly $2.4 billion. The handbag and purse industry was worth more than $3 billion at decade's end.

Although revenues were on the rise, profits were on the decline as shoppers flooded to outlets versus retailers. In fact, industry leader, Coach Inc.'s profits fell 32.8 percent in the fourth-quarter of 2009. That trend was expected to continue until the economy rebounded and consumers have more confidence in spending. "Given the ongoing uncertainty regarding economic conditions and consumer spending, we are continuing to plan conservatively, as we focus on managing our business for the long term." Coach's chairman and CEO, Lew Frankfort told Just-Style magazine in July 2009.

Background and Development

Historically, women have made most of their handbag purchases at boutique specialty stores and department stores. Consumers in the purse and handbag industry most often made handbag purchases on the basis of style and designer recognition. During the 1980s, consumers took great interest in their appearance and became slightly extravagant. Sales of high-priced and mid-range brands, such as Coach and Dooney & Bourke, proliferated. Purchases of handbags and other apparel accessories nearly doubled in the 1980s, with an average annual growth rate of 7.3 percent. Then the recession caused weak growth in disposable income, along with high unemployment, and consumers became much more cost-conscious.

Along with these economic changes came changes in consumer psychology. Designer names, high-priced accessories, and frequent shopping sprees were not as popular as they once were. Consumers became more value conscious and began purchasing less-expensive products at lower-end retail establishments and mass merchandisers. Leather buying habits started shifting to form, function, and comfort, away from designer names.

Nonetheless, Coach and Dooney & Bourke products, which ranged from just above $100 to more than $400, remained consistently strong performers in spite of the recession. However, other high-priced segments of the handbag business did not fare as well. High-priced lines like Liz Claiborne stumbled badly at the retail counters. Many experts attributed the success of Coach and Dooney & Bourke to the lines' classic/casual styling versus Liz Claiborne's dressier appearance.

Shoppers changed their handbag buying habits during the early 1990s. Consumer purchasing shifted toward the most basic, functional accessories. Rather than purchasing a handbag to match each outfit, which was the pattern during the first three-quarters of the twentieth century, shoppers began purchasing a single handbag versatile enough to match many outfits. This pattern reflected a more value-oriented consumer, as well as an aging population seeking comfort and casualness. Many mass merchandisers added more recognizable national brand names to their in-store inventory. In the past, most brand names were distributed only through department stores.

In 1992, specialty and department store retailers were optimistic about the growth of the handbag category. At the time, retailers predicted increases in handbag sales between 8 and 20 percent. Through 1996, however, sales continued to drop an average of 4 percent a year. The key for sales success was to have the right assortment of handbags, from the moderate-priced to the higher-priced brands. By 1992, the moderate-priced handbag business doubled its 1990 sales level. Brand names such as Perry Ellis America, Capezio, and Esprit led the pack in producing fashionable handbags at moderate prices and giving retailers new inventory options.

Shoppers began spending again in the late 1990s as the economy recovered and financial security returned. In turn, the department store shares of sales began creeping up, and shoppers who had purchased basic handbags and less expensive goods in strip malls and outlet stores began returning to the department stores. Discount stores continued to hold the largest share of business, but they loosened their grip on retailing somewhat as the economy recovered and consumers were willing to shop at the specialty and department stores. For mass retail stores such as Kmart and Wal-Mart, brand name recognition was still important, and brands such as Chic and Gitano were particularly successful. Functional, organizer-style bags such as shoulder bags and totes continued to be strong performers. Designer signatures on handbags were also important features because they elevated the accessories as status items.

The biggest challenge in the mid-2000s continued to be increased competition from overseas markets. Despite the drop in production, outlet stores continued to be an important avenue for selling domestic-made purses and handbags. Experts attributed the growing appeal of outlet stores to the value-conscious shopper. Outlet stores' primary draw is price. The merchandise is often top quality and comes from current inventory, although many manufacturers use their own outlet stores to move surplus and low-quality merchandise. Manufacturers prefer this form of distribution to off-price retailers because they avoid tarnishing their brand names, which can occur when too much merchandise is sold through discounters. In addition, outlet stores tend to be located away from the selling areas of conventional department and specialty stores, decreasing the chance that the manufacturer's regular retail customers would lose sales to the outlet stores.

Storage of inventory is one of the highest expenses a retailer faces. To reduce this expense, retailers increasingly demanded that manufacturers carry inventory instead and make deliveries when retailers' stock was low. For this type of relationship to work, especially when dealing with the large quantities of merchandise required by stores such as Wal-Mart or Kmart, retailers and vendors found it necessary to form partnerships. Quick response is the most important aspect of this relationship, and orders must be replenished automatically via computer links called electronic data interchange (EDI).

One problem that the purse and handbag industry faced in the mid-2000s was the infiltration of counterfeit products. Producers manufactured handbags and purses that looked like those made by name-brand and designer companies, and sold them under those names for a lot less than the original. Some of the names that have been attached to fake goods the most in the purse industry include Gucci and Prada, and U.S. brands such as Coach. Counterfeits from across the border contribute to the problem. As of mid-2005, 14 percent of the counterfeit goods seized by U.S. Customs Border and Protection were in the handbag/wallet category. The year before, that figure was only 3 percent. The U.S. Chamber of Commerce estimated that counterfeit goods cost U.S. companies between $200 and $250 billion annually.

Current Conditions

According to industry statistics, there were an estimated 517 establishments engaged in manufacturing women's handbags and purses of leather, or other materials, except precious metals. Valued at $3.35 billion, industry-wide employment was 4,157, the majority of whom (2,982) were employed manufacturing women's handbags. Most establishments were located in California, New York, Texas, and Florida, with New York responsible for $3.21 billion of the industry's total shipments.

Women's handbags and purses accounted for 47.4 percent of market share or $57.5 million in shipments. Women's handbags held 43.5 percent in market share, as well as $3.27 billion in shipped handbags. Manufacturers of women's purses, with 9.1 percent of the market generated $21.4 million in sales.

Challenging market conditions persisted as the global economic downturn continued to lower profit margins and bottom lines. In one survey conducted by Stores Magazine, 92 percent of consumers queried reported they could do without luxury handbags, foregoing the high ticket items in the struggling economy. Outlet shopping remained an ongoing dilemma as well, as consumers sought discounted prices. Also adding to the industry's woes, counterfeit goods seized by the U.S. Customs Border and Protection in the handbag, wallet, and backpack category grew to 29.6 percent during 2008.

To offset declining sales, industry leader Coach closed four of its North American retail stores, trimmed its workforce, and dropped some of its so-called 'unusual' items. With emphasis on the savvy shopper during the tough economic downturn, the company priced more items at between $200 and $300 to attract more buyers.

Industry Leaders

During the late twentieth century, the 10 largest publicly traded apparel and accessory companies experienced an increase in market share of nearly 5 percent. Part of this growth can be attributed to increased demand for these companies' products. The remaining growth was a result of acquisitions and consolidations. As large department store retailers merged, they consolidated their buying functions. Larger manufacturers benefited from this because it became more efficient for a lower number of buyers to use one vendor rather than several. In response, growth-oriented handbag and purse manufacturers increased their acquisition activity in search of new brands and broader product offerings.

In addition, the enormous growth of large mass merchandisers was driving the industry to consolidate. From 1981 through 1991, Sears, the nation's largest retailer, saw its sales increase rapidly, as did Wal-Mart and Kmart. Historically, many brand-name manufacturers sold their goods only to department stores, but they soon began selling nearly identical merchandise to mass merchandisers and catalogues in order to participate in the phenomenal growth experienced by those sales channels. Not surprisingly, this affected the manufacturers' relationships with the department stores, who seek exclusivity in their products. To remedy the situation, many manufacturers began to produce several different categories of brand names, each of which was distributed through a different type of retailer. Each retailer had brand exclusivity within its own category.

One of the industry leaders in the mid-2000s was Coach, Inc., in New York City, which had sales of $3.2 billion in 2009, reflecting a 23 percent increase over 2005. In the mid-2000s Coach sold its goods in 19 countries other than the United States and had 4,200 employees. One of Coach's reasons for success, according to Business Week Online, was that it worked to make handbags a category that required multiple purchases for multiple uses, including weekend bags, evening bags, casual bags, travel bags, and so on. Other industry leaders were Pyramid Handbags Inc., Jaclyn Inc., AD Sutton and Sons, Koret Inc., JLN Inc., Ima Fashions Inc., Chaus Accessories, LANA MARKS Boutique, Nine West Accessories Inc., Ponte Vecchio International, and Michael Stevens Limited.

America and the World

Because labor costs represent such a high proportion of total production costs, handbags and other personal leather goods industries encountered significant import competition in the mid-2000s. This competition came primarily from developing nations where wage rates are far below those in the United States. For example, China rapidly became the dominant supplier of these products to the United States. Some of the world's leading brands of these goods were produced in developing countries, a trend that is expected to continue because of the drastic differences in labor costs. Furthermore, because international demand for handbags and other leather goods rose in the early 1990s, many more developing countries with appropriate supplies of leather and suitable production skills had the opportunity to enter the trade. Most of these developing nations enter the trade by producing travel goods or small leather articles, which tend to stay in fashion longer than women's handbags. This way, the producers have opportunities to establish steady export businesses before turning to the production of the seasonal women's handbags.

Research and Technology

The production of handbags and purses is more labor intensive than many other industries. Therefore, like most companies, large producers of women's handbags are under extreme pressure to limit their number of employees by boosting productivity and efficiency. The industry considers new technology to be the key to increasing growth and profitability and keeping more production jobs in the United States. In the late twentieth century, the increased use of computers integrated design, manufacturing, management, and marketing functions. Computerized production allowed manufacturers to emphasize such non-price factors as quality and quick delivery to compete with imports.

Many handbag producers turned to computer-aided design (CAD) and computer-aided manufacturing (CAM) systems and software. As a result, these manufacturers can produce tooling from CAD data and link it to auto-stitchers, milling, and turning machines. Computers enable manufacturers to combine several operations or machines under fewer operators, reducing handling time and number of employees, and improving quality. The industry also developed computerized robots to handle and transfer operations within and between production modules.

To meet the demands of retailers' quick response requirements, more manufacturers utilize electronic data interchange (EDI), which allows retailers and manufacturers to instantly communicate. The goal of quick response is to maintain lean inventories and avoid overstocking while ensuring that retailers have the merchandise customers want to buy. In the EDI system, interlinked computer systems are placed at every point of the manufacturing and sales process. Through use of an electronic scanner and bar code that has been tagged to the merchandise, retailers record at the point of sale which merchandise has been sold. All sales data on the individual products, including details of color and size, are transmitted immediately to the manufacturer. Through this method, the manufacturer keeps track of every store's retail sales trends. This firsthand view of consumer purchasing trends allows manufacturers to produce handbags based directly on customer demand. The information contained in the bar code sets automatic reordering into motion. The industry also refers to this type of inventory replenishment as "flow" or "just-in-time." The manufacturer can quickly restock a retailer's shelves, using no more than a computer for communication. In addition to automatic replenishment, EDI enhances distribution and shipping. For example, once a shipment is ready to go, the manufacturer creates a labeling document and EDI sends an invoice automatically. In the future, EDI is expected to include electronic funds transfer as well.

Much of this new technology was developed and used in Europe before coming to the United States. Most of it can be readily transferred to Asian producers, depending on the availability of capital. However, for these manufacturers the labor-saving benefits of the new technology is not expected to be as great as for producers with higher costs of production. Industry experts expected that the net effect of such technology would reduce the costs of U.S. production relative to Asian production, although the latter would continue to maintain a competitive advantage for most categories of handbags.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

News and information about Women's Handbags and Purses

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