True investment creates margin

The Redwood Blog
Published:  22 September, 2015
Mike Redwood

2016 looks like it will be an interesting year. Demand for leather has fallen around the world and yet raw material supply looks like it will shrink even more. So the equilibrium will mean that a steady volume of production should be available for tanners with hopefully less price volatility than in the past few months.

Part of the fall in demand is the impact of difficult geopolitical events impacting on consumer buying. Events in Russia, Ukraine and the Middle East along with the evolution of the Chinese economy down to a lower level of GDP after decades of astonishing growth cannot but impact on sales of leather products.

Yet a smaller volume in a more competitive marketplace - there is no doubt the rise of synthetics is part of the problem - means the battle for margins will be harder than ever. For that we need more than just quality and consistency, we need innovation that outstrips the textile and plastic competitors. Innovation that offers features and benefits that brands know consumers will appreciate. It is no longer just a matter of price. It is a matter of value and of how consumers understand, consume and ultimately value the offer from the tannery.

As an industry we look to Italy and certainly to the dominant decades of Santa Croce as indicative of how value can be added to mediocre raw material. Yet that innovation was largely about look and feel; the elegance that is so important with leather. Today we need to add another aspect to this, which seems to have been forgotten: “performance”.

One company that we as an industry should observe and admire is the Swiss textile company Schoeller. Originating back in 1867, not unlike quite a number of tanneries, it develops functional fabrics for a multitude of end uses each with specific targeted performance characteristics, including touch and feel, specifically engineered. Through carefully organised joint ventures Schoeller can work at a wide range of price points and in many market sectors. In 2011, it was brave enough to purchase an external chemical laboratory in order to expand its research and development.

A look at Schoeller’s recent offer for cycling with its “Eschler” brand is typical. The collection offers elastic, antistatic warp knit structures in various gauges with different compression values. The material is abrasion resistant, can be suited to transfer printing, with UV and heat protection plus antimicrobial treatment to keep it fresh; and in a variety of sheen and soft touch effects. In leather we have the most wonderful substrate to start with and many perfectly targeted performance elements could be introduced if we chose to take that path. Yet all the potential high performance elements appear to have been ignored in the rush to get leather into a very badly defined “luxury” market.

Tanners need to remember that while leather works well in exclusive upmarket products it is its everyday values and performance that mean even more to consumers. Leather makes articles that really perform, and last so much longer - looking good - than any synthetic or textile but only so long as we keep our development of it progressing. Leather is special, but we must work harder to keep it so. Otherwise we lose our margins and sink into the world of commodities.

  Listen to the podcast here: True_Innovation_Creates_Margin.mp3

Mike Redwood

mike@internationalleathermaker.com

Follow Mike Redwood on twitter: @michaelredwood

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