Scarcity drives change

The Redwood Blog
Published:  29 April, 2014
Mike Redwood

Raw material prices are high. "Off the scale" according to some of our most experienced commentators. And with it being clear that population growth and land scarcity will restrict the future growth of raw material the underlying scarcity looks set to continue. So the only way for prices to go is upwards, perhaps even faster. 

Yet is this as simple as this logic implies? Not really. One of the most noticeable aspects of recent price hikes is that not every sector has reacted in the same way. Leather has quite quickly slipped out of some sectors of the footwear and is at all time lows in terms of market share in global footwear production. On the other hand the luxury handbag trade, and the real luxury automobile business are struggling to secure enough high quality - by their definition - to meet their growing requirements.

What we are being reminded of is that old adage that "not all cows are the same". Given that the vast majority of the world's tanners still respond to any hide or skin defect with large layers of plastic finish, rather than marketing and innovation, then we can expect maybe a third of the leather in the world to continue losing market share to materials that offer better value. With plastics and textiles getting better technically and aesthetically it feels like just a matter of time before 25% of our leather will not be able to find a home.

Gelatine and foodstuff end uses beckon, as do the cosmetic and medical industries. Certainly they would not be wasted. But what are the implications for prices of the raw? How about that never ending upward trajectory?

Take away a couple of thoughts. Leather does not live in a vacuum and if prices keep rising then customers, leather buyers as well as consumers, will make choices. Second thought, those plastics and textiles are supported by great marketing - not just selling: well planned strategic marketing that has analysed consumer needs and carefully positioned well designed products.

With similar high quality marketing - from designing the right products onwards - those struggling hides and skins could stay in the leather chain. 

Mike Redwood

mike@internationalleathermaker.com

Follow Mike Redwood on twitter: @michaelredwood

comments powered by Disqus