Leather goods have traditionally remained expensive over the years. This is regardless of where such goods are sold. Like other goods, there are a number of factors that determine the cost of goods made of leather. Such include leather production cost, distribution costs and retailer profit margins. Thrown in such other costs as packaging and transport costs and the final cost of leather goods literally shoot high.
Although the above can be said of other types of goods, it is somehow different with leather goods. Unlike with other types of goods, the cost of leather goods is mainly determined by the cost of cowhide, the raw material used in producing leather. Why cowhide in particular? This is a question that anybody reading this is bound to ask. Although hide used for making leather can be that of any other animal or mammal, cowhide stands out as the most reliable and of the highest quality of all hides. This is why most leather goods are made of leather obtained from cows.
From available statistics, cowhides account for almost 60% of leather production costs. Chemicals used in preparing the skin and tanning the same account for roughly 12% of total production cost. Labor and other overheads take up the rest of production cost percentage. It is also worth noting that trade in hides and skin is heavily regulated across the globe with tariff and non-tariff barriers seriously affecting hides and skin prices in the market.
It must also be noted that the general price of hides and skins is highly volatile. This is so because of constant fluctuations in supply of the same. A big percentage of hides and skins worldwide come from the world’s largest producers of beef, which happen to be India, US, China, EU and Brazil. The number of hides and skins these countries produce is directly linked to how much meat orders they receive. While reduction in meat orders lead to reduced hides in the market and therefore high leather prices, increase in orders lead to reduced leather prices.
Although the above is the general scenario, a new phenomenon hitherto overlooked that continues to keep cost of leather high is the huge disparity between beef and dairy cows reared not only in the major beef producing countries but across the world as a whole. There is a huge disparity in the total number of dairy cows compared to bulls with preference given to dairy cows. It must be noted that although skin obtained from dairy cows also makes good quality leather, that obtained from bulls is of the highest quality.
The major fluctuation in the cost of leather and leather prices in recent times was the period between 2008 and 2009, the global financial crisis period. The sharp demand in leather experienced seriously affected production of leather goods. Demand for hides also fell resulting in law prices of the same, which in effect led to reduced production of hides. Demand for leather goods was also seriously affected.
Although things are starting to look better in the leather market, the sub-industry is yet to fully come out of the woods. This is because cowhide sales revenues recorded worldwide have not reached the same figures recorded before the global financial crisis. However, it is encouraging to note that demand for leather goods continues to rise.