Note: Industry statistics cover activities in Hong Kong only.

Hong Kong companies export a wide range of travel goods and handbags, which accounted for 44.8% and 55.2% respectively. Major products include handbags with plastics/textiles sheeting (37%), cases for binoculars, cameras, musical instruments and spectacles (27%), leather handbags (18%) and wallets and purse (14%).

Many Hong Kong manufactures have relocated their production base to the Chinese mainland to capitalise on the cheaper wages and rents. Domestic exports now account for only a very small share of total exports of travel goods and handbags. With a good cluster of supporting industries, the competitiveness of Hong Kong exports in terms of productivity, quality, reliability and delivery has been enhanced. Many handbags and luggage fittings (like clips and buckles) are supplied by nearby factories specialising in metal and plastic parts. Some other Hong Kong and mainland manufacturers are vertically integrated, which further enhances quality control and flexibility in production and creates synergy. 

Facing keen competition from suppliers in the Chinese mainland and developing countries, some local manufacturers have shifted to high-end/niche markets. Others have developed ODM/OBM business and domestic sales in the Chinese mainland. 

The worldwide luggage market encompasses a wide range of products with differences in product quality and prices. At one end of the market are high-quality, full-featured products that have prestigious brand names, higher prices and selective distribution. Beneath this ‘‘luxury'' market is a broad middle market in which products are differentiated by features, brand name and price. Within this market, sales are largest at mid and low product price levels. Product differentiation decreases and breadth of distribution increases at lower price levels. At the lower end of the luggage market, unbranded or private label products with few differentiating features are sold in significant volumes and at low margins, competing primarily on the basis of price. 

Performance of Hong Kong's Exports of Travel Goods and Handbags^

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessary reflect the export business managed by Hong Kong companies.
*  Insignificant
 

In the first quarter of 2009, the value of Hong Kong's total exports of travel goods and handbags was about HK$9.8 billion. Total exports dropped slightly by 3% during the same period. The EU was the largest export market for travel goods and handbags in Jan - Mar 2009 (accounting for 27.5% of total), followed by the US (27.2%), South Korea (11.0%) and Japan (11.0%). In terms of product categories, exports of handbags increased by 4% in the first quarter of 2009, while those of travel goods dropped by 10%. 

Sales Channels 

Many Hong Kong's travel goods and handbags are exported under OEM arrangements with overseas manufacturers. Buyers usually provide product specifications and designs. Yet, Hong Kong manufacturers are increasingly involved in product design and development, engineering, modelling, tooling and quality control. 

Apart from producing for the OEM customers, some Hong Kong manufacturers also have their own  R&D undertakings to develop new models and produce their own branded products. However, due to the difficulties of reaching individual sellers, most of the local manufacturers prefer selling to overseas importers and distributors, who in turn market to the wholesalers and retailers.

Apart from online shopping, retail channels of distribution of the travel goods and handbags industry primarily include department and specialty stores, national and mass merchant retailers, warehouse clubs, and company-owned retail stores. 

In order to establish connections and explore market opportunities, travel goods and handbags manufacturers and traders can join trade fair missions organised by the Hong Kong Trade Development Council (HKTDC) to participate in various international trade fairs such as Middle East International Fashion, Accessories and Leather Fair and JFW International Fashion Fair (IFF) in Tokyo. HKTDC also organises from time to time study or match-making missions for Hong Kong manufacturers, in particular those OEM manufacturers, to visit specific markets for exploring business potential and establishing new business relations. 

CEPA Provisions 

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) came into effect on 1 January 2004, and all items can enjoy duty-free access to the mainland beginning from 1 January 2006 by meeting the CEPA rules of origin.  According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. For more information about country of origin criteria, please refer to the Trade and Industry Department's CEPA web page: http://www.tid.gov.hk/english/cepa/index.html 

Industry Trends 

Sales of travel goods are largely influenced by the number of travels people undertake. The Chinese mainland is expected to be a high-growth market and Chinese tourists are the fastest-growing group of international tourists in the world. Due to closer economic ties with the rest of the world and rising affluence, more Chinese people are planning to travel overseas for either business or leisure purposes. Yet, most of them are looking for value-for-money luggage and other travel goods, which offer a huge market potential for Hong Kong manufacturers. 

Trade Measures Affecting Exports of Travel Goods and Handbags  

The Washington Convention (Convention on International Trade in Endangered Species of Wild Fauna and Flora, also known as CITES) restricts or prohibits the import of bags containing leather from species listed in the Appendices to the Convention. CITES is an international agreement which countries adhere voluntarily and 175 countries joined the agreement. Many Hong Kong's exports markets such as the US, the EU, Japan, South Korea, Canada and the Chinese mainland are the members of CITES.   

In the CITES agreement, Appendix I is applied to the species in immediate danger of extinction. Commercial traffic in these species or products made from these species are prohibited. Appendix II is related to the species requiring strict international regulation to prevent danger of extinction. Appendix III is applied to the species which any party identifies as being subject to regulation and as needing the co-operation of other parties in the control of trade. For all products falling into either Appendix II or III, importers must present an export certificate and a certificate of origin issued by the Management Authority of exporting country. 

Hong Kong's handbags and briefcases manufacturers also face challenges from the regulatory environment overseas. For health reasons, the EU has adopted a Directive aimed at prohibiting the trading of leather articles which contain azo-dyes, from which aromatic amines may be released. The Chinese government is also increasingly concerned about the pollution caused to the environment in the process of leather tanning. It appears likely that more stringent regulations on environmental protection could be put in place in future. 

Product Trends 

Today's travellers are not only seeking increased comfort and convenience while travelling, but are searching for products that also offer fashion and functionality, according to the Travel Goods Association in the US. R&D is focused on ease of use, interior organisation, portability, durability, shock absorption and mobility. For example, many travel goods manufacturers are moving away from black in their luggage and accessories offerings toward bright, funky colours. 

In addition, many new fabrics and materials have been introduced, including micro fleece grid fabric, crinkle nylon/polyester blends, suede skin etc. Nowadays, many consumers preferred cheaper and more casual softside bags and luggage (whose production is labour intensive), in particular for hybrid luggage, instead of hardside luggage (capital intensive). 

As electronic gadgets are becoming more popular, demand for cases for electronic gadgets such as iPod/MP3, Blackberry, mobile phones and portable game player (for example PSP and NDS) is increasing significantly. Besides the consumer market, many companies will order them as corporate gifts for their clients, creating a new market niche for the industry. 

With more women in the workplace, many of the new travel goods are being specifically designed for women, including portfolios, computer bags and wheeled totes for female professionals. In addition, there are new luggage lines that feature special sections for toiletries, cosmetics, shoes and other items that enable female travellers to travel more conveniently. 

Meanwhile, ergonomically-designed items continue to be in high-demand, with new items including luggage with handle systems that can be alternated for left-handed and right-handed people; products with weight-bearing, push-button retractable handles and four swivel wheels that allow bags to pivot 360 degrees; luggage with a shock-absorbing wheel system that adjusts to surface changes for smooth rolling; and a collection that features a removable wheel and handle system for numerous travel options etc. 

For handbags, styles and colours are closely aligned with the trend in the fashion industry. Some of the current trends in handbag design include: handbags made out of lamb/deer skin, denim and wool that almost imitate clothing, use of unconventional materials like canvas, emphasis on delicacy in details, leather bowling bags, handbags made of faux fur and vintage design with beading and embellishment. As handbags become accessories to fashion, their life cycles have shortened, and new items are introduced all year round.