bag

Higher raw material costs, intense competition and the labor shortage that affects nearly all industrial provinces in China's coastal regions have considerably cut profit margins of school bag and casual backpack suppliers. Many bag makers in this sector are increasing their focus on midrange and high-end products such as fashion and specialty backpacks, which yield higher profits. School bag and casual backpack suppliers face rising production costs that are widespread in nearly all manufacturing industries in China. Increasing material costs have hit backpack makers particularly hard since, depending on type and density, fabrics account for 30 to 60 percent of a product's cost. Raw material costs have increased significantly in the past year. The price of locally sourced 600d nylon, the most commonly used fabric for bags and backpacks in China, surged 22 percent in 2004. Although nylon fabric costs are expected to stabilize in 2005, an unexpected rise in oil prices could result in an upward movement. Backpack and bags makers have also had to increase migrant workers' wages up to 15 percent to keep them from moving back to the inland provinces, where economies are improving. In all, total operational costs have gone up an average 20 percent in the past year, but suppliers have been able to pass only 10 percent of these additional costs to buyers.