Casual Backpacks & Schoolbags

Escalating raw material costs — coupled with a labor shortage — caused production costs of China-made school and casual backpacks to jump by almost 20% in 2004.

Due to intense competition, manufacturers have not passed all these additional costs on to buyers. But the situation is expected to change, if rising oil prices push nylon-fabric costs up.

The profiles of key manufacturers in this report will help you choose which makers are best equipped to deal with your requirements and with the challenges ahead.

Plus, the industry analysis, product comparisons and practical advice contained in this one-of-a-kind publication will let you develop the most effective sourcing strategies possible.

What you'll get

In-depth profiles of 15 casual backpack makers based on factory tours and interviews with senior managers. These provide detailed information on suppliers' manufacturing capabilities, product offerings and future plans and are not available anywhere else

Profiles of an additional 68 suppliers with key information such as machinery installed, exports by product type, main overseas markets and export sales

A Product Gallery highlighting 107 best-selling knapsacks, school/children's backpacks and fashion backpacks, with detailed product specifications and color pictures

The results of Global Sources' latest supplier survey, forecasting price, product, production and R&D trends for the next 12 months

This report covers: knapsacks, schoolchildren's backpacks, fashion backpacks and specialty backpacks

How you'll benefit

Gain a competitive advantage with advance knowledge of quality enhancements that some China suppliers are implementing to make bags more lightweight and comfortable

Understand the critical differences between low-end, midrange and high-end backpacks and school bags available from China

Get a clear understanding of how the manufacturing processes differ in small — and large-size — companies and how these differences impact costs

Discover which production hub accounts for 30% of China's casual backpack and schoolbag exports, and understand the competitive reasons for this

Executive summary

The increasing cost of production is one of the biggest challenges facing China's casual backpack and schoolbag industry today. Soaring material prices and rising workers' salaries pushed manufacturing costs up by as much as 20 percent last year.

However, because of intense competition, especially in the low-end segment, suppliers have been able to pass only 10 percent of these additional costs to buyers. This has resulted in shrinking profit margins, particularly for companies that focus on low-priced knapsacks. Makers are now looking at ways to deal with the higher production costs and increase their profitability.

The following are some of the key trends we see in China's casual backpacks and schoolbags industry:

Increasing production costs will continue to be a concern for backpack manufacturers in China. While about half of the suppliers are keen on keeping export prices stable in the next 12 months, the other half have definite plans to raise prices.

Some makers will increase the production of high-value products such as fashion and specialty backpacks, which will give them higher profit margins.

Multicolor casual backpacks and schoolbags in brighter shades are becoming popular. Many of the new products come with multiple compartments for mobile phones and CD or MP3 players. Some even have earphone ports.

Developing new designs and researching alternate fabrics that can either lower the cost of a product or increase functionality will be the R&D focus for most makers.

OEM production will continue to drive exports for the next few years.

The United States and the European Union will remain the country's major destinations for casual backpacks and schoolbags, with the Middle East and Asia growing in importance.

Suppliers in China export four types of backpacks — knapsacks, school and children's backpacks, fashion backpacks and specialty packs. These products are the scope of this report.

Almost all backpack manufacturers produce knapsacks, and some specialize in the line. More than 70 percent of suppliers featured in this report produce all four kinds of casual backpacks for export and more than 60 percent have knapsacks as their main product line.

The Products & Prices section in this report discusses the main features of each backpack type and their price ranges. It also explains the differences between low-end, midrange and high-end products in each product category.

Product development and design focus are discussed in the R&D/Design section, while the Materials & Components module details the main fabrics used by China makers.

The Manufacturing section lists the key steps in backpack production and how these differ in companies of different size.

Industry overview

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 and casual backpack suppliers. Many 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 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 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 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.

Apart from rising production costs, manufacturers have also had to deal with increasing competition, which has been fueled by the China government's decision in 2004 to lower the registered capital requirement for companies applying for an export license from US$1.21 million to US$600,000. While this is applicable for all export industries in China, school and casual backpack suppliers have been quick to respond, especially because only about half of the country's 900 school and casual backpack suppliers currently have export licenses.

The competition is especially intense in the knapsacks and school bags segments, as nearly all backpack suppliers in China produce these lines. This, coupled with the fact that design is not a crucial factor in knapsack and school backpack manufacture, gives less room for suppliers to raise prices of these products.

In contrast, design is a major element in fashion and specialty backpacks, and since their manufacture requires strong R&D capability, there are fewer suppliers producing these backpacks. This enables companies to raise prices of their fashion and specialty backpacks to compensate for overall higher production costs, without the risk of losing potential orders. Therefore, in the next 12 months, many backpack makers are expected to increase prices of fashion and specialty backpacks by about 10 percent on average.

Higher profit margins have also encouraged suppliers to boost their output of fashion and specialty backpacks, especially since demand for the products is growing overseas.

Although suppliers will be increasing production of fashion and specialty backpacks, knapsacks will still make up the majority of output in China. Despite lower profit margins, most suppliers are more adept in manufacturing basic knapsacks than fashion or specialty types.

Industry composition
China is the world's largest producer of school and casual backpacks. In 2004, it exported more than US$200 million worth to the United States alone making that country China's largest export market for school and casual backpacks. The European Union is also a major market.

The majority of the 900 suppliers engaged in the manufacture and export of school and casual backpacks are based in four provinces. Although the cost of entering the line has decreased, we have not yet seen an influx of manufacturers to other provinces. If the labor shortage continues to be a problem, it is likely that some suppliers will move facilities to the inland provinces.

Seventy percent of these companies are locally owned, some of which were previously state-run. The remaining companies are private enterprises funded by investors from Taiwan, Hong Kong, South Korea and Japan.

Samples of supplier profile

Dachuang Bags & Suitcases Garments Co. Ltd
Dachuang, a privately owned company established in 2000, has recorded steady annual growth of 15 percent, with sales of all products including casual backpacks, school bags and computer backpacks reaching US$6 million in 2004. This midsize ISO 9001:2000-certified manufacturer employs 600 workers at a 13,000sqm production facility in Quanzhou, Fujian province.

Dachuang exports all of output, with OEM and ODM business sharing equally in the production. It has introduced an in-house brand, Dafeng, to the domestic market but seldom uses it for export. Main markets are the United States (25 percent of shipments), the European Union (60 percent) and Asia (15 percent). Customers include Skechers of the US and Pro-X of Germany.

Products
Dachuang's backpack products include casual knapsacks in trendy and multifunctional designs (45 percent of output), school bags and children's bags in cartoon themes (20 percent) and specialty backpacks with laptop compartments, cooler compartments or designed for mountaineering purpose (35 percent). Latest designs come with padded bottoms, expandable panels for extra room and CD/MP3 player pocket with earphone ports. Some models are designed with skateboard or bicycle-helmet holders.

Prices range from US$2 to US$15 each. Mountaineering backpacks are the most expensive models. Casual knapsacks in sizes 19 to 22 inches are US$3 to US$7.50, while school bags go for US$2.50 to US$4 each. Special purpose backpacks usually range from US$6 to US$14 or higher.

The company has held prices steady for long-standing customers so far this year, with quotes for other buyers increasing by 8 percent at most. This is despite a 20 percent increase in the company's material costs.

Nylon and polyester fabrics are the main materials used, mostly in counts of 300, 600, 420, 1200 and 1680d with PU backing. Checked and jacquard patterns are best sellers. Lining is made of 190 and 210d nylon and polyester. Cardboard, EVA, PE and wood board are used as stuffing or base.

About 20 percent of materials are imported from Hong Kong and Taiwan, and the rest is locally sourced.

Dachuang has an 18-member R&D team that uses a CAD/CAM system, Photoshop and CorelDraw to design new products and create buyers' samples. The team spends US$300,000 annually on research and sampling, frequently attending professional trade shows such as ISPO and US Outdoor Retailer. Directed by three designers, 600 new styles are launched each year. The team is able to develop buyers' ideas and can accommodate special requirements such as logos, labels, printing and embroidery.

Dachuang's models are generally lightweight and cushioned for ease of use. The development of a new series consisting of three models takes almost one month. The company's designers provide new models to mountaineering clubs in Quanzhou and Beijing and incorporate the users' feedback into new designs.

Manufacturing
Dachuang's factory is located in two buildings with eight sewing lines that have a monthly capacity of 200,000 bags. Embroidery, silk-screening and EVA laminating are subcontracted to four workshops in Quanzhou.

Equipment includes 450 mechanical sewing machines and five computerized sewing machines with SunStar brand from South Korea. Lines have 60 to 70 workers who handle each sewing step and monitor the quality. There are 24 Juki post-bed lockstitch sewing machines, four zigzag machines, six riveting machines and four cutting machines.

Sample of product gallery

Knapsacks Best-Carry Model: Outdoor-46603 Minimum order: One TEU (4,956 pieces) Packaging type: Polybag and export carton Delivery time: 45 days Indicated price: US$10.26 Description: 17.5x13x5.5 inches; 1680d nylon; 0.16CBM per carton

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