World Leather answers Financial Times question
16/12/2015
Ms Romei wrote a long article on December 11 bemoaning the importance we still give to manufacturing when it’s services such as marketing, retailing and advertising that are “the majority of output in advanced economies and are usually the most dynamic part of the economy”.
Her specific reference to leather came when she said: “The distinction between manufacturing and services should be clear, since the first involves a tangible product and the latter doesn’t. But how important is this tangible product in the value of manufacturing production? How much does the actual value of the leather and labour involved producing a Prada handbag weigh in its overall value compared with branding, design, advertising and retailing?”
In response, World Leather said that, at an educated guess, you could say Prada will use 0.6 square-metres of calf leather to make each of its Inside bags, for example. Then there’s the nappa lining, plus the leather in the handles, plus a bit of wastage. Sourcing high-quality material such as French calfskin tanned in Tuscany, with the highest levels of care for workers and the environment, would suggest a price of €100 or just under.
On its website, Prada charges €2300 for each bag, making the material cost 4.3% of the price the consumer will pay, at most.
Clearly, this appears to support Valentina Romei’s argument that material costs weigh little compared to branding, advertising and retailing in the product’s overall cost, but, World Leather pointed out, it is some consolation that, while Prada could execute most of those smoke-in-the-wind services anywhere, the French calfskin can only come from France and the Tuscan tanner can only produce the finished leather in Tuscany.
And if 4.3% of the cost is too little a share for anyone to make much of a fuss about leather, the magazine’s response to the FT said it would be nice if big brands’ buying departments could at least stop trying to beat tanners down to 4.2% or lower in every conversation.
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