Profit Distribution Across Different Stages of the Industry Chain

                                          Profit Distribution Across Different Stages of the Industry Chain

The global luggage and bags industry is facing a growing imbalance in profit distribution across its supply chain, as downstream brands and sales channels capture the majority of value while upstream raw material suppliers and midstream manufacturers operate on razor-thin margins. A widely cited industry example notes that a suitcase retailing for over USD 2,700 may generate only a few dollars in processing fees for the factory that produces it-underscoring the long-standing structural challenges within the travel luggage sector.

As one of the world's largest producers and exporters of traveling bags, China has developed a comprehensive industrial chain covering raw materials, components, finished luggage, and global brand distribution. According to industry data, from January to November 2024, China's exports of luggage bags and related containers reached 3.31 million tons, marking a year-on-year increase of 9.2%. Despite this growth, profit concentration remains heavily skewed toward brand owners and overseas channels.

High-end and luxury brands continue to enjoy substantial margins. For example, internationally recognized brands often achieve profit markups of 10 to 20 times production costs. A premium travel suitcase retailing for USD 3,000 may cost less than USD 150 in materials and manufacturing, with the remaining value derived from brand premiums, marketing, and retail operations. Even mid-range travel luggage bags follow a similar pattern, where factory prices remain low while retail prices increase exponentially through branding and distribution.

In contrast, midstream manufacturers of travel trolley bags, luggage bags, and other travel luggage products often struggle with margins of around 5% or less. Rising costs for leather, hardware, wheels, and zippers have further compressed profitability, pushing some manufacturers' net margins below 3%. Upstream suppliers of raw materials face similar pressure, with limited bargaining power and industry-wide net profit margins typically below 8%.

To counter these challenges, regional industrial clusters are playing an increasingly important role. Manufacturing hubs such as Baigou in Hebei Province and Huaihua in Hunan Province are strengthening supply chain integration by localizing key components for travel suitcases and luggage and bags, improving production efficiency while reducing logistics costs by up to 30%. Policy support, streamlined customs processes, and dedicated international logistics routes have also enhanced export competitiveness for traveling bags manufacturers.

Industry analysts attribute the imbalance to strong brand premiums and control over global sales channels. While downstream brands command pricing power, manufacturers face intense competition and product homogenization, limiting their ability to negotiate higher prices. However, this dynamic is beginning to shift as manufacturers pursue branding, product differentiation, and flexible production models.

An increasing number of Chinese luggage manufacturers are transitioning from OEM production to building proprietary brands, launching IP collaborations, and targeting mid-to-high-end markets. By focusing on design innovation, quality upgrades, and small-batch customization of travel luggage bags and travel trolley bags, some companies have successfully increased gross margins to 20–30% and expanded their presence in Japan, South Korea, Europe, and North America.

Experts believe that while profit concentration is a natural outcome of global industrial division of labor, excessive imbalance threatens long-term sustainability. Through technological innovation, brand development, and improved supply chain collaboration, the luggage and bags industry is expected to move toward a more balanced profit structure-supporting China's transformation from a major manufacturing base into a global branding powerhouse for travel luggage and travel suitcases.