"Moreover, despite the drop in capacity, the export value has been rising," it added.

"In the first 10 months of this year, the export value rose 11 per cent from the same period last year. While small-sized leather-bag export value dropped 0.6 per cent, travelling leather bags and other leather bags showed a huge increase in export value of 45.5 per cent and 38.1 per cent, respectively.

"This shows that these operators suffer largely in the domestic market."

From interviews with operators, the centre found that plants were more flexible in adjusting production lines to accommodate specific new orders. Moreover, the operators could switch to many other materials aside from authentic leather.

However, it said the industry was facing fierce competition in domestic and foreign markets and that operators were required to move to the middle to upper markets by using quality raw materials. While these operators can compete comfortably, small operators that focus on the low-end market face fierce competition from cheap Chinese products.

"They need to upgrade their products, because Vietnam and India are entering into the market, plus the baht is strong against US dollar. Indeed, Thailand has an advantage in terms of skilled labour," the centre said.

To stay afloat, the centre recommended operators upgrade their designs and reduce operating costs. As 90 per cent are small or medium-sized, they should increase competitiveness by focusing on niche markets. They should also be concerned with labour costs and labour shortages. - The Nation.