Prices will continue to grow due to rising input costs being passed on to customers; however, growing environmental concern over single-use bags will limit price growth in the coming years.
Los Angeles, CA (PRWEB) October 17, 2014
Paper bags have a buyer power score of 3.6 out of 5, indicating a moderate level of buyer negotiating power. Buyers have numerous negotiating advantages, including a wide availability of substitutes, such as single-use plastic bags. “Paper bags are also commoditized goods, with little difference in quality across suppliers,” says IBISWorld procurement analyst Jesse Chiang. “Buyers can easily switch between operators without risking significant changes in quality.” Low switching costs further boost such leverage. Still, the rising cost of paper is leading to progressively higher prices for paper bags, which is limiting buyer power.
The primary substitutes for paper bags are single-use plastic bags and multiuse sustainable bags. Plastic bags are generally cheaper to purchase and serve a similar purpose to paper bags. However, in recent years, increasing regulation has restricted the use of plastic bags. Unfortunately for suppliers, growing environmental concern has led to the rising popularity of sustainable multiuse bags, undercutting recovering demand for paper bags. “The high level of substitutes gives greater power to buyers, who can ultimately switch to alternative products if the paper bag market does not offer the price or functionality desired,” adds Chiang. Buyers also gain negotiating power from the fact that paper bags are commoditized goods, indicating that switching costs are low. There are no special handling procedures or knowledge necessary to use paper bags, nor are there significant differences in quality across most products. Thus, buyers can leverage prices from other operators in negotiations or simply switch to the operator with lower prices.
However, the rising price of paper bags has undercut buyer power. The price of paper, a key input, has grown in the three years to 2014, boosting the price of paper bags. Coupled with returning demand from the economic recovery, prices have increased as suppliers have sought to boost profit margins lost during the recession. Worse yet, prices are expected to continue to climb in the three years to 2017. To limit the negative effect of rising prices, buyers are advised to engage in contracts to lock in current prices. For more information, visit IBISWorld’s Paper Bags procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of paper bags. Paper bags come in a variety of sizes and can come with or without protective coating. Paper bags are used in several different applications, including grocers’ bags and sacks, as well as shopping bags. Suppliers include paper bag manufacturers, wholesalers and retailers.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.