In the stagnant Italian economy, one sector is still soaring: luxury manufacturing. Its health is a result of a strategy that involves both promoting the “Made in Italy” label and companies “structuring themselves to rival those countries that are advantaged by lower labour costs”, according to Alessandro Varisco, chief executive of Moschino.
In 2011 Italy’s fashion industry employed more than 447,000 people, generating a turnover of €52bn. The country is the second-largest exporter of leather goods, footwear and apparel in the world, after China. According to the Fondazione Altagamma, the national luxury goods consortium, with data from Eurostat and Istituti Nazionali di Statistica, Italy exported leather goods and footwear worth $17.8bn in 2010, an 11.3 per cent share of total exports, while in clothing it shipped $19.9bn worth of garments, a 5.6 per cent slice of the export pie.
Italy manufactures more than 50 per cent of the apparel sold in EU countries, including accessories for such French brands as Chanel and Louis Vuitton, according to Armando Branchini, executive director of Fondazione Altagamma.
“In terms of high-end brands, the production outsourced is relatively small, and usually more linked to market proximity advantages than cost breaks, because the Chinese labour cost has recently grown significantly. Furthermore, logistics and transport costs, as well as the exchange rates, indent the margins of a product that is made in China but sold in EU countries,” says Mr Branchini.
At the Brioni factory in Penne “apprentices spend 38 hours a week learning how to hand-make a suit that requires 220 macro steps, or a blazer that counts between 5,000 and 7,000 handmade stitches”, says Angelo Petrucci, the 41-year-old chief master tailor at Brioni, which was acquired by French conglomerate PPR in 2011 and has 1,800 employees.
Pier Luigi Loro Piana, co-chief executive of Loro Piana, which makes all its products in-house, says: “In the late 1990s, we did consider going abroad but decided against it, because by the time you transfer your knowhow, manufacturing skills and quality control to China, the costs could rise significantly.”
Ferruccio Ferragamo, chairman of Ferragamo, also notes that in Asia, and in China especially, consumers are attracted by a “Made in Italy” tag. Ferragamo’s footwear and bags are made by about 50 small companies scattered throughout Tuscany and the southern Campania region.
“Most of these companies have worked for us for over 50 years without a contract, handling our production as if they worked in-house. We want to safeguard them,” he says.
Gucci employs 45,000 people in Italy, mainly grouped in small family businesses that have been working with the label for generations.
When it comes to manufacturing secondary, or diffusion, lines of top-end luxury brands, however, allegiance often changes.
“Versus has very high fashion content that would be impossible to handle in China, but the Mediterranean basin has good prices, quality and service,” says Gian Giacomo Ferraris, chief executive of Versace, referring to its younger line.
“Cheap & Chic [Moschino’s more affordable line] includes basic items that we outsource, primarily to increment a wider range of entry-level prices and to support a strategy of fair trade and special projects,” says Mr Varisco.
Half of Red Valentino, the company’s younger label, is fashioned between Turkey, Romania and Hungary.
“The wage of a Romanian worker is one-fifth that of an Italian worker so the final cost of a jacket, for example, which is labour intensive, is much more competitive,” says Stefano Sassi, Valentino’s chief executive.
Fashion executives say lower taxes would stimulate the sector and allow them to hire more people, and that more, better-quality schools for artisans would reduce the level of training needed on the job.
“It is very important that the Italian fashion system supports and enhances the industry and its high-tech supply chain through a re-industrialisation plan to increasingly lure high-end consumers, especially Chinese ones, who are ready to pay high price tags for a genuine brand that mirrors the culture of our product,” says Michele Tronconi, president of Sistema Moda Italia, the Italian apparel and textile federation.