When the economy gets tough, the tough get better.
In the face of adversity, Italian firms are adjusting everything from supply-chain management to sourcing to marketing strategies to provide compelling stories to go along with high-quality products.
“The world expects special products from Italy; it’s an increasingly stronger issue, and, more and more, there is a request for special products,” said Brunello Cucinelli.
Armando Branchini, deputy chairman at Milan-based consultancy InterCorporate, added, “The crisis has triggered development and entrepreneurial strategies to become more efficient, with an eye on long-term and stable production structures,” he said. “It has also freed up more resources and opportunities.”
To wit, manufacturing is being meticulously planned and companies are reorganizing to develop globally, channeling their efforts on expanding business outside of Italy, as exports provide a most welcome outlet in a sluggish local economy.
The cost of labor per unit of product has shot up in countries once favored for outsourcing, mainly China, and the costs of transportation have skyrocketed, said Branchini, resulting in manufacturing returning home.
“We are only speaking of midtier Italian firms,” he underscored, also noting that, as the crisis caused hundreds of small and medium-size family companies to close down, machines and workers are available for reallocation.
Prada and Tod’s are ampng the many fashion companies investing in the expansion of their production facilities in Italy.
Aside from ethical and quality considerations, manufacturing outside Italy, especially in Asia, is limiting as it focuses on big volumes and a small number of models. That results in “rigidity in reaction to timing in a market that is so fast,” said Patrizio di Marco, president and chief executive officer of Gucci and a firm supporter of Made in Italy production.
When di Marco joined Gucci in 2009, following the Lehman Brothers crisis that sent world economies into a tailspin, he reassessed the supply chain with the goal of enhancing the brand’s leather content. Gucci inked a deal with the unions, and the company takes responsibility to certify all aspects of its pipeline, even subsuppliers.
“It is a major deal for us. We conduct more than 2,000 [independent] inspections,” said di Marco. “This is a moral obligation, which is in line with our solid presence in the territory.”
This position runs even deeper, as Gucci has been signing joint ventures with its best suppliers.
“We are fine-tuning a joint venture for leather in ready-to-wear, which will be finalized soon,” he revealed. At the same time, the company has been facilitating access to credit for all its suppliers.
“We have our own data base we provide to the banks. This is not a paternalistic approach but a structured system that works with the goal to support, invest in and share expertise,” said di Marco.
Among other examples in Italy, the Chamber of Fashion and industry association Sistema Moda Italia have signed a deal with the country’s giant UniCredit to favor the commercial growth of 50,000 companies that make up the nation’s textile and fashion system, said Fabio Tamburini, UniCredit executive in charge of Made in Italy development, whose fashion background includes posts at Pomellato and Benetton.
The projects range from the financing that aims to relaunch the manufacturing skills of the Italian fashion industry to the strengthening of key assets, such as creativity, marketing and communication through training, fairs and events.
Versace ceo Gian Giacomo Ferraris underscored the relevance of the ready-to-wear component for the brand in strategic planning.
“The signature line accounts for 60 percent of the group’s sales and 100 percent of the signature line is produced in Italy. Fifty percent of sales derive from ready-to-wear, so each season we have a different workmanship for certain fashion details.”
Since he arrived at the company in 2009, when he launched an extensive reorganization plan, Ferraris has nearly doubled the company’s size and expanded its business, also capitalizing on investments made over the past few seasons in its production platform in Novara, Italy. In addition, “there is a network of laboratories in Italy that is the country’s strength and added advantage,” he explained. Different laboratories are specialized in different crafts and details, which allow more flexibility and innovation for a brand that sells so much ready-to-wear, he noted.
However, Ferraris underscored that all contracts are strictly regulated by law so that employment terms are established and guaranteed long-term.
Francesco Pesci, ceo of Brioni, said the company, founded in central Italy’s Penne almost 55 years ago, has a tight relationship with its region and, with parent company Kering, it has started to “create excellence in the supply chain centralized in Penne, so it becomes a top-quality industrial operation in terms of efficiency, to guarantee continuity. Luxury has a great tradition of artisanal production but this hasn’t always coincided with efficient service, timely deliveries and modern design.”
Pesci said Brioni has begun to offer its master tailors new career possibilities around the world. Students from the company’s Sartoria School may become part of the brand’s retail network in Italy and abroad. While working within the company was traditionally the only outlet for these trained tailors, this is no longer the case. For instance, a 20-year-old tailor may set out for Beijing to work in Brioni’s store there, said Pesci. “We are opening the territory to the world, we are bringing it to our customers. We are not only talking about it, telling a story about our product, but we also want them to feel, see and touch it.”
Pesci contended that “the Made in Italy label is a competitive advantage, it provides product integrity and authenticity, but consumers are focusing on brands that have substance in addition to desirability.”
Mario Filippi Coccetta, president and ceo of Fabiana Filippi, which is headquartered in Italy’s Umbria region and specializes in fine cashmere, concurred.
“It’s not only about the label, but also about the perception of the product,” he said.
His goal is for the brand’s looks to be instantly recognizable in windows as being Made in Italy.
He, too, underscored the need for industrial organization as well as craftsmanship.
“Markets require more planning, as the timing of deliveries has been significantly pushed earlier and earlier — especially outside Italy. We deliver fall collections in May or June and our spring lines in November or December.”
This requires great organization and a pool of reliable suppliers, as the company projects the acquisition of raw materials, “basically in the dark,” he said. It takes between 45 and 90 days for a production cycle, meaning the company must have raw materials and supplies in-house when the orders are received.
“We don’t respond to a need, but rather we provoke it….Taking a stroll at a summer resort, a tourist will want to buy a cashmere coat because he feels like he wants to wear it the following winter, not because he is feeling cold,” remarked Filippi Coccetta.
Cucinelli’s personal and professional history is closely tied to the medieval village of Solomeo, near Italy’s Perugia, which he bought and restored as his company’s headquarters. The entrepreneur has built a theater and set up a school in Solomeo.
Inviting investors to the village for a first-hand experience — and a few meals at the local trattoria — ahead of his company’s initial public offering in 2012 helped build the brand’s aura and success in the market, he said. But Cucinelli knows product is what defines a brand.
“The difference between artisanal, [handmade] and exclusive pieces and those that are industrial and are priced lower has become increasingly sharp over the past two years, and accelerated in the past year,” he said, noting a heightened request for women’s luxury daywear. “There is a shift — we don’t need what is in excess in the U.S. and Europe.”
Umberto Angeloni, chairman and ceo of Fabbrica Sartoriale Italiana, which produces the Caruso brand, said “one must know how to tell the consumer today also about the manufacture and the region the products come from.”
He is investing in the expansion of the company, based in Soragna, near Parma, and, with a short film he is developing, he plans to tell the story of the brand and the locale, fusing it with the production facility. The plant becomes “a meeting point and destination for clients, buyers and also customers — sort of a grand tour.”
The local culinary experience also becomes part of this story. At its Milan showroom, the company set up a small trattoria with a pergola serving Soragna’s famed culatello, tortellini and parmigiano “as a reflection of the territory, the production and the landscape. This is the direction, it’s not only about products made by hand, but also about the location, it’s a deeper [version of] Made in Italy,” said Angeloni. “The excellence is not only about the suit or the label, customers also want to see the location to embrace the Italian lifestyle.”