FLORENCE — Given stagnating domestic demand, Italian luxury companies are developing aggressive strategies to expand abroad, as highlighted by a number of the fashion industry’s top players at the Milano Fashion Global Summit held here Tuesday.

This story first appeared in the December 10, 2012 issue of WWD. Subscribe Today.

According to data provided by Mario Boselli, president of Italy’s Chamber of Fashion, sales of fashion and textiles dropped 6.3 percent in the first half in Italy. On the other hand, in the January-August period, exports were up 3.3 percent. In particular, Italian companies’ shipments to the U.S. posted an 18 percent increase, and the country’s exports to Japan and Brazil jumped 20 and 21 percent, respectively, even if the South American country accounts for only 2 percent of Italy’s exports. Speakers at the summit focused on the U.S., Brazil and Japan.

“The U.S. represents our first market also from a cultural point of view and in 2012 it performed even better than what we expected,” said Salvatore Ferragamo’s chief executive officer Michele Norsa, who was more skeptical about future opportunities in Japan. “Japan is a mature market with high profit margins, but currently there are no internal investments which could stimulate domestic consumption.”

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He noticed that in Florence, Japanese tourists are those spending more in Ferragamo’s stores, while Americans, who tend to spend a lot on hotels and restaurants, don’t make so many purchases because the products’ price difference in Italy and in the U.S. is not relevant.

According to Norsa, on the other hand, Brazil has strong potential, even if it’s currently not so relevant due to high import taxes, which spike prices, making them unappealing to Brazilian customers, who tend to buy European luxury products in the U.S. or in Europe.

Norsa also highlighted the importance of attracting more tourists in Italy in order to boost the national luxury sector’s business. “The growth in Europe is driven by the flow of customers coming from Asia and South America,” he said, adding that Ferragamo will also keep investing on its digital strategy because “the Web has enormous potential for luxury companies both in terms of sales and communication.”

A huge focus on quality and the right balance between innovation and tradition are winning means to face the challenges of the actual market, according to Brunello Cucinelli, chairman and founder of the namesake luxury firm.

“The world is fascinated by the Italian lifestyle and, if we keep producing artisanal and exclusive products, Italian companies won’t have any problem in facing the future,” he said, pointing at craftsmanship as a core value to transmit to customers round the globe. The Italy-based company, which distributes its cashmere-centered products in 54 countries, counts the U.S. as its main market, accounting for 30 percent of its total business.

Ferragamo and Cucinelli are among the listed companies, including Luxottica and Tod’s, which determined the success of Italian luxury within the financial luxury landscape this year, according to Merrill Lynch.

“In the last 12 months, the Italian luxury business, considered in terms of listed brands, registered the best trading performances on the global stock exchange,” said Paola Durante, Merrill Lynch investment banking managing director. According to the American bank, Italian luxury companies excelled due to three factors: “strong brand heritage, deep production expertise and unique Italian lifestyle.”

Durante released Merrill Lynch’s macro estimates for 2013. The U.S. economy, which is predicted to grow 1.5 percent compared with 2012, is expected to report a modest slowdown; Italy and the euro zone are forecast to register a 1 and a 0.4 percent contraction, respectively, and China’s gross domestic product is expected to post an 8.1 percent growth.

Even if no estimates were provided for the growth of the Brazilian market in future years, it appears as one of the most promising for Italian luxury brands, said Chiara Altomonte, general manager at Consea Executive Search, an Italian recruitment company operating across Italy, Poland, China and Brazil. According to Altomonte, who valued Brazil’s luxury market at $2.3 billion, the country’s “middle class is growing a lot and the salaries are high, so in the country there is a huge potential at the customer’s level,” she said, adding that São Paulo, which currently counts 13 high-end shopping malls, will feature 20 by the end of 2014.

In addition, the country’s economy will be boosted in the short term by two global sporting events, the FIFA World Cup in 2014 and the Rio 2016 Olympic Games.

Diesel is among the fashion labels banking on the South American country. According to its founder Renzo Rosso, who connected via video conferencing from the company’s headquarters in Italy’s Veneto region, the brand, which posted revenues of 15 million euros, or $19 million at current exchange, in Brazil in 2012, expects to reach sales of 27 million euros, or $35 million, in the region by the end of 2013.

In order to win the Brazilian challenge, “European brands must ‘tropicalize’ to reach Brazilian customers,” suggested Monica Mendes, chairman of São Paulo-based fashion public relations agency Monica Mendes Communications. “Brazilians are accustomed to luxury products; they have already bought high-end goods abroad, so European companies must listen to what domestic consumers want and shouldn’t hire foreign buyers for their stores in the country.”

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