THE ITALIAN CHALLENGE
Byline: Sara Gay Forden
MILAN — Amid political instability, corruption scandals, a domestic consumption slump and exchange rate fluctuations, Italy’s industrial sector has managed to put together a startling export-driven recovery and gain a significant competitive advantage over its French and German neighbors.
Italy’s textile and apparel firms are leading that export boom. According to preliminary statistics issued by industry association Federtessile, Italian textile and apparel exports jumped 17.7 percent last year to $24 billion (38 trillion lire). The firms behind the statistics, often headed by families that have handed down the business from one generation to another, have been able to overcome handicaps at home caused by a top-heavy bureaucracy and economic recession to not only penetrate foreign markets but to expand their market share abroad. Characterized by entrepreneurial spirit, product and marketing savvy and the ability to build business relationships overseas, these are the companies that have managed not only to survive, but to shine.
Some credit is due to the devaluation of the lira in September 1992, when Italy pulled its currency out of the European Monetary System (EMS) of semifixed exchange rates. However, analysts agree that the best Italian firms have been successful at leveraging the exchange rate advantage to expand their market share. “If it were just an exchange rate factor, then everybody would have exported more across the board,” observed Armando Branchini, vice president of Intercorporate, a consulting firm. “In this case, it was the companies that had positioned themselves strategically to be able to take advantage of the devaluation that reaped the windfall from the exchange rate,” he explained. “And that requires a constant effort of research, product planning, investment, developing distribution networks, and more.”
For example, the Gianni Versace fashion house, which usually captures attention for its sexy styles rather than its business savvy, is one firm that has revolutionized its product planning and expanded its business empire with a pace matched by few, Intercorporate’s Branchini points out.
“Versace has transformed what was already a very successful business oriented around all his printed silk looks into a rather different style oriented to a much more youthful customer,” said Branchini. “All those little suits in candy colors are more than just a fashion statement — if you start dressing a woman when she’s 25 or 30 and keep dressing her as she grows up — you’ve created a long-term business relationship that can only help your sales in the long term,” he said.
Branchini also cited Prada as another success story for having diversified what was essentially an accessories-oriented business into a successful apparel company with an updated image and product range that is keeping sales booming. The firm, whose production facilities are based in Arezzo, is investing in new factories to boost production and hopes to more than double its annual sales to about $320 million a year.
Meanwhile, family firm Salvatore Ferragamo has quietly turned itself from a high-end footwear maker founded in 1926 into a leading luxury goods business with a full range of products, including apparel. Its investment expansion plan — which has seen the firm open new stores in France, Shanghai, Australia and New York over the past year — is clearly working. With estimated 1994 sales of $379 million (600 billion lire), up a striking 70 percent from 351 billion lire in 1993, Ferragamo ranks as one of Italy’s fastest-growing fashion houses, even though it’s one of the oldest. Of total sales, some 46 percent are derived from the U.S. market, 24 percent from the European market, 18 percent from Asia and 12 percent from duty-free shops.
Another fast-growing company that is making a name for itself in the manufacture and distribution of designer diffusion collections is Ittierre, a little-known firm based in Isernia, near Naples. Through an aggressive strategy of developing designer sportswear lines, Ittierre has tripled its sales in three years to an estimated $200 million (330 billion lire) in 1994, and expects to reach sales of $250 million (400 billion lire) this year. Ittierre just signed a new license to do a jeans line with Dolce & Gabbana, after launching Dolce & Gabbana’s new collection for young people, D&G, last year. The first D&G store recently opened in Milan and plans are underway for more stores in major fashion cities such as Rome, Paris and London. Ittierre, which also produces Trussardi Jeans, Versace’s Versus collection and Versace Jeans Couture, has embarked on an international expansion program with new subsidiaries in New York and in Germany. And the firm is also growing at home — it has decided to expand its facilities with a new, 200,000-square-foot state-of-the-art operation adjacent to its existing factory, designed by Swedish architect Edward Kahn. The new facilities will be capable of shipping 80,000 pieces a day and will be equipped with a computerized bar code system organized by country and client. Ittierre is also launching two of its own collections: Extempore and a young line, Exte.