Fashion brands across the world may rejoice over putting pandemic gloomiest seasons behind but fashion manufacturers in Italy, both big and small, are keeping a close watch on current economic and geopolitical scenario.  As per a Woman’s Wear Daily report, the government in Italy is introducing a range of initiatives to help fashion companies retain business. It is helping established and new brands connect with local supply chain besides offering marketing expertise. 

Engaging third party manufacturers

Supporting SMEs since 2015, David Clementoni, Founder, Artisan has developed a platform to recruit firms with employees numbering four to 100. He has also been engaging third-party manufacturers across 30 out of 54 of Italy’s fashion manufacturing hubs and helping them connect with international fashion brands and retailers. Introduced in its current version in 2019, the platform has onboarded around 700 manufacturing, points out Clementoni. He is continuously hunting for new players to add to the platform. New players have led to the evolution of the platform’s goals. Brands continue to join the platform as they look to re-shore production from abroad to leverage the ‘Made in Italy’ label. As of June, the platform boasted of 10,000 registered brands. 

The platform aims to ensure efficient and effective execution of business, says Clementoni. It acts more as a facilitator than an intermediary as its business model is based on royalties from produced goods and add-on services provided by it, he adds.  Artisan recently collaborated with British platform Arts Thread, which has 300,000 users from fashion schools across the globe, and Italy’s Camera Buyer to allow local retailers develop house brands. Through these initiatives, the platform aims to attract 60,000 brands by 2028 and generate more than 370 million euros in business.

Connecting with players beyond Italy

Like Artisan, Italy’s association of leather goods manufacturer Assopellettieri has been boosting relationships between manufacturing and players operating outside Italy through its Mipel Lab format, developed in collaboration with tanning industry trade show Lineapelle.

An area within Lineapelle’s biannual fair, the format introduced a digital business-to-business platform in collaboration with the Intesa Sanpaolo bank and Ds Group, which provided the AI-enabled software. The association aims to seek new opportunities for our enterprises, says Franco Gabrelli, President, Assopellettieri. Leather goods firms in the country have been moving towards third-party manufacturing as sales of in-house brands are declining with growing competition from fashion houses having marketing prowess.

Having 16 manufacturers, which together post revenues of €500,000 million, the association looks to Italy’s supply chain besides engaging brands operating outside Italy  due to rising production and logistics costs from overseas manufacturing, adds D’Alessandro.

Earlier, brands viewed manufacturing costs as squandering, as they often had to deal with two to four intermediaries. This dented their bottom lines and wasted resources, affirms D’Alessandro. They also had to seek reliable production partners and offer high-value services which weren’t feasible for small manufacturers. Hence, they preferred to outsource production to neighboring countries such as Spain and Portugal were seen as less expensive. However, this is no longer the case, he pronounces. 

Posting a ‘V-shaped’ rebound from the pandemic, global luxury sales surged 7 per cent to $301 billion in 2021 over 2019 pre-pandemic levels, reveals consulting firm Bain & Co. Sales of luxury players including Chanel and Hermes’ grew almost 30 per cent. However, the impending global economic recession threatens to derail this growth story, explains a Business of Fashion report.  With inflation and interest rests soaring across Europe and North America, rising fuel and food prices are straining household budgets. Primary driver of the luxury industry, the US saw its economy shrink 1.6 per cent Q-o-Q between January-March, indicates the Bureau of Economic Analysis. EU Statistics agency Eurostat figures reveals, inflation in Europe reached its highest levels of 8.6 per cent in June. 

So far, consumer expenditure on luxury items has been resistant to deteriorating economic conditions. This can be seen from the 19 per cent rise in sales compared to the pre-pandemic sales, says Bain. The analysts attribute this to revenge spending after resumption in travel, socializing and travel. 

Luxury’s share in sales declining

However, despite continuing sales upsurge through summer, the share of people indulging in luxury sales is set to decline.  Statistics show, wealthy shoppers tend to spend less when the market is down though the impact of this decline is often less dramatic than other groups.  A few analysts expect luxury sales to be more resilient during the current crisis as lower income and middle-class consumers have been more affected than high-income earners. Previous recessions had affected luxury consumers more than this time, notes Adam Cochrane, Analyst, Deutsche Bank

Distinction between luxury and affordable brands blurs

Yet, luxury sales are not determined by ultra-rich consumers only. Even middle class and aspirational shoppers make up for a significant percentage of this category. Off late, brands have been introducing more accessible products in categories like streetwear, sneakers, eyewear and small accessories to attract these shoppers. 

The distinction between absolute luxury and more accessible brands has blurred as brands are offering products at wider price points, says Federica Levato, Partner, Bain & Co. Brands appealing to higher-income groups are likely to perform better during the current recession while those appealing to aspirational consumers will be the hardest hit. 

Brands with strongest recall to win 

The pandemic made a clear distinction between the winners and losers as companies with strongest brand recall excelled while smaller players struggled. The impending recession is expected to make this this distinction even clearer.

According to UBS, one of the only companies to report positive sales growth during the recession is likely to be Hermes. They also expect positive sales by LVMH while Tod’s and Ferragamo are expected to falter. 

Scale allows luxury players to invest in brand building, especially during difficult times like these, says Daniel Langer, CEO,  Equité and Executive Professor, Pepperdine University. They can play a bigger role in influencing consumers and boosting their emotional well-being, he adds. 

Brands like Chanel are exploring this strategy to tide over pandemic losses. It increased marketing spend by $1.8 billion in 2021. This enabled it to increase revenues by 23 per cent to $15 billion last year. The recession can prove to be a great opportunity for brands to play a bigger role in the industry and invest in winning customers’ trust. 

Better equipped to face difficult times

Depending on how quickly China recovers from the recession, Bain & Co expect the luxury industry to grow between 5 and 15 per cent this year. However, the industry seems to be better prepared to face the crisis than it was in 2008. 

Brands seem to be better equipped to respond to unpredictable demand with shortened lead times and more agile supply chains. They also have a better control over distribution channels, and are strategically reducing dependence on wholesale channels. This enables them to achieve a higher margin on each sales and boost bottom lines. It also enables them to control discounts and encourage full-price sales 

Brands need to also focus on inventory management during times of volatile demand. They need to stock more classic times like bags, shoes and fine jewelry, that can be carried over from season to seaon. This will enable them to retain brand value and be culturally revelant. 

India’s exports of leather and leather products are expected to grow in 2022-23 on account of growing demand for these products in global markets, says the Council of Leather Exports. Changes in global market dynamics caused by the pandemic have created huge export opportunities for the sector. Also with a slew of trade agreements signed and in the pipeline and active support of the government are helping sustain the export growth in the remaining months of this year.

Shipments from the sector rose by 32.5 per cent in 2021-22 from the previous year. The healthy export growth witnessed in 2021-22 is continuing this year also, with export of leather, leather products and footwear increasing in April to May 2022 from April to May 2021. In this period exports to the USA registered a growth of about 78.5 per cent. Shipments to India's largest market Europe too registered a growth of 44.6 per cent during the first two months of this fiscal. Exports to other markets like Canada, Australia, the UAE have also grown this year. Signing of trade pacts with the UAE and Australia are expected to help in further boosting outbound shipments.

More than 200 small mills involved in recycling cotton waste into yarn and fabrics across Tamil Nadu have come together and formed a recycle textile federation called Recycle Textile Federation. Creating awareness among members on the markets where the products and services have a demand is the focus of the federation.

Headquartered in Coimbatore, the federation presently has 230 members representing various mills from Tamil Nadu. The federation has plans to bring together such mills across the country to collectively address the needs of the industry, identify markets in different parts of the world, and direct its members to cater to places that need their products and services.

There are 400 mills in Tamil Nadu that process/recycle cotton waste and PET bottles into yarns and garments, with Coimbatore and Tirupur having 180 such mills. The federation would first strive to bring them together and function as an entity that would represent their common needs and demands and would also go for national and international coordination.