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Apparel Article 7/20/2010
The world’s economic struggles create a unique challenge for the apparel industry. Age old questions of whether clothing is a necessity, an element of function or a luxury is debated from mall counters, Paris fashion houses and fashion rags round the globe. Recent economic struggles in Italy, France, Spain, Greece and Portugal brought these issues to the motherland of fashion. Two areas we find interesting when analyzing this sector are the prevailing socio economic issues in the EU and evolving mass consumerism in developing countries.
Recent travels to Milan and Bologna specifically to analyze the apparel sector provided fascinating insight into significant consequences of the Euro Zone. The fashion industry has achieved modern perfection over the last couple hundred years and is considered the standard for excellence around the world. It was typically thought that the greatest threat to Italian and old European fashion houses would come in the form of knock offs from Asia. In reality, the greatest threat has come instead from neighboring countries in the Euro Zone and from within Italy itself as the cultural gap between the north and south manifests in cannibalistic competition.
The Euro zone and most of the world has been fairly successful at stopping the movement of counterfeit or contraband apparel products from Asia. A portion of this is in part to the high level of skilled artisans manufacturing the originals in Italy (and elsewhere) making it virtually impossible for knockoffs to escape identification by consumers. More importantly, companies such as Gucci have been purchasing the Asian factories primarily responsible for producing the notorious Gucci purses running lesser lines through the factories and ensuring that there are clear visual differences between products crafted in Italy and the cheap Asian replicas. Import tariffs on all goods arriving from China throughout the world have created a financial equation where the tariffs have raised the price per product to a level high enough to cut into budget for materials and labor creating a less attractive piece.
The one place the Euro zone did not anticipate having industry changing competition was within the zone itself. Bulgaria has proven to be the major nemesis these countries are contending themselves with now supplying approximately 40% of shoes in the luxury shoe business. It comes down to simple economics with Bulgaria quickly developing very skilled craftsman willing to work for 25% or less of the wages demanded by their counterparts in Italy. The cost of living is significantly less in Bulgaria than it is in Italy so there is a fertile ground for producing apparel at the same level of quality for far less. With no tariffs placed on these products and a level of quality close to parity with Italian and other traditional manufacturing companies, there has been a significant shift in market share.
Italy, similar to many Mediterranean nations is quite culturally divided. The north of Italy is the center of fashion and shares much in common culturally with its European neighbors. The South of Italy is a very ethnically and culturally diverse socio economic region which has led to a different attitude concerning business practices. Outside of Tuscany in Prato there are Chinese sweat shops where conditions similar to the Death Mills made famous during turn of the 20th Century England and North East in the United States. Barbaric conditions turning out Made in Italy products that cannibalize higher quality products from the North and elsewhere around the country.
This only scrapes the surface of the rampant problems in the industry. Though this bodes badly for the Centuries old skilled artisan manufacturers of Italy and elsewhere, it bodes quite well for consumers as competition drives innovation and ultimately quality as consumers speak with their wallets.
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