Italy’s luxury manufacturers have been open for a little more than a month now, but they still make it up as one goes along.
Italian manufacturers supporting Italy’s biggest luxury brands like Gucci, Prada and Giorgio Armani are already under strain after the forced closures caused by Covid-19, and fewer orders as brands’ sales dropped globally. Now that’s been compounded by a generalised delay in the payment of state social security (the “cassa integrazione” unemployment benefits) and government-backed loans, putting at risk the production of 40 per cent of global luxury goods, 580,000 jobs and €63.4 billion of Italian exports, one of the country’s biggest.
According to Italy’s National Social Security Institute, as of 4 June companies have requested unemployment benefits for 8.4 million workers. A huge number! The problem is that nobody was prepared to such a huge amount of requests over a short period of time and also the troublesome bureaucracy have blocked down the system and this means delays in payments, rejection if the requests and difficulties for companies and workers.
Similarly, requests for Covid-19 state-backed loans are lagging behind with only 301,777 of 607,391 requests for assistance granted as of 20 May, according to a report by Italy’s bicameral investigative commission. (An accepted request doesn’t mean a loan has actually been dispensed.) While 52 per cent of requests for loans under €25,000 have been accepted, only 24 per cent of requests for loans for more than €25,000 have.
Most of the biggest and most solid companies advanced unemployment benefits, but companies with less available cash are not able to do the same.
“Everyone is paying us on time,” says Marco Angeloni, CEO of Fabbrica Sartoriale Italiana, which produces menswear and womenswear for established companies including Richemont and Ralph Lauren and independent labels like Matthew Williams’s 1017 Alyx 9SM. That’s helped the manufacturer avoid further cash damage in the wake of Covid-19.
This model of supply chain solidarity, where those at the top of the chain support suppliers at the source, pre-dates Covid-19 and is typical of made in Italy, a system built on collaboration and support. If you lose these suppliers you lose skills that can no longer be found, no supply chain leader benefits from the disappearance of this fragile and unique ecosystem of small suppliers and laboratories.
Future prospects, both short and long-term, remain uncertain. Most of the manufacturing companies registered 30 to 40 per cent fewer orders for Autumn/Winter 2020, and expect a negative Spring/Summer 2021 and an uncertain Autumn/Winter 2021. Pelletterie Toscane, a leather company working with Louis Vuitton, Hermès and Gucci, says orders are coming in, but more limited, and production times are slower as the industry slowly restarts.
Ratti, a fabric manufacturer that has signed licensing agreements with brands including Givenchy and Elie Saab, says order flow in the four weeks from reopening has been extremely low, with some clients dropping off the radar.
Manufacturers and suppliers are looking positively at the changes in the fashion calendar advocated by a number of brands including Gucci, Saint Laurent and Armani, which would allow for longer production times and a more manageable schedule. Not many, however, think the change is possible, given the turnover brands need to survive with their current retail footprint.
Another important point is the recovery of the end consumer. The way the end consumer recovers from the current economic and health crisis is a central preoccupation for manufacturers and suppliers, as their spending reverberates through the supply chain. Sapaf’s Calistri thinks that niche luxury, like made-to-order for selected clients, will recover faster than general luxury, which depends on greater spending from a larger demographic. “Returning to consumptions pre-Covid-19 requires a psychological state that is far from customers right now,” he says.
A central point for many will be the international promotion of Italy both as a tourist destination and as the heartland of luxury manufacturing, as made-in-Italy products make up 60 per cent of total tourism spend. “Italy on its own can’t support industrial structures aimed at much larger audiences,” says Tamburini. “We need to keep up the image of the country or we are dead.”