As part of the event organised this past 30 April by MF/MilanoFinanza and ClassEditori, some of the leading protagonists in the Italian fashion industry examined the post-pandemic reality and changes that have occurred in the fashion industry along with the current needs of consumers, doing their best to identify the direction in which this change is headed, while coming up with ideas and strategies for protecting and restarting the supply chain that represents one of the crowning glories of the ‘tricolour’ economy.
FASHION OVERVIEW –2021-22 TRENDS
According to Alfonso Dolce, CEO of Dolce e Gabbana (a reality that is proudly independent also of the fact that it is not listed on the stock exchange), 2020 was without a doubt a difficult year for the fashion industry, but not necessarily negative, because it forced its players to re-examine the traits of their companies and look at the market in a new way. Prospects for the future are accordingly positive, and there’s a great desire to restart, while at the same time opening up a new window of opportunity characterised by an even more emotional kind of consumption, which however is attentive to the quality of products and dictated by the desire to participate in a life experience. Michele Norsa, Executive Vice President of Salvatore Ferragamo, underlined how the beginning of the year was very positive for the company in markets like China where the economy never stopped and the impossibility of travelling abroad gave further impulse to domestic consumption with double-digit growth and new opportunities in stores and malls. The USA suffered a lot in 2020, but quickly restarted with an influx of capital, positive results on the Stock Exchange, and growth in the luxury segment. In greater difficulty is Europe, still highly influenced by the lack of incoming visitors from other continents, which was forced to fall back on domestic and Intra-European sales. Italy remains in a privileged position as both a tourist destination and place for business, but it is fundamental to increase the quality of our product offering even more in order to meet the needs of a younger and more digital consumer.
Ubaldo Minelli, CEO of OTB Group, which is owned by Renzo Rosso, representing the first Italian multibrand hub (with the recent acquisition of Jil Sanders), confirmed that the strength of the Group was that of understanding right from the start how the pandemic, like many changes occurring in the market and society, would soon become structural. From here, the decision to accelerate on the implementation of strategies that were already on the agenda, starting from investments in digital, with the creation of an e-commerce platform of the Group that allowed it to immediately reap its first benefits and limit its losses in other channels. In general, Minelli underlined how the pandemic opened up the doors to different opportunities for growth, starting from possible actions along the productive supply chain, but also commercial ones, as well as opportunities connected to acquisitions in a systematic approach.
Flavio Sciuccati, Director of the Industrial Strategy and Policy Practice, Head of the Global Fashion & Luxury Unit, The European House – Ambrosetti, explains how the Ambrosetti Observatory has already noted progressive economic growth for the fashion industry in the first quarter 2021 – with positive forecasts continuing all the way through 2022 – and expectations of returning to a pre-Covid situation by the middle/end of 2023. In general, the pandemic accelerated the implementation of changes and innovations, above all in a digital context, and businesses unable to make these changes, including especially SMEs, have found themselves in serious difficulty, since they now lag behind with a gap that will be quite difficult to bridge. Next to digitalisation, from the Observatory there also emerges the importance of internationalisation: the Asian market in fact allowed companies operating there to minimize the losses they suffered on the European and American markets during the period of lockdown, thereby confirming how important it is for a company to have a balanced presence in all the main markets worldwide. Finally, the Observatory demonstrated how expertise is fundamental in overcoming the most critical moments in the fashion and luxury sector: there’s accordingly need for a managerial presence to guide innovation, and there’s a need for figures who know how to manage change and, in many cases, drive the ‘family business’ towards more important business opportunities with greater profit.
Francesca Diviccaro, Head of Retail & Luxury Industry – Global Corporate Department, IMI Corporate & Investment Banking, Intesa Sanpaolo confirmed a forecasted recovery for the fashion and luxury industries by the end of 2022/beginning of 2023, a recovery that will be guided above all by digital technology, sustainability, and resilience, understood as the ability to adapt to change and transform weaknesses into strengths.
MILAN, CAPITAL OF FASHION
Flavio Sciuccati confirms that Milan is and will be the international hub of fashion and this is mainly because everything starts from Milan: apart from Pitti, it is here that all of the most important international fairs of fabrics and materials, as well as the finished product and seasonal fashion shows are held. In the middle are the industry and supply chain. There is then the role of Milan as a front-end. Two examples are Gucci and Moncler, which have strong roots in the territory where their supply chains are located, but which have moved all of their front-end activities to Milan, along with a good part of their product development and commercial activities. According to Sciuccati, this centrality of Milan will not change, not even with the increasingly strong presence of the digital world.
Michele Norsa underlined how it is more important now than ever before to funnel all efforts into bringing ‘true luxury travel’ back towards Italy and Milan, since Italy is the first destination worldwide for its culture, food and wine, and shopping. Italy must accordingly make the most if its unique features and Milan must guide this collective force, since it plays a primary role in the world of business travel, fashion, and culture. Norsa points out how in this moment there is a burning desire for renewal and renovation in Milan with many leading luxury hotels updating their look, restaurants renewing their spaces, and Linate airport renovating its entire boutique area. There is however a lack in terms of infrastructure, which is strictly related to the new metro line.
Ubaldo Minelli reinforces the concept that the leadership of Milan will not be called into question by that which will be defined as the new ‘normality’. For the OTB Group, which is proudly Veneto in origins, Milan is also the headquarters of two of its brands – Nardi and the new entry Jil Sanders – as well as the location of the fashion shows and showrooms, which before the outbreak of the pandemic, accounted for 60% of seasonal orders. People will soon start travelling again, even if probably they will travel a little less than in the past and will be more selective in their choice of destination, and this could even reinforce the role of Milan as the capital of fashion.
Alfonso Dolce explains how Dolce e Gabbana has always considered Milan to be an engine of entrepreneurial culture, a crossroads of international capitals, a catalyst of excellences and individual expertise, as well as a hotbed of new projects and start-ups. According to Dolce, Milan is always a starting point, but never a point of arrival, thanks to its ability to constantly renew itself, but also thanks to fashion and design and to university, scholastic, and professional hubs, which allow for an emersion of talents of international scope. Milan is the entrepreneurial locomotive of Italy and it gives visibility – through fairs, fashion shows, showrooms, stores, and all of its other ‘front’ activities – to the excellence of Made in Italy and its productive districts. Those who choose a Made in Italy product, also buy a piece of history, culture, an emotion, a lifestyle, which they can take away with them.
DOES A FUTURE FOR FASHION EXIST WITHOUT MERGERS?
According to Flavio Sciuccati, the theme of mergers is without a doubt at the centre of attention, with 20% of companies accounting for 80% of business and with leading Groups that control most global business. There will be an increasing tendency for new brands to merge with large groups, so they can the most of their combined synergies in terms of capital, distribution, presence on the market, and innovation of processes. Mergers will unavoidably occur also along the b2b supply chain, because small and micro businesses will have increasing difficulty in competing and innovating in the fashion business. According to Sciuccati, however, to overcome the resistance to mergers present in our country, and above all in certain specific districts, it will be necessary to have a leader with a clear strategic vision, capable of attracting capital and associating with extremely specialised and niche subjects.
One example of merger that is completely Italian is that of the OTB Group. As mentioned by Minelli, also the recent acquisition of Jil Sanders comes from afar and re-enters in the strategy of the Group that was accelerated by the pandemic. A strategy, which for OTB does not regard only the acquisition of brands, but also new opportunities in the field of the productive and distributive supply chain.
Different is the merger strategy of D&G, which has not moved towards becoming a hub of multiple brands, but which has rather moved towards becoming a hub of excellences and an integration of the entire supply chain in a wide variety of specialisations. In the words of Alfonso Dolce, merging should not be seen as a sum of numbers, but rather as a blending of specific qualitative expertise and development across the territories. In fact, D&G has chosen to operate in the luxury segment as a single brand that is made up by two genders (men’s and women’s) and three lines (including one for children), with the aim of expressing its lifestyle and research onto excellence in way that is across-the-board, through different product categories that range from textiles to tanning, and licenses like those in beauty, all the way up to forays into the world of food and beverages.
As noted by Francesca Diviccaro, this is the moment for accelerating on mergers, which for some time now have been put on standby by many companies, also because there is now capital available. The pandemic, underlined Diviccaro, accelerated the establishment of a ‘minimal dimensional scale’ for competing on a global level, but there can be different forms of merging a supply chain, like for example consortiums or networks.
According to Michele Norsa, mergers are key to guaranteeing a certain continuity during the most difficult moments like the ones we are currently experiencing, while also guaranteeing a scope that goes beyond the single generation or even multiple generations of entrepreneurs, as in the case of family-run companies, thereby providing continuity to brands over time. In this moment, there is a great availability of cash, but it is important for acquisitions to be guided by a precise logic and expertise, with preferably a connection to the company’s core business, otherwise there is the risk that they become destructive in value.
THE SUPPLY CHAIN AS A LEGACY OF THE COUNTRY SYSTEM
Alfonso Dolce underlines how the supply chain is the beating heart in driving Italian production par excellence, while Ubaldo Minelli recalls how OTB has been working with the supply chain since 2013 through a programme known as Cash, which allows easy access to credit for virtuous partners in the productive supply chain, resulting in over 250 million euros in loans being granted over the last 5 years. With 30% of Diesel’s production based in Italy, and the Group’s other brands with over 90% Made in Italy production, the supply chain in fact becomes a strategic asset of extreme importance. Considering the drive towards digitalisation and sustainability, the Group is also thinking of extending this programme beyond easy credit access.
Flavio Sciuccati remarks upon the importance of protecting the supply chain in fashion, because it is the supply chain that gives life to those ‘objects of desire’ for which we are envied and sought out around the world. The supply chain offers the stylistic input that leads to the development of the product, its industrialization, and its production. And today it is more important than ever before for the Italian supply chain to embrace the theme of sustainability, so that it can lead Italian fashion towards an international position of leadership worldwide. The supply chain instead sees distribution increasingly focused on the digital channel, where the profit of brands is higher and which should arrive at over 30% of total revenue in a few years’ time, to the disadvantage of physical distribution.
Michele Norsa underlined how Ferragamo produces over 95% of its production in Italy, through a network of suppliers that has remained almost unchanged over the last 100 years, and together with its supply chain of brands, it has constructed excellences and innovative ways of producing. This is confirmation of how protecting the supply chain is fundamental for the entire Italian fashion system.
Francesca Diviccaro, instead, underlined the role of the supply chain in post-Covid economic recovery. Banca Intesa has always been close to the world of businesses and supply chains with initiatives like the Supply Chain Group Programme, which calls for agreements between supply chains and small entrepreneurs, with loans granted in support of the financial needs of small and micro-sized businesses.