February 20, 2020
The Italian fashion industry earned $77.4 billion in aggregate sales in 2018, contributing to 1.2 percent of the country’s GDP as growth holds steady, never falling below 3.4 percent, despite a slowdown in growth in recent years.
Sales were up 22.5 percent in 2018, as compared to 2014, and up 3.4 percent over 2017, according to a new report from Mediobanca. The fashion sector grew at almost double the rate of the country’s GDP over the last five years, with a net profit totaling $4 billion in 2018, 25.2 percent higher than in 2014. Family-led companies had the best margins at 13.4 percent, and the strongest exports, with 86.1 percent of their product selling internationally.
"Family companies are so profitable because the family can convey the heritage, the history of the brand, the values and the passion that is part of the DNA of the founding family,” said Nadia Portioli, financial analyst at Mediobanca, Milan.
“More precisely, listed companies where families are the primary shareholder are even more profitable because they combine families’ ownership with opening to the markets that can accelerate growth and internationalization,” she said.
Clothing is the biggest division in the fashion sector, accounting for 42.6 percent of aggregate sales in Italy, followed by leatherwear at 23.1 percent and eyewear at 15.6 percent.
Jewelry stood out in terms of the annual average growth rates of sales from 2014-18, with 10.9 percent growth.
Non-Italian groups and employment on the rise
The number of non-Italian groups operating in the Italian fashion industry remains high, representing 70 out of 173 companies. These companies bring in 34.7 percent of the aggregate revenue, up from 2014, when non-Italian groups accounted for only 23.9 percent of total sales.
Despite this, Italian firms have performed better than non-Italian firms in terms of profitability, with 9.3 percent margins versus 6.2 percent.
Employment levels up are, as the luxury business employed around 366,000 staff. An additional 45,300 new staff was hired in 2018, representing a 14.1 percent increase from 2014.
Jewelry saw the greatest increases in employment, up 32.7 percent from 2014. This was followed by leatherwear, which was up 24.6 percent.
Employment in the fashion industry was up 20 percent in 2018, with 190,000 new staff hired.
French companies created 43,000 new jobs, up 13.1 percent, and Italian fashion industry giants created 11,200 new jobs, an increase of 11 percent.
“In the industry overall, attention to employment and the territory in which the company operates is very strategic,” Ms. Portioli said.
“The fashion industry is particularly labor-intensive and the important figures are, alongside managers, creatives and craftsmen, those who know how to transform the ideas of the creative into a design, a prototype and a product of quality and excellence,” she said.
“Especially in Italy, it is important to create employment also for high-quality craftsmen in order to remain competitive with other countries, because in this field Italy can make the difference,” she said. “It is also necessary to invest training for figures of this type, to promote manual labor and strengthen manufacturing.”
Women at the table
The most dynamic companies examined in the report had women at the helm.
The analysis of gender equality on the boards of 173 the Italian fashion companies reviewed found a direct correlation between gender representation, company earnings and financial performance.
The dynamic companies, which had above-average margins, had women on the board, at least 22 percent of its members. Companies with fewer than 17.9 percent women on the board earned lower margins.
“The presence of women helps because it brings diversity: women are no better than men, they are simply different, and this diversity is true wealth, this diversity is the ingredient that can make the difference,” Ms. Portioli said.
“In the fashion industry, the female presence is greater than in other sectors and the gender diversity is a boost to improve the company’s profitability,” she said. “Our analysis showed a direct correlation between gender representation, company earnings and financial performance.”
The Italian fashion industry’s revenues are expected to reach $86.3 billion over the next two years, representing an 8 percent increase, according to data from Prometeia. While there will be more growth, there will also be higher margins, driven by the fashion industry’s online presence.
The 559 different brands owned by the 173 companies generate about 300 million Internet searches per month, and 57 of those brands attract more than 1 million searches each. These searches hint at demand, which is projected to reach $1.83 billion by 2021.
"In the luxury fashion sector, the need to evolve through a balanced use of technology and digital strategy is important to offer the consumer an intuitive and modern experience,” Ms. Portioli said.
“The fashion world changed dramatically with the advent of social media and the explosion of the digital revolution," she said. "The customer is increasingly informed and demanding, and the company must increase its digital communication investments.”
Consumers in Germany and the United States conduct the most online searches for Italian fashion, followed by China and Russia.
Consumers in Australia, Brazil, India, Poland, Canada and Mexico are considered a potentially untapped market, according to the report.
Common keywords that result in Italian brands include quality, authenticity and reliability. Sustainability, online shopping, and cruelty and conflict-free have also risen in prominence.
“Digital strategy will be more and more a real development opportunity for the luxury fashion segment that must always find a way to express the strong individuality of the brand, which is the core of this industry,” Ms. Portioli said.
“Think heritage, play digital, but without forgetting the traditional retail, not so much as a place of sale, but above all, as an experiential location, in an omnichannel perspective where the driver will always remain the brand,” she said.