Can Made In Italy Overcome The Crisis?

It is no secret that the luxury sector has been struggling for several months now. Many companies have seen their financial results plummet due to an economic climate characterized by geopolitical conflicts and persistent economic instability.

In Italy, the craftsmanship of excellence has always been one of the jewels in the crown of ‘Made in Italy,’ a designation synonymous with quality and exceptional know-how. In the fashion sector, around 60,000 companies generate a turnover of around 96 billion euros, accounting for almost 5% of the national GDP.

Several major international groups, such as Kering, have set up manufacturing hubs in Italy in recent years. The country, led by Giorgia Meloni, is home to many subcontractors specialising in the production of luxury goods.

To understand the origins of the current crisis, we need to analyse post-pandemic dynamics. After the end of the health crisis, all markets experienced an euphoric rebound. The ‘Covid revenge’ effect was felt in almost all lifestyle (travel, wellness) and luxury sectors. This shopping frenzy by consumers led to price increases by many brands.

While this policy proved successful initially, it had negative impacts in the long term. The boomerang effect kicked in, combined with geopolitical tensions and an uncertain global economic situation. Consumers became much more cautious; luxury products, considered too expensive, lost their appeal, and compulsive buying gave way to more considered investments.

This situation has plunged many luxury subcontractors into a severe crisis. In 2024, the hours paid for through redundancy funds in this sector increased by 200%. In regions historically specialised in producing luxury materials (leather, wool, fabrics and accessories) – such as the Marches or Tuscany – closures are multiplying: around 700 companies have ceased trading in the Marches and more than 300 in Tuscany.

The policy of raising prices is not the only factor responsible for the crisis. In an article on the situation of subcontractors in Italy, the Italian newspaper ‘Il Fatto Quotidiano’ conducted an investigation, revealing that small companies that produce for the luxury giants, such as Kering, Prada, and LVMH, are caught in a vice. In some cases, up to 90% of their production is destined for these big companies, giving them considerable power to impose ever lower costs, while demanding impeccable quality (‘the aim is to seduce “very important clients” who are prepared to spend more than 50,000 on a very high-quality leather item’, commented one of the artisans interviewed).

The advantages enjoyed by the major groups with this system of subcontracting are numerous. For example, the possibility of increasing or reducing orders according to market fluctuations without having to directly manage their own production.

The major groups have de facto established a form of monopoly in the world of luxury goods. The comparison may seem surprising, but this situation is reminiscent of the risks associated with monoculture in agriculture: if demand for a product collapses, the entire economy of a country falters. Similarly, if Italian textile craftsmanship depends solely on the two or three major international groups, changes in their financial strategy and internal policies can seriously threaten the existence of these companies.

Faced with this crisis, the Italian state is forced to intervene. The Ministry of Enterprise and Made in Italy has announced a 250 million euro support plan to help artisans in difficult times.

It remains to be seen whether this measure will be enough to save an endangered economic model, or whether deeper structural reforms will be necessary to guarantee the sustainability of Italian excellence.