THE ITALIAN WAY: THE FUTURE OF THE FASHION INDUSTRY

Thanks to the global recognition of Made in Italy, Italian fashion holds an international leadership position and acts as a national manufacturing pillar. But the industry was also hit hard by the global lockdown. How best to survive and restart in the post-Covid economic scenario?

This was the focus of the first Italian Way event, held in Naples on 16th June, which was dedicated to the fashion industry and organised in collaboration with Confindustria Campania.

Joining the discussion were Remo Taricani, Co-CEO Commercial Banking Italy at UniCredit, Annalisa Areni, Regional Manager South at UniCredit, Vito Grassi, Vice President of Confindustria and President of Confindustria Campania, Carlo Casillo, President of the Unione Industriali Napoli’s Fashion & Design Department, Giuseppe Attolini, Vice Presidente at Cesare Attolini Spa, Lavinia Biagiotti, President and CEO at Biagiotti Group,  Andrea Miranda, Managing Director at Kocca Srl and  Carlo Palmieri, Vice President Sistema Moda Italia with responsibility for the South of Italy and e Vice President at Pianoforte Holding Spa.

At the event, UniCredit presented sector-focused research on the effects of the pandemic before leading a discussion about ways how the fashion industry can both recover and capitalise on new opportunities. Participants agreed that companies in the sector will need to take advantage of new consumer habits, the exponential growth of e-commerce and strengthen their use of multiple-channels.

1 A big impact on Italy’s fashion supply chain

The Italian fashion supply chain has a strong global reputation with global sales accounting for more than 70% of total Italian fashion turnover. But today the sector faces a competitive and particularly delicate international framework.

The halt of many Chinese factories could be particularly damaging to Italy’s fashion industry given the large amounts of clothes and accessories produced in the Asian country. China represents 36% of the sector’s global exports and the impact on Italy’s fashion supply chain will be, at least in the initial stage, greater for companies with significant exposure to China in terms of exports, procurement of raw materials and end products.

2 Two outlooks: soft and hard

UniCredit outlined two possible scenarios for Italy’s fashion supply chain –  a more conservative (“soft”) scenario and a second more pessimistic (“hard”) outcome. Both predict a deep fall in 2020 and a recovery in 2021.

In the “soft” scenario, turnover will fall by 1/5th from 2019 levels before recovering in 2021. In the “hard” scenario, the decrease could be higher, down by ¼ from its pre-Covid value, but also with a significant rebound in 2021.

3 Those with most debt and least variety are most affected

Companies’ risk profiles are predicted to deteriorate due to less revenues, reduced profitability and worsening of their financial structures. The worst hit will be those with most debt and those with the least geographical diversity. Other companies that will also be vulnerable will be those with a high level of demand but with a smaller stock rotation.

4 Pillars to restart: innovation and finance

In order to survive and restart in the post-Covid economic scenario, companies must take advantage of new consumer habits and to the exponential growth of e-commerce, which is changing the scene and companies’ organisation models. The strategies to restart therefore need to include:

• Flexibility: a push towards a cross-channel approach, with shops becoming not only traditional exhibition spots but also distribution hubs for e-commerce.
• Quality: sector companies will need to continue investing in high-quality products that ensure Made in Italy is recognised globally
• Innovation: the Italian fashion industry will need to introduce new strategies that can increase their sale channels, such as virtual catwalks, digital showrooms and 3D designs