If fashion had a horoscope, for 2016 it would recommend caution. That’s what 2015 suggests: the year started with cautious optimism, but ended with a screeching halt.
According to estimates made by SMI based on ISTAT data, in fact, 2015 will end with a 1.1% growth for the Italian textile- fashion industry, compared with an estimated 3.8% growth back in June.
Growth in exports is also seen slowing to 1.9%, while in 2014 it was 3.8% with total overseas sales reaching €29 billion. And for the first half of 2016 expectations are for a growth in sales of 2.2%.
These are increases, it is true, but all have been revised downward.
Like other industries, the Italian fashion system was burdened by the events that especially in the last months of the year have increased the sense of uncertainty that plagues production, but also shopping.
First, Russia and China, two of Italy’s top export markets, are hurting: Russia activated an embargo against Italian products in August 2014, and 2015 saw another sharp drop, of 32.1%.
The Italian fashion industry trade groups, with shoe producers in the lead, are lobbying the EU to ease sanctions against Russia, but the outcome is uncertain.
In China the situation is even more complex. The production of high-end Italian goods is experiencing the negative consequences of the devaluation of the renminbi, which has hurt Chinese consumer spending, and of the government’s anti-corruption policy - which will continue in 2016. While in Hong Kong, many brands are literally closing the doors of their boutiques.
This explains also the negative performance of Hong Kong-listed Prada shares, which from the beginning of the year have lost almost 44% of their value and are paying the price of a policy of store openings that is seen as too expansive, especially in Asia.
Prada can be a good example when looking at the industry from another point of view: luxury, in fact, is changing its skin, even in emerging markets, where consumers increasingly educated and aware of the relationship between quality and price are no longer content with a “just” logo but want real quality and new values to justify the word “luxury.”
Hermès and Chanel are the brands that have been able to best retain their market position. The challenge is more difficult for companies like Prada and Salvatore Ferragamo, which are based on leather goods, an increasingly competitive industry.
Therefore, looking at Italian fashion’s big brands, the best-placed in 2016 will be the ones who are able to renew their image: like how Gucci, which belongs to French group Kering but is produced in Italy, completely changed its style with a new designer, Alessandro Michele named in January 2015. Praised by critics, investors are now waiting to see the impact on the bottom line, since Michele’s first collection arrived in Gucci stores at the end of 2015.
Which brings us to the topic of retail: the effects of the crisis are still impacting domestic consumption and new flows of tourists have meant that purchases of fashion and luxury in Italy in recent years are made primarily by foreigners.
But even on this front 2016 opens with uncertainty: the fear of new terrorist attacks like the one in Paris will likely have a negative effect on tax free shopping, plus the fact that the Chinese, one of the largest groups of tourists visiting Italy, are spending most of their money in nearby countries like Japan (which has devalued the yen), Thailand and South Korea.
With fighting on so many fronts, we really would like to have a horoscope to understand how 2016 will be for Italian fashion.
However, there are signs that bode well. Sales in the United States and the United Kingdom, for example, are doing very well. The number of companies that are shutting down is falling, as is the number of job losses.
And ICE-Italian Trade Agency is reaping the first results of its ambitious plan for the internationalization of Italian SMEs.
This is the key to the future for over 47,000 companies in Italy’s textile-fashion sector: a focus on manufacturing excellence, niches increasingly appreciated by a global consumer looking for “real” luxury, history, and savoir faire.
But the challenge for many small companies is to make an evolutionary leap -- that is, go from a small family run company to an international one: sometimes both capital and entrepreneurial culture is lacking. But the value of Made in Italy remains powerful draw, to be sure, even in 2016 it will be able to attract new investment, especially from abroad, from those who love it.
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