It has long been a given that the rise of China would signal the decline and fall of Rome, as Chinese and other Asian manufacturers mastered the art of copying low-tech traditional Italian products such as textiles, clothing, and shoes. Indeed, Italian factories are closing, exports are falling, and whole industrial districts -- where tiny companies all make the same type of product -- are suffering.
But there are early indications that the bleeding has been stemmed and that Italian qualità is holding its own once more. Italian manufacturing, which now accounts for only 22% of employment in Italy, is undergoing a Darwinian selection process. Midsize companies producing high-quality, high-priced products are growing and competing more effectively, even as small, low-end companies are being forced to close. "We believe there will be a manufacturing nucleus, in sectors like textiles and clothing, that will have a future in Italy," says Stefania Trenti, an economist with Milan-based Banca Intesa.
Here's why. High-end Italian exporters, mainly family-owned companies, are coming together, organizing themselves more efficiently, innovating, and responding more quickly to changes in consumer tastes. Top quality silkmakers in the northern city of Como, for instance, have banded together to create a new brand called seri.co, used to guarantee quality standards for silk that finds its way into haute couture lines and other apparel.
SERI.CO and other similar successful efforts have helped boost silk exports by 8% in the first eight months of 2005, compared with the same period in 2004, as newly wealthy consumers in Russia and China snatch up expensive Italian suits and accessories. Italian clothing exports to Russia rose 18% in the first eight months of this year, and those to China by a thumping 84%, with ever-higher price tags on the items being sold. But the gains aren't limited to just apparel. The price of an average pair of Italian shoes sold in China has risen from $19.75 in 1993 to $59.45 today, and there are more and more Chinese consumers willing to pay up. In both shoes and clothing, it's no longer just the marquee brands, like Armani and Ferragamo, that are selling. Now, lesser-known but high-quality apparel is also selling big.
Nowhere are the gains more apparent than in the silk industry. After a half-century of decline, as silk production migrated to China, the industry is finally enjoying a bit of a revival. Larger silk companies have invested heavily in new technologies, which have enabled them not only to produce higher-quality fabrics but to do so with more flexibility, tailoring production runs to a clothing maker's individual requirements. SERI.CO's labs, for instance, make sure its members' products resist extreme conditions and don't tear, pill, irritate skin, or stain. They're tested with everything from artificial sweat to electric current. And the labs are a way to pool resources for common research and development.
SERI.CO also helps small silk companies work together globally with the weight of a larger company through initiatives at trade fairs in markets like China and Russia. That, according to government statistics, helped boost Italian silk exports to China by 155% in the first eight months of this year, though the amount was still very small -- just $5.3 million out of total industry exports of $248 million. "The Chinese have already learned how to do what we do," says Alessandro Tessuto, chief executive of Como-based silk manufacturer Clerici Tessuto. "What they lack is creativity, innovation, and flexibility. We're better in those areas."
The jury is still out on whether the high end will help keep Italy competitive. Many, like Tessuto, are doubtful. "Italy is a niche economy selling Ferraris to the world's wealthy," says Giacomo Vaciago, an economics professor at Milan's Catholic University. Others are more optimistic. "There has been an inversion of the trend," says Industry Vice-Minister Adolfo Urso. The final answer may depend on the Chinese appetite for Italian silk foulards, handbags, and stiletto heels.
By Maureen Kline