Sergio Tamborini of SMI on the challenges faced by today’s luxury market

Sergio Tamborini, head of Sistema Moda Italia (SMI), the federation bringing together all the textile and clothing companies in Italy, and who also runs Ratti, the leading silk specialist in Como, talks to FashionNetwork.com about the complex market situation since the start of the year. And the impact of the crisis on the Italian supply chain, which is essential to the entire luxury sector in Europe.

 
FashionNewwork.com: What is the situation for Italian fashion?
 
Sergio Tamborini: 2023 started out very well for all brands and manufacturers, but in the second part of the year production problems began, which became an increasing issue in 2024. The Italian fashion system as a whole, including leather goods and accessories, exceeded 110 billion euros in 2023, up 5% on 2022. The textile-clothing sector alone has reached €64 billion, and men’s fashion nearly €12 billion. All this, with exports accounting for 70% of the total.
 
FNW: What are the forecasts for 2024?

ST: Since the beginning of the year, redundancies in the fashion sector have become a decisive factor. The Italian system is made up of a series of upstream SMEs, which produce not only for Italian brands, but also for European brands, mainly French. Estimates for 2024 are in decline. If we end up with the same figures as 2023, we should be happy. These will already be very good numbers.
 
FNW: How do you explain this situation?

ST: The spiral of price rises in the luxury sector has become excessive. This is leading to a reduction in volumes, because there is growth in sales, but this is not matched by an equal growth in volumes. Luxury boutiques that used to sell four products at €4,000 before Covid are now selling just two at €12,000. This is a win-win situation for the brand and a loss for the manufacturer, who produces far fewer items. Suppliers make up the bulk of the Italian fashion industry.
 
FNW: How long have you been noticing this drop in volumes?

ST: We’ve been noticing it for at least six to eight months. When you look at the 40 to 50% growth in turnover for luxury brands, before and after the pandemic, while prices rose three times as much on certain products, it’s obvious that these figures have not been followed by the same increase in volumes.
 
FNW: Which sectors have been hit the hardest?

ST: This dynamic is now significantly present in certain regions, but I would say that it is affecting all Italian regions. The crisis in leather goods was already evident in Tuscany, for example, at the end of last year, but also in textiles, in the Como region, and in the woollen district of Biella. Requests for short-time work are high because of the lack of volume.
 
FNW: How is the luxury goods market developing?

ST: In the luxury sector today, extreme prices are preventing the Western and European middle classes, and even the Americans, from being able to afford certain products. On the other hand, hyper-consumption is also an issue, which has proved problematic in terms of environmental sustainability. This means that the system needs to find a new balance. We are at a time of rethinking the system. We’ve been expanding for twenty years, and luxury as such will probably continue to grow. But we run the risk of having a very aristocratic luxury that is not accompanied by growth in volumes. Yet it is volumes that ensure the economic sustainability of companies. The fewer parts there are to produce, the less manpower there is to fill a supply chain that is struggling to survive. This is a dynamic in which we need to find a balance, which needs to be redefined to some extent.
 
FNW: In other words?

ST: All that is involved; the ability to buy raw materials; to find and transform them; to create a new product; and therefore also the creative capacity and the distribution capacity, all need to find new balances.
 
FNW: What are the other challenges facing the luxury goods market?

ST: There’s an obvious problem with the supply of raw materials. This creates difficulties where prices are concerned, as they will not be able to come down. In a situation like the current one, the need to distribute margins within the supply chain will once again be strongly felt. It’s clear that at a time like this, which is very delicate, the weakest companies are feeling the pressure. If being under pressure is due to the disappearance of certain elements in the supply chain, this becomes problematic for the resilience of the whole production system.

FNW: What about sustainability?

ST: We have to be careful not to make sustainability an absolute value. It’s obviously an important element, but it has to be broken down into several terms. There is environmental sustainability. There is social sustainability, which means that craftsmen and workers must be paid properly. And then there is economic sustainability, without which there can be no business. None of these elements can be set as an absolute value. These elements have to merge together. Including in a transformation model that starts with one condition and ends with another.
 
FNW: How is this transformation taking place?

ST: I think that sustainability will be expressed in different ways in the future. On the one hand, there will be the term durability and repairability of the product for the very top of the range. On the other, we will have a term that refers to the recyclability of products at the lower end of the market. Let’s not forget that, according to estimates, the global textile and fashion industry, which also includes fast fashion, has a turnover of 3,000 billion dollars. It is the world’s largest industry and employs one eighth of the world’s working population. If we think we can halve volumes with the wave of a magic wand, we will obviously also create an equivalent number of unemployed. We need to find the right balance between environmental sustainability and social sustainability.