Globalization and high fashion

Predictably, even the high fashion industry has started producing in low-cost countries.

I notice in Eugene that the $3k Natuzzi Italian leather sofa set is competing against a $1.2k Italian leather, but made in China, sofa set made by some company called Shanghai Living. Both have nice modern lines and would look at home in Dwell magazine. Last time I was in Shanghai a few years ago I was amazed at the huge furniture showrooms there, packed with buyers representing furniture distributors from all over the world. The Shanghai Living stuff was brought to Eugene by an enterprising store owner who liked what he saw and "bought an entire container".

According to the WSJ article (excerpt below), hourly fashion manufacturing wages are about $20 in Italy and France, and under a dollar in China. The guy who says it will take 15 years for full delocalization of production is dreaming. There are already armies of good designers (not just armies of workers) in Asia who are ready to take business from these guys.

See here for how design and manufacturing are done today.

WSJ: The move out of France and Italy is only just beginning. Fashion executives say some production won't ever move to low-cost countries because Italian craftsmanship is still unparalleled. Sophisticated items made in low volumes -- such as hand-woven leather handbags -- may always be "Made in Italy," for example. For the rest, the industry thinks it's only a matter of time.

"It will take another 15 years until luxury brands' main lines are completely delocalized, but it will happen," said Tonino Perna, chief executive of IT Holding SpA, which manufactures relatively affordable collections for labels such as Versace and Dolce & Gabbana. IT Holding makes about 30% of its clothes and accessories abroad. Executives say privately that more fashion brands are producing outside of Europe than the number who care to admit it.

This shift underscores how the developing world's manufacturing talent is improving to the point where even quintessential luxury products are starting to move offshore. It's also a sign of the extent to which high-end products are under pressure from low-cost alternatives.

Companies from sneaker makers to automotive giants have long outsourced to China and Mexico, but luxury-goods brands have always touted Italian and French production as essential to the luxury experience. The "Made in Italy" label, with its centuries-old history of artisanship, has justified exorbitant prices. If their clothes are stitched at low-cost factories, how will consumers react? Will luxury brands eventually have to bow to pressure and lower prices at the expense of their margins?

Many Italian fashion houses fear a backlash if they're seen hastening the decline of Italy's textile industry. For more than a century, that sector helped power the Italian economy, the fourth-largest in Europe. As companies outsourced production, sales of Italian textiles have fallen more than 10% in the past three years, with 24,000 textile manufacturing jobs lost last year, according to Italy's textile association. How to stop the trend, which is contributing to Italy's current economic malaise, is a hotly debated political issue.

"Our 'Made in Italy' has to be defended with force," Claudio Scajola, Italian Minister for Productive Activities, said at the Milan fashion shows, which started this week.