-1- MADE IN ITALY Textile / Clothing / Fashion Chain MADE IN ITALY Textile / Clothing / Fashion Chain Area Centro Studi September 2005

-2- THE ITALIAN TEXTILE AND CLOTHING INDUSTRY The Italian textile and clothing industry is unique, lively, innovative, and leader in the world. Its innovation ability represents its main and most lasting competitive advantage. The “mission” of the Italian fashion system lies in offering original, and very distinctive products, which meanwhile answer to consumer’s taste and meet his needs. This also implies a continuous improvement in technical performances of fibres, yarns, fabrics, and finishing. The success of the whole chain - from the first processes on fibres to fabrics, finishing operations, and final products for the market - is favoured by the interaction of a sophisticated manufacturing network, where the strength of each element is at the same time a condition and a function of the vitality of the whole system. This dynamic combination of productive, creative, and managing activities involves about 67,500 industrial companies with large, medium, and even very small scale operations. This unique mix still turns out to be the main point of strength of Italian T/C industry, whose about 540,000 employees contribute to roughly 10% of the manufacturing sector’s added value. The strong export trend of the T/C industry is shown by the turnover share totalized abroad, amounting to 62% of total sales. The significant flow of exports ensures a foreign trade surplus of about 12 billion Euros, which compensate, to a large extent, the country’s deficit in energy and agriculture. Besides the value which can be measured in figures, Italian fashion, strongly founded on T/C, has enormously contributed to the definition of the ideas of Italian “good taste” and “life quality”, with positive effects on Italian products all over the world.

-3- MADE IN ITALY FASHION FIGURES IN 2004

-4- THE ITALIAN TEXTILE/CLOTHING (T/C) SECTOR IN 2004 (in current millions of Euros)

-5- THE WEIGHT OF T/C ON THE ITALIAN MANUFACTURING SCENARY IN 2004

-6- ITALY’S WEIGHT ON THE WHOLE EUROPEAN TEXTILE/CLOTHING SCENARY IN 2004

-7- AN INDUSTRY WHERE LARGE AND SMALL COMPANIES COEXIST SUCCESSFULLY The international success of Italian T/C has been favoured by the co-existence, on an equal status and importance basis, of large companies and SMEs. The innovation ability as well as the attention to the quality of materials and processes characterize large concerns, whose brand names can be found in the shops all over the planet. Medium-sized enterprises are often world leaders in particular market niches, while small companies are specialized and excel in one or more specific production stages. The whole chain is made of about 67,500 enterprises, of which roughly 90% with less than 15 employees.

-8- ENTERPRISES, EMPLOYEES AND TURNOVER IN THE ITALIAN TEXTILE/CLOTHING SECTOR (2004) (*)

-9- The T/C Sector’s Foreign Trade

-10- THE ITALIAN T/C SECTOR’S FOREIGN TRADE The Italian T/C industry is strongly export-oriented: actually, more than 62% of the total turnover is achieved thanks to foreign markets. The figure of 26.6 billion Euros in foreign sales totalized last year represents 10% of the whole Italian manufacturing industry’s export value. In 2004 net export reached 11.7 billion Euros, i.e. 31% of the whole manufacturing industry’s trade surplus. Other fashion related products (such as shoes, goldsmithery, leather products, cosmetics and glasses) accounted for a further 10 billion Euros surplus. That’s to say that the “Oil of Italy” can roughly completely compensate for the country’s deficit in energy, food and agriculture. In 2004, the flows of Italian TC products towards European Union markets (15 countries) raised by 1.4%, while those towards the 10 new members decreased by 13%. Outside EU25 (which absorbed 54% of total Italian TC foreign sales), exports to USA (third largest market for Italian fashion system) recorded a drop of 2.6%, Japan lost 8.5%, while Russia (tenth biggest customer) was the most dynamic market (+11,2%). A significant increase was also recorded by exports to Hong Kong (+5,1%). On import side, China has furthermore consolidated its leadership position among top Italy’s suppliers (+13.7%). In 2003 Italy was the third world’s exporter of textile products (about 8% of the total amount), after China and USA, recording a CAGR loss ( ) of roughly 1%. In 2003 among the main clothing exporters our country was placed just behind China, however showing a CAGR drop near to 2%.

-11- FOREIGN TRADE FLOWS OF THE ITALIAN TEXTILE/CLOTHING INDUSTRY (2004) The composition of Italian T/C’s trade surplus in 2004

-12- TRADE PARTNERS OF THE ITALIAN T/C INDUSTRY IN 2004 (in millions of Euros) The top 10 customer countriesThe top 10 supplier countries

-13- THE MAIN WORLD’S EXPORTERS OF TEXTILE PRODUCTS ( )

-14- THE MAIN WORLD’S EXPORTERS OF CLOTHING PRODUCTS ( )

-15- The geography of the Italian T/C sector

-16- THE GEOGRAPHY OF THE ITALIAN T/C SECTOR This heritage of specialization and this network of relationship find a special form of organization in the so-called “industrial districts”, the Italian contribution to industrial organization models. Actually, the Italian fashion industry is located into an archipelago of specialized districts: Como for silk fabrics, Biella, Prato, and Vicenza for wool yarns and fabrics, Castelgoffredo for women’s stockings, Carpi and Treviso for knitwear, Empoli for leatherwear, Pesaro for denim apparel, Grumello for buttons, Brescia for socks producing machinery, and so on. The close interactions between different companies, which in most cases are located in specialized districts, are case studies at the main universities and business schools all over the world as a model of successful industrial organization. Industrial districts are particular manufacturing structures, merging advanced technical and organisational solutions with the craftsman tradition which represents an important springboard for creativeness, allowing the quick production of prototypes, small production lots, and a large number of product variants. In some of these specialized districts, the T/C industry is a fundamental element of social relations, local culture and, of course, business practice.

-17- Varese Como Bergamo - Brescia Mantua Biella - Novara Vicenza - Treviso Padua - Rovigo Modena - Reggio E. Teramo - Pescara Prato - Pistoia - Florence Arezzo - Perugia Bari Lecce Naples Milan WHERE MADE IN ITALY FASHION IS BORN

-18- ITALY’S MAIN T/C DISTRICTS (2004)

-19- Retail system and chain model

-20- CONSUMER - INDUSTRY COMMUNICATION: RETAIL The industry’s attention to the consumer’s behaviour was favoured in Italy by the existence of an articulated retail system, with a significant presence of independent retailers. The need to modernize retail outlets is leading to a rapid evolution of the retail system towards more highly structured models with larger sales areas. The retail system of the early 21st century requires a stronger producer - retailer - consumer interaction, a new technology in communication as well as a new organisation of the T/C production cycle from the first yarn processing to the point of sale. In this direction is moving the huge flow of investments and reorganization projects underway in Italian companies all over the production pipeline. Retail channels in Italy, clothing items (2004) (% weight) Source: SitaRicerca

-21- THE CHAIN MODEL DESIGN INDUSTRY RETAIL VALUE CROSSES ONE SINGLE CHAIN :   TECHNOLOGY   INNOVATION   QUALITY/PRICE HOW TO TURN TECHNOLOGY INTO ART IN ORDER TO TRANSMIT TO CONSUMERS AN UNIQUE IMAGE

-22- MADE IN ITALY FASHION SYSTEM AUTHENTICITY (Made in Italy) ORIGINALITY (From Renaissance to XXI century) TECHNOLOGICAL LEADERSHIP (The textile districts) EXCLUSIVENESS (Italian life style) QUALITY/PRICE RATIO (Value for money) ORGANIZATION EFFICIENCY (The chain model)

-23- For further information: SISTEMA MODA ITALIA Economic Studies Dept. Viale Sarca, Milan Italy Ph. no Fax no