LOS ANGELES — Only the strong survive.
As Italy’s manufacturing sector continues to get battered by skyrocketing costs and a high euro, it’s no surprise that more and more footwear designers are fleeing to China in favor of cheaper options.
“Italy is falling like a stone,” said Nate Herman, director of international trade for the American Apparel & Footwear Association. “And that doesn’t show any signs of abating.”
Still, a small — but powerful — group of designers and brands remains loyal to Italian product. And more than ever, they’re using the made-in-Italy label as a selling point with retailers and consumers looking for top-quality product.
But current production trends certainly aren’t working in their favor. For the first half of 2008, U.S. imports from Italy dropped 20.6 percent, or about 3 million pairs, according to research conducted by the AAFA. Italian imports have been steadily declining — at the rate of 4 million to 5 million pairs a year — since 2000, when imported Italian footwear peaked at 52.2 million pairs.
Meanwhile, China has continued to cement its reputation as the main production hub for footwear, stealing market share from European producers. In 2007, China was responsible for 83.8 percent of all footwear imports to the U.S., compared with Italy’s 1 percent. And for the first half of this year, China captured 87 percent of all footwear imports.
Designer Giuseppe Zanotti — who continues to champion Italian-made product — recently told Footwear News that Italian factories have been hammered to the point of near extinction. “There is [almost] no manufacturing in Italy,” he said. “There were 7,000 [factories], and now there are maybe 70.”
Despite the enormous challenges they face, Zanotti and other high-end designers remain committed to manufacturing in Italy, at least for the time being.
Smaller labels continue to bank on the “Made in Italy” moniker as an exclusive selling point.
For example, Ruthie Davis, owner and designer of the Davis by Ruthie Davis collection, is creating a “Made in Italy” tab on her soon-to-be relaunched Website to educate customers about her line, which is produced entirely in Italy.
“In the very exclusive and high-end stores and Web sites, being made in Italy is a critical point to tell the customer if you have a retail price at $500 and up,” said Davis, whose shoes, launched in 2006, sell for $500 to $1,300 at high-end boutiques such as Jeffrey, Shoe-In at the Wynn Las Vegas, Ron Herman and Tracey Ross. “It is important for my customer to better understand why shoes made in Italy are so expensive and worth every penny.”
Davis tries to educate customers by letting them know her shoes are made by skilled craftspeople at an artisan factory that has been in the shoemaking business for generations. “Italy is the authentic original,” said Davis. “And all of us who manufacture in Italy will continue to put up with the constraints because it is those very same constraints that make shoes coming out of a place like Italy so special.”
But that’s not to say making shoes in Italy is getting any easier, as costs continue to rise.
Be Inthavong, co-designer of New York-based Be&D, is trying to offset the effects of rising costs by keeping production and distribution tight and maintaining a close relationship with his retailers, which in the U.S. include Neiman Marcus, Nordstrom and select high-end specialty stores.
“You want your retailers to be a home run for you,” said Inthavong, whose company first made its name with handbags and launched footwear in fall ’07. “So we have to keep nailing it. We can’t have five kinds of flats for summer. We have to pick two.”
Smart plays such as this can translate into growing businesses. Sales are up this year for both Davis by Ruthie Davis and Be&D, which is partly reflective of the youth of both companies and the fact that shoes are a new category for Be&D, which has seen a 40 to 50 percent increase in sales since the launch.
“That’s just a sign that [the customer is] looking for something new,” said Inthavong. “But we still have to continue to be cautious.”
Still, there’s no question that production costs are up, and some companies have had little choice but to raise prices. Davis increased her price points to keep up with rising costs, a weak U.S. dollar and suppliers who have also raised costs and tightened their payment terms.
But it’s a delicate balance. “The mold costs for the heels and platforms are very expensive in Italy,” said Davis, “but if I raise my prices too high, I will price myself out of the market.”
Inthavong expressed frustration that his company is already being asked by factories for 2009 production projections.
“Being a larger company almost forces you out of Italy,” said Inthavong. “It’s very difficult because the [problems in] the Italian economy are really hitting factories and operations, and they are imposing it on the brands. We are experiencing it across the board — from lasts to outer leather companies.”
Despite cost woes, for some designers, the innovative capabilities of Italian factories are worth the hassles — and the costs.
“[What’s] important is the fact that there have always been progressive thinkers in Italian manufacturing,” said Frank Zambrelli, one half of design firm Banfi Zambrelli. “The advanced level of design in many new industries requires equally advanced manufacturing techniques.”
Davis agreed: “Although I am a relatively new brand, I am taking the same positioning of any of the super shoe brands made in Italy. I am not compromising on the design or quality and use the best tanneries, heel makers and factories in Italy.”
Francesa Mambrini, designer of her namesake collection, based in Italy, employs 200 people at her factory and said, for her, the decision to manufacture in Italy is not even a question.
“We will always continue to produce in Italy because we want to maintain a high-quality manufacturing level,” said Mambrini. “We differentiate ourselves by offering a high-quality product that we think only ‘Made in Italy’ can guarantee.”
Zambrelli, who has had experience manufacturing elsewhere for clients, said he is content to stay in Italy and ride out the storm. “If a collection was able to weather the euro at $1.60, then the relatively halcyon days of $1.40 that we believe are approaching seem like a relief,“ he said. “We are well aware of the great [manufacturing] opportunities coming out of other nations, yet even with some producers achieving a greater quality than ever before, there remains the issue of materials, components and an infrastructure to match their efforts.”
For Mambrini and others, one bright spot in the difficult business climate is growth in emerging markets.
Sales opportunities have been opening up in Russia, China, India, Brazil, Spain and Poland. The 5-year-old Banfi Zambrelli line has also seen tremendous growth in the Middle East.
However, the U.S. market remains the essential one for Zanotti, and the designer said he has yet to feel price resistance, despite the economy. “Last December, I was nervous because [wholesale] price points increased 15 to 18 percent,” he said. “But my customers bought the same quantity as before. We actually sold 7 or 8 percent more than [the prior season], and in February, it was the same thing.”
Jeffrey Kalinsky, founder of the Jeffrey boutiques in New York and Atlanta, said that while his shoppers are becoming more discerning, if the product is right, they have to have it. “I definitely don’t think that my client is going to trade down,” he said.
High-end retailer Mario’s, which focuses on luxury Italian goods, said that they, too, have not seen price resistance to their footwear business based out of Italy.
“We have many customers who understand the workmanship and quality and design that comes out of Italy,” said Lynwood Holmberg, women’s fashion director for the Portland, Ore.-based retailer. “We have seen that customers will pay for the perceived value of an item — clothing or shoes.”
The store, which carries Prada, Jimmy Choo, Lanvin and others, works closely with its vendors. According to Holmberg, several of the labels looked for creative ways to keep price increases at modest levels.
The AAFA’s Herman acknowledged that the cachet associated with the “Made in Italy” moniker hasn’t eroded completely, but he is not as optimistic about the future of Italian footwear manufacturing.
“I’m not sure anyone can match the capacity that China has,” said Herman, who cautioned that many consumers don’t even realize that some Italian labels may not actually be producing in Italy. And if they do, cost quickly sways their opinions in favor of lower prices. “Customers are not going to Nordstrom anymore, but to Wal-Mart or Kmart,” he said.
Even those loyal to their Italian factories conceded they are uncertain just how long they can remain in Italy. “It’s fighting the machine,” said Inthavong. “Will we beat it? I don’t know.”
For high-end production, Davis said she wouldn’t consider going elsewhere, unless she added a lower-priced line. “If I decide to launch a lower-priced little sister, then I would absolutely look outside of Italy for sourcing and production,” she said.