Reacting to the Crisis
March 16, 2010 Despite being considered the seventh-largest economy in the world, Italy entered the global financial crisis before many other countries and felt more of its costs than its competitors on both the import and export sides.
The sharp reduction in consumer demand, anticipated and reinforced by the turmoil in the financial and property markets, has revealed structural excesses of production capacity in a number of sectors, including the textile market, which was dramatically hit by the downturn. As a direct consequence, many companies have been compelled to close, while others have seen their sales and exports curtailed by 20, 30 and even 50 percent.
Two main reasons for this crisis loomed large: the lack of orders and the reduction in profits. Before the crisis, the Italian textile sector contended with negative issues such as insufficient innovation, slow structural adjustments and other limiting conditions like high labor, electricity costs and credit restrictions. However, since these enterprises remained relatively profitable, they did not focus enough of their energies on addressing ongoing concerns. As a result, Italian firms’ competitiveness continued to erode and now, facing difficulties exacerbated by the crisis, they are focusing on finding long-term solutions.
Although going deeper into debt in such a difficult economic climate can be dangerous, experts suggest that there are just two ways to beat the crisis: either close down the shop or invest more. Recent statistics reveal that Italian businesses are willing to take the risk of investing more. This is supported by the fact that business confidence is improving. According to a poll conducted by Banca d’Italia and the Italian financial newspaper, Il Sole 24 Ore, business leaders are more optimistic about the duration of the crisis. The poll of about 500 small- and medium-sized businesses showed that 58 percent of the entrepreneurs believe that the Italian economy will be considerably better in the next two or three years.
Paradoxically, the gloomy situation is a stimulus for many companies, as they are compelled to improve their organization by investing in the quality and the value of their production. The strategy is to concentrate on the development of the most successful and interesting products while continuing research of new materials. Many companies, in fact, think that the crisis may be seen as an opportunity, emphasizing the peculiarities of “Made in Italy” — the innovation, the design, the quality and the service.
The Spinning Sector
Speaking in particular about the spinning sector, we have to point out that those spinners who diligently sought new markets, new points of differentiation and new products, and who were able to deliver additional value to their costumers, found a niche. They have not switched off spindles and rotors like others, but instead have increased automation and productivity, developing specialized products and very good service.
Consider the case of two medium-sized spinning mills in the Seriana Valley, located near Bergamo, once one of the most important textile areas in the North (now reduced to just a few mills mainly belonging to old textile families who keep their businesses open in a zone that doesn’t offer many other career possibilities). These two companies — specializing in open-end and ring-carded yarns, ranging from apparel to denim, from bed linen to furnishing — cater to a different array of customers thanks to their investment in new machineries and technology and their concentration on products with added value and contents. These companies are now able to fight and compete against imports and enjoy a solid reputation among their Italian and foreign customers.
However, notwithstanding efforts such as these, there are still negative points of concern. The Italian consumers’ trust continues to display a high level of pessimism. Data released this past October by Confcommercio (the Italian Commerce Federation) reveals that spending dropped further, despite Italian Government incentives, and is now back to the August 2009 level. The Italian textile industry must help consumers overcome this pessimism.
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