The fashion system can be considered a cluster of closely interconnected industries. Often attention is focused only on the end products, in spite of the fact that these are the results of a long and developed chain of stages and activities whose interaction is largely responsible for the products final success on the market.
An issue that textile companies face is that they are somehow hidden in the value chain for the final customers but are fundamental to give to the product the right aesthetic value for money, fit quality and comfort.
The Value chain
Some textile companies in the past went from upstream to downstream:
- Ermenegildo Zegna
- Loro Piana
They began as spinning mills and now they produce the finished product and are also retailers.
Ermenegildo Zegna is an italian luxury fashion house that makes men’s clothing and accessories. Founded in 1910 when Ermenegildo bought his father’s textilelooms, it is now managed by the fourth generation of the Zegna family and remains in family ownership. As well as producing mens suits for its own labels, it also manufactures suits for Gucci, Yvws Saint Laurent, Dunhill and Tom Ford. As one of the biggest global producers of fine fabrics (2.3 million metres per year), Zegna has been active in promoting improvements in wool production around the world. Zegna is the largest menswear brand in the world by revenue €1.3 billion (2013). Alessandro Sartori oversees creative direction for all departments of the brand.
- mens suits
- small and large leathergoods
- made-to-measure suits
Zegna’s range includes fabrics, suits, neckties, knitwear, shirts, accessories and sportswear. They have also branched out in other areas, for instance upholstering the interior of automobiles such as the Lancia Trevi Volumex in 1982, and a limited edition, sixth generation Maserati Quattroporte sedan.
Ermenegildo Zegna has a yearly output of over 2.3 million meters of fabric, 600,000 sleeve units suits, 1.6 million pieces of sportswear and 1.7 million textile accessories. Zegna employs over 7,000 workers worldwide. The export quota was more than 90% in 2010 divided equally between Europe, Americas and Asia. As one of the biggest buyers of ultra-fine Merino wool, Ermenegildo Zegna has encouraged, supported and rewarded the efforts of the Australian wool industry since 1963 in the production of finer and softer wools.
Loro Piana is an italian clothing company specialising in high-end, luxury cashmere and wool products. The company has stores in Europe, North America, and Asia, totalling 132 stores worldwide. Today it belongs to LVMH. In 2012, turnover reached €700 million and net income represented 20% of sales. In December 2013, LVMH announced that Antoine Arnault would become chairperson of Loro Piana. In 2016, revenue was estimated at €800 million. The company produces about 5 million meters of fabric each year, and supplying textiles to other brands accounts for about a quarter of its revenue.
Others stay in B2B, they sell fabrics and not the final garments. Examples are:
- Mantero for silk accessories
- Albini Group for cotton
- Vitale Barberis Canonico for wool fabrics
Albini acquired a spinning mill company in order to control the yarn phase and started to cultivate the cotton in Egypt in order to provide the best raw materials.
Vitale Barberis Canonico is an italian fabric mill established in 1663, located about 50 miles north of Milan in the northern Biella region. Francesco Vitale Barberis is the current creative director. The company’s largest customer is the Italian fabric mill and luxury menswear fashion house Ermenegildo Zegna. Vitale Barberis Canonico has remained a family-owned business for 15 generations.
Revenues and Corporate Governance
Most of italian textile companies are family run businesses. This assures investments continuity and know hows transmission throughout generations. It is a very complex business. Companies do not have the same level of margins than the companies of finished products. Companies must invest a lot in technologies, but sometimes the value created is not recognized.
Ingredient branding is the strategy that can be followed to make the value to be perceived and to get a premium price on the market. Ingredient-branding is creating a brand for an ingredient or component of a product, to project the high quality or performance of the ingredient. It makes the invisible visible as its said in book of Koler, Philip; Pfortsch Waldemar: Ingredient Branding – Making the Invisible Visible, Springer 2010
Ingredient-branding takes a special position in marketing, as it cannot be clearly allocated to either industrial or consumer goods marketing. On the one hand, the consumer is the end-user of the ingredient, but at the same time is not part of the buying decision for the component, as this is up to the producer of the end product. On the other hand the producer will only decide on the usage of the ingredient – or at least take it into account in the communication policy – if the image of this ingredient will have an effect on the consumer, meaning a positive influence on his or her buying decision. In other words its key that the final consumer is aware of the components that are inside the final product.
So why to develop Ingredient Branding Projects? Because it:
- Creates value for the customer: promotes value for money, image and corporate social responsibility
- Educates the customer about the function, features and benefits and therefore increases customer loyalty
- Establishes a premium price and therefore increases profitability
- Establishes entry barriers in the sector
- Increases brand equity