In Italy, luxury items show vulnerability and resilience in economic crisis
“It’s been a disaster, a disaster,” bellows Ubaldo Grazia.
The owner of his family’s 500-year-old ceramics business isn’t talking about the financial meltdown in his country or the Eurozone debt crisis, but the weak U.S. economy that he said had cost him one customer after another. Saks, Tiffany, Nieman Marcus, Williams-Sonoma — his list goes on.
Grazia’s company, now in its 25th generation, is one of dozens of ceramics makers struggling in this picturesque medieval town known for its handcrafted pottery. Business has fallen so low — down to just five painters from 75 a few years ago — that he’s worried about whether it will make it to the 26th generation.
A half-hour’s drive away in central Italy’s Umbria, in the hilltop village of Solomeo, Brunello Cucinelli seems a picture of contentment inside his 14th century castle, headquarters for his thriving cashmere clothing company named after himself.
Cucinelli is expecting another double-digit growth in sales this year, in part thanks to emerging markets like China. The self-styled philosopher-entrepreneur has made enough money to help restore the village church, repave streets and build a 240-seat theater that looks like Rome’s Pantheon.
“I want to make profits with dignity,” said Cucinelli, 58.
The contrast between the two Umbrian businesses shows both the resilience and vulnerability of one of Italy’s staple industries — luxury. Whether cashmere sweaters, designer handbags or sports cars, Italy’s luxury goods are famous the world over, but the Great Recession and the region’s widening debt crisis have severely tested old formulas and markets.
Many of them are hoping for an eventual lift from Italy’s new government and the promise of economic reforms, even as the country braces for pain from austerity measures to come. On Sunday, Italy’s new prime minister, Mario Monti, announced approval of spending cuts, higher taxes and other proposals to “reawaken” the economy and help avert a collapse of the euro.
Italy’s luxury sales have bounced back after they were hammered by the 2008-09 recession, but its future — like that of many other industries — will depend also on how well they adapt to the new realities of globalization.