In the Harvard Business Review of 1998, Harvard professor, Michael E. Porter, underlined the competitive advantages of clusters, that is, districts, that manage to grow due to “external economies”, through mutual actions and competition/cooperation between operators along the same production chain – also by stimulating innovation. The characteristics and potential of these districts are very well known to business strategy theorists, like Professor Porter, who highlighted the fact that a district allows each member to gain advantage as if working on a great scale or as if it were formally united to others but without giving up on flexibility. Marco Carniello, Jewelry & Fashion Division Manager at IEG, starts exactly from this concept as he commented on the difficult situation that the entire industry is experiencing at the moment due to the Covid-19 emergency. «Reference to Professor Porter’s Harvard analysis on the value of clusters, or rather, districts, is extremely fitting in a moment such as this which is penalizing business due to the serious economic uncertainty, even if orders are holding up. As we know, the production value of the Italian jewelry industry is generated by about 8,000 companies employing around 30,000 people, in other words, about 4 workers per company. All the companies are practically grouped into the famous Italian “districts”. Why do I mention all of this? At a time of such enormous economic uncertainty as this, with Covid-19, we can truly say that the districts can count on that characteristic flexibility that allows them to overcome “shocks” and adapt to changes on the market scene.
For this reason, at least in relative terms, today’s Italian jewelry companies, which have already experienced periods of great change, are in a better condition than other sectors to overcome this critical moment and perhaps even reap the odd new opportunity. Because Italy’s strength has always come from small, coordinating companies». So, who is suffering from the slowdown in Chinese production? «The great slowdown in turnover is affecting those who are highly exposed to the Chinese market, such as the watch industry. In regard to Italy, the slowdown in Chinese production will probably lead to a reshoring, even if the cost war is not evenly matched. China is convenient when a company works with large volumes and quantities which are, however, not so consistent with demand these days. We must differentiate the risk so that the market does not absorb such high volumes. Let me give an example. Instead of buying 100 pieces at 10 Euro, companies are willing to buy a little less in order to reduce stock. This dynamic is gathering speed as this pandemic coronavirus emergency continues. Companies prefer to buy and receive immediately. Jewelry companies are now stronger and more used to managing shocks because they have diversified according to the client base, worked on both fixed costs and the subcontracting network. They have acquired a high level of resilience». But, if we wanted to “photograph” the Chinese consumer of tomorrow, what might we foresee? «Let me quote some numbers resulting from Bain’s study on the future of luxury. Chinese consumers in 2017 represented 32% of the total in terms of global luxury purchases. According to forecasts, in 2025, this figure will stand at 46%. This refers to imported domestic purchases and foreign purchases. Therefore, the impact is extremely strong and should be monitored».