Made in Italy: the Flaws in an Industrial Model Under Pressure

The Piedmont-based house, which joined the LVMH portfolio in 2013 for an estimated €2 billion, has established itself as one of the most accomplished symbols of European ultra-premium luxury. The price of a coat can easily exceed €10,000, while certain vicuña pieces top €25,000. Yet behind this promise of absolute exclusivity, the scandal that came to light in Milan last year served as a brutal reminder of another reality: that of an Italian luxury industry whose excellence relies on a network of suppliers that is often fragmented, sometimes opaque, and subject to growing economic pressure.

Indeed, last July, Italian courts placed Loro Piana under temporary judicial administration as part of an investigation into subcontracting workshops indirectly linked to its production chain. Two Chinese workshops located on the outskirts of Milan had been shut down for alleged worker exploitation and safety violations.

Although the company itself was not criminally prosecuted, the Milan prosecutor’s decision marked a symbolic turning point: for the first time, the responsibility of major fashion houses was being examined not only in terms of the finished product, but also across their entire supply chain.

Above all, the case highlighted a reality well known to industry professionals: in Italian fashion, the manufacture of a garment can involve between five and fifteen successive subcontractors, from spinning to final assembly. This historical fragmentation, inherited from Italy’s industrial distretti, constitutes both the strength and the vulnerability of “Made in Italy.”

Even today, more than 40% of Italian luxury textile production remains concentrated in Lombardy, Piedmont, Tuscany, and Veneto. But behind the historic workshops lies an extremely fragmented network of companies: more than 60% of them reportedly employ fewer than ten workers. This structure makes the inspections and monitoring carried out by law enforcement—measures implemented by the Ispettorato del Lavoro (Labor Inspectorate)—particularly complex.

“The problem for years has been the intense pressure on the production sector, whose margins are shrinking ever further,” explains Edoardo Secchi, president of the Italy-France Business Club.

“Major brands are increasing their margins through higher retail prices, but also by lowering the amounts paid to suppliers. This pressure is driving some of them to outsource even more work to workshops where labor is exploited and underpaid.”

This economic pressure is part of a broader context of a slowdown in the accessible luxury market. While the most exclusive houses, such as Hermès, continue to post solid financial results, the mid-range luxury sector faces a more demanding, less captive consumer who is increasingly attentive to issues of ethical consistency.