1. The economic value of creativity
Hermes lab srl
Bangkok, december 29, 2003
The economic value of creativity
The business model of the italian fashion clusters
Marco Ricchetti, CEO, Hermes lab, Italy

2. The economic value of creativity: outline of the presentation
Brief summary of
the Italian fashion industry
The Fashion business
Fashion clusters, advantages and
new challenges

3. The italian fashion industry in figures
Textiles, clothing, leather goods, footwear
2002
2003 (fcst)
Turnover (mln Euros)
71,097
70,031
Trade balance (mln Euros)
+19,146
+16,781
Employment
925,000
Share in World exports (%)
9.8%

4. Fashion industry vs. TC industry (1)
What we mean when we use the term fashion industry
Fashion is, by definition, change.
Success in fashion comes with the ability to grasp and recreate in clothes and accessories the ethereal spirit of the time and voluble desires of customers.
Fashion adds an important design dimension to textiles or leather artifacts, which is capable of providing a continual and varied flow of new products

5. Fashion industry vs. TC industry (2)
The factories manufacture clothes,
but consumers buy
emotions, hope and dreams
The failure of marketing.
Competition focus on immaterial (intangible) factors

6. APPAREL MARKET BY PRICE-SEGMENT
Fashion vs Luxury (1)
A fashionable good can be a luxury good,
but not necessarily is so. Very often it is not !
LUXURY
The high-end
luxury market,
accounts for
a very small share
of the market
BRIDGE +
BETTER
MODERATE
BUDGET
APPAREL MARKET BY PRICE-SEGMENT

7. fashion and variety matter.
Fashion vs Luxury (2)
holds a strong position in luxury (designers), bridge and better segments
And, most of all, where
fashion and variety matter.
Italy

8. Fashion and Risk RISK Variety and the low predictability Increasing
of factors that make
a new product
a best seller or a worst-seller
generates a risk far greater
in fashion
than in other industries
Increasing
uncertainty
and risk
very high
When fashion comes into play, a garment’s commercial life
shortens frequently to less than four months. On the other
hand, that same garment is the fruit of investment into
stylistic research and development along the whole of the
production chain - from the yarn to the finished garment -,
about two years work.
high
Medium to high

9. The fashion pipeline A reduction of risk can be
BUREAU DE STYLE
FIBERS MANUFACTURERS
FASHION TREND FORECASTS
The fashion pipeline
PROTOTYPES
YARN
MAKERS
A reduction of risk can be
acheived trough a complex
interaction of goods and
information flows.
PROTOTYPES, SAMPLES, TRADE FAIRS
FABRIC
MAKERS
DESIGNERS
PROTOTYPES, SAMPLES, TRADE FAIRS
Key competences are:
Strong ralationships
along the pipeline
Combined with
flexibility
Mastering of
innovation routines
GARMENT
MAKERS
PROTOTYPES, SAMPLES, TRADE FAIRS
RUNAWAY SHOWS
SPECIALIZED
PRESS
ADVERTISING
CULTURAL
INDUSTRY
OPINION MAKERS
RETAILERS
SALES POINTS
FLOWS
INFORMATION
GOODS
CONSUMERS

10. The advantage of clusters
Strong ties
Within a cluster the whole pipeline
is often reproduced,
sometimes it extends
to the manufacturers of specialized machinery.
The close relationship between
users and providers
of machinery and intermediates
is decisive
in the introduction of new products,
and new processes.

11. The advantage of clusters
Know-How
The concentration of professional skills
applied to all phases of the pipeline
is powerful
and marked by
a great variety of operators.
Knowledge and information
circulate easier inside
than outside the cluster.

12. The advantage of clusters
Innovation machine
Merging of advanced technical
and organizational solutions
with the craft traditions
build a remarkable platform
for creativity and innovation
(rapid development of prototypes,
short run series, great array of variants).

13. The advantage of clusters
Entrepeneurial competence
The small to medium size of the companies
does not prevent the world
to be considered by entrepeneurs
as their reference market.
Company structures are lean and flexible.
Family ownership is very common,
providing quick decision making,
long-term planning and commitment.

14. A critical weakness of clusters
Industrial cluster heavily focus on manufacturing know-how
while
in fashion industry
specialized services
(design, communication, cultural industry etc….)
Are of crucial importance
Actually, main fashion clusters developed around two
urban centres that played the role of services providers:
MILANO and FIRENZE

15. A map of italian fashion clusters
Most of fashion clusters in Northern Italy
Are within a radius o 200Km around Milano
Most of fashion clusters in Central Italy
Are within a radius o 150Km around Firenze

16. Challenges for the future
The fashion business in the ‘80
Communication
Design
In the past, fashion clusters built their succes focusing
on manufacturing buying
on the market the necessary specialized services
(including retailing).
Culture
Society
Consumption
Retailing
Manufacturing
The core competence of fashion clusters

17. Challenges for the future
The fashion business in the new decade
Competition in fashion goods
urges companies to approach
the market in an integrated
way.
Manufacturing Know-
How becomes less important.
Brand image, communication, control of distribution
channels are the challenges
for success.
Culture
Society
Consumption
Design
Communication
Multi-competence
company
Manufacturing
Retailing
Will the cluster companies be able to expand their
core competence ?

18. Marco Ricchetti, CEO, Hermes lab, Italy
Hermes lab srl
Bangkok, december 29, 2003
End of presentation
Marco Ricchetti, CEO, Hermes lab, Italy