Since then the whole world market has been glutted with the Chinese products.
Italian textile manufacturers are eager regarding the market condition. The competition posed by China is not only reducing the profit margins of the Italian textile industry but also effecting the employment conditions in the industry.
The leading industries of Italy are the clothing and textile industries. About some 68,000-fashion businesses, majority of, which are small, are located in the country's north side. The revenues come from exports and constitute about sixty percent.
The lively combination of productive, creative, and managing activities turns out to be the main point of strength of Italian textile and clothing industry, whose about540,000 employees contribute to roughly 10% of the manufacturing sector's added value. (Made in Italy, 2005) However, the problem is a decrease of turnover of Italy's fashion industry because of the invasion of Chinese products into all of Europe.
As a result the sector has been struggling in recent years, losing more than Euro 5.2 billion (US$6.3 billion) in turnover since 2001. The financial decrease has led to the closing of some companies and the sacking of some 90,000 workers. According to Italy's national statistics office, production of clothing and textiles fell by 7 percent, while shoe production decreased by 10 percent, corroborating recent reports that footwear from China is treading at a rapid rate on what used to be a flagship of Italian style. (Italian designers, 2005)
In 2003 Italy was the third world's exporter of textile products (about 8% of the total amount), after China and USA, recording a CAGR loss (1995-2003) of roughly 1%. In 2003 among the main clothing exporters the country was placed just behind China. (Made in Italy, 2005)
Although the Italian sector is currently facing unprecedented challenges but these challenges can be faced only by innovation. These include the abolition of quantitative restrictions (quotas) which took place on 1st January 2005. These challenges are occurring in a period of marked slowdown in economic activity, which has a significant impact on sectors such as textiles and clothing. Furthermore, at the same time the Euro has shown a significant upward trend against the US dollar. All in all, every segment of textiles and clothing production, from spinning and weaving to garment make-up, has in one way or the other suffered from the impact of the developments of the last few years. (Textiles and clothing sector in the EU-25) The years 2001-2004 have been particularly difficult for the industry. After substantial falls in production and employment in the previous three years, it is estimated that in 2003 production fell by a further 4.4% and employment by 7.1% (EU-25, source: Eurostat). The trade deficit (EU-25) amounted to 29.4 billion in 2003, the trade in textiles reaching a surplus of 3.7 billion and the deficit in clothing 33.1 billion.
What Italian companies need is to be flexible, creative, and innovative. Their weapons are professional knowledge and a great sense in luxury.
Another opportunity which Italian companies can utilize to their benefit is the size of the companies. The structure of the industry is changing becoming aggressive and difficult to govern. Small companies are able to react with agility and intervene speedily,