Patrizio Bertelli (Gruppo Prada) e Gildo Zegna (Ermenegildo Zegna)

We have listened to Minister Di Maio and his proposal for the export pact. Naturally, working in newspapers for many years, general states, pacts for export or pacts of any kind have sometimes had a positive function, other times they have become large discussion forums that then did not deliver what companies and workers expect: effectiveness, results, presence, an increase in the share of exports of companies in the international system. This is an important point because there is the government's proposal, but then there are the needs and considerations that companies are making at this moment. From this point of view, I believe we could not do better than to discuss it with two very important representatives of the fashion world: Patrizio Bertelli, CEO of the Prada Group, and Gildo Zegna, CEO of the Zegna Group. Before moving to the discussion, two brief video presentations.

So, I take the floor again to speak with Patrizio Bertelli, CEO of Prada, and with Gildo Zegna, CEO of the Zegna Group. They are present all over the world, with revenues and products abroad for over 80, 90 percent. Let's start: you are connected, I see you. So, Minister Di Maio spoke about the fact that for exports, he said, we need to face a new post-coronavirus world. You are heads of such internationalized companies. What is your first comment on Di Maio's words and this pact? Then we will go into the merits of the various markets, which is a bit our theme today. Who wants to start? Patrizio Bertelli?

I have a consideration because in the other appointment we had on Thursday, we talked about the fact that fashion does not feel considered by the government, not seen as an industry, but rather only the more glamorous aspect is seen, not the industrial part. This complaint from the fashion world emerges very often. Patrizio Bertelli, your comment?

I naturally listened to what you said, and I know it's a criticism that also came immediately after the convocation of this export pact. But my point is that you also said that fashion in Italy perhaps cannot even make a system. There are two very different representative bodies, a bit of individualism and anarchy that doesn't lead to what many countries manage to do: present themselves as a well-structured phalanx.

But to say that you yourself have somewhat criticized the fact that fashion has too many voices... I don't want to dwell too much on this topic because today I would like to focus a bit on the theme of markets. We need to understand how markets are moving in light of this serious crisis. This pandemic started in China, which we said is the main market for luxury, particularly for the Zegna Group. Gildo Zegna was saying that for them, the first market is China. You are also listed in Hong Kong, which is not exactly China, and there are some laws we will address. Now I wanted to understand from you how these markets are moving: China, the United States, which is just coming out of lockdown these days. Will they be different markets compared to pre-Covid? Gildo Zegna, and then I'll also intervene.

We have been in China since 1991, so my experience in China is almost as long as my career at Zegna. It is a unique market. The future will be in China again. Today, China represents 30% of the global luxury market, considering that more Chinese buy abroad than in China until yesterday. This year promises to be a bit different. Forecasts are that it will represent 50% of luxury by 2025, so we are very close. The Chinese are in love with 'Made in Italy'. They are consumers who initially went for status, but now they go for taste, for function. They can discern between high added value and not. They are starting to look carefully at sustainability, they are interested in traceability, they are extremely technological. So all the discussions about China start from China, starting with services. They look at online and offline interchangeably. And there is a strong attention to personalization. I think these characteristics will become even more magnetic, even more important. Since we are quite tied to this market, our lockdown started at the end of January, so it's been four months until yesterday. We are still far from America after these riots, having opened in mid-May and then closed again with all the stores going around America. It's incredible. They are two totally different realities. China has reopened greatly, and I believe that Bertelli and we are fortunate that in May and June we are more or less at the same level as last year. We went down to 93-100% of the environment in February, to minus 50% in March compared to the previous year, to minus 20% in April, and from May we are equal or slightly higher. In July, China has a recovery capacity. We saw it in specific countries, but it came out great because they took very, very serious measures. After an initial slowdown, the consumer reacted seriously. Keep in mind that the young consumer is the key, which unfortunately we don't have in Europe, Japan, or the United States. So the young consumer is coming out with enthusiasm, with impulse spending for brands that have capitalized value. And who better than 'Made in Italy' fashion carries this message? I believe this will continue. I remember the period of the 2008-2009 crisis: China pulled us out. I remember SARS, when it seemed everything was lost, and in three months it was over. So I am certain that China will continue this successful gallop for Italian fashion. So we must continue to believe in it, continue to invest, regardless of what happens in America. If I have one euro to spend, I spend it in China, thinking about the future, because I want to be an important part of that 50% of luxury that today is in China. Those who invested like us, like Ferragamo, like Prada in the early years with important organizations in China, believed in it, and today they fortunately have important returns that compensate for the negatives or certain problems we can discuss in the American market. Today, it is more or less the first or second luxury market. It is certainly in difficulty. We will also address the American market because it has completely different characteristics from the Chinese one. I recall that Zegna was born in China. The first store was actually inside a hotel. It was truly a different era compared to what China is today.

Patrizio Bertelli, a comment on this as well?

On this point, I wanted to say: you are listed in Hong Kong. Hong Kong was a very important market for luxury, with the largest stores in the world. But it was predominantly Chinese buying. What impact will this crisis, the social crisis, have?

There is a huge downsizing, at least for two years, at least until 2022. I believe the position will be very critical. Part of the Hong Kong market will move to Macau, which the Chinese government has decided to give the opportunity for Chinese to return to Macau, so Macau will take a bit of Hong Kong's place. But globally, we have to see it globally. When we do the consolidated, we put all these places together. So yes, Hong Kong loses, but we will certainly recover in China, Macau, and other places. Singapore is also doing well. Now there is a lockdown, but I would say the entire Far East, when it reopens, in a short time, as Gildo said, in about a month or a month and a half, returns to 2019 parameters. In Europe, we have a problem. It's not that Europe is doing so badly, but tourism is missing. So all brands are trying to work with locals, and I would say the reactions are good. But tourism is missing. The drop in revenue in Europe is the lack of tourism. Until we see the airline system functioning at full capacity, we will have this problem. Then you saw that China also passed a law that air travel is allowed for distances of three hours of flight, or three and a half hours. They have covered all the reference points of their market. So it is a country that, with the lockdown, is projecting itself to recover its internal GDP, forcing, so to speak, Chinese not to go abroad but to buy internally. So as he said, all those who made investments like us, him, and others, made serious investments in China, not thinking about the usual tasteless suits we have seen in recent years. We took it as an important, serious, professional market. The result is this. I don't see a crisis in the fashion industry. I don't see a crisis. I see exactly a slowdown caused by what we all know, but I absolutely don't think that in 2022 we won't all be back to the same levels as before, or even better.

I wanted to return for a moment to the differences between markets. We mentioned it, but we are on a public platform, and the audience may not be entirely expert in the sector. So I tend to make some clarifications so that everyone understands what we are saying. We talked about the crisis of American department stores. Gildo Zegna, that is a typical distribution model in the United States, different from the Asian model with malls. Gildo Zegna, briefly, can you tell us about this diversity in distribution models so that all the people listening can understand the things we are talking about?

I have a slightly different opinion. There are those who say that the mall is finished and those who say it will be as before. I am in the middle, not because I am a mediator, but I truly believe it will not be the same as before. If I look at our numbers, Hong Kong was among the top five global markets. It was a city that was a market as important as a major market. In five years, we have dropped more than 50%, and I believe this year we will have very few points, maybe not even four. The fact is that Hong Kong lived 70% thanks to Chinese visitors, who today are totally going elsewhere. They stay in China, as Bertelli said, they go to Singapore, they go to Hainan. Once they came to Europe, once they went to America. So I believe we have to come to terms with a downsizing of Hong Kong. Capital is moving from Hong Kong to Singapore. Chinese capital, the Shanghai stock exchange, will probably take the place of Hong Kong's. The technologies that once started from a focus on science... we have to deal with these shifts. So if you ask me about the future of Hong Kong, I certainly believe more in the future of Singapore after China. Keep in mind that we have done a lot of work with the Camera della Moda, thanks to Carlo Capasa, to talk behind the scenes, virtually during this lockdown, to exchange information. The most important fight has been against the landlord. Today we have enemies: the landlords. We have fixed costs that are out of our minds, imposed by property owners. We still live with crazy costs. If we can't renegotiate, there will be no more stores later because productivity is low. So we need smaller, cheaper stores. Through the Camera della Moda, we opened a table where we exchanged information on these and other topics. So the importance of working together as authors of 'Made in Italy' to counter these phenomena, which are very detrimental to investments and the survival of a vital sector for Italy, as Bertelli says. So I close the parenthesis on Hong Kong and move to your question on the United States. The United States, where I studied and where I started working with samples on airplanes, seeing clients in hotel rooms in the 80s. So my heart is there, and what is happening hurts me. America has always been a market of freedom, high spending by young people, and what is happening does not please me. I believe there will be an American turnaround, but today we have to deal with the large luxury groups that are relevant. It's the equivalent of the Italian administration. I hope it comes out well. I am convinced of it. The problem is that there are few retail groups, and they are led by... the 109, there were entrepreneurial families that started the retail. The only one left that is important for us and still standing is Neiman Marcus. The others have gone to funds. The problem of large American industry is that it is highly leveraged. So with that debt, how can you invest? How can you keep up with competition? Then there has been a downsizing of others, and the landlords have destroyed the names. You sell more at sales than at regular prices. Online is another means, then we add retail and so on. And on top of that, there is the umbrella of Amazon. So I believe that the future of America will be to clean up the market. There will be a strong shakeout in America. It's much easier to cut dead branches there than in Europe. So I believe there will be many wounded, but those who remain, hopefully, will be stronger. So it is a market where the part of selling to third parties is as important as the part of selling to yourself. Our position in America is 50-50, balanced differently. But I believe that by working with the large groups that are cleaning up, maybe with forms like Saks, there is a possibility to come out. I remember in my time there were the famous emerging... the professors of marketing and American merchandising. I believe there could be a return of the specialists. I gave the example of our brand, which now has a network of six stores around America. These friends could double their share and become again an exclusive reality of luxury 'Made in Italy' and service. Because the American wants to be pampered, and the Chinese client needs to be followed with a good product but also with service. This is what I hope will happen in the American market.

I have two questions from our listeners. One asks for more detail on the European market. We mentioned something earlier. Bertelli spoke about the strong link with tourism. Perhaps we can go deeper. And above all, they ask how the international fashion supply chain has changed and will change after Covid. I don't know if Bertelli wants to answer.

We decided... I'll do it. I'll add the pepper, he'll add the salt. So we make this salad together. The question on the supply chain: the supply chain is fundamental for fashion and for 'Made in Italy'. So when we talk about the Camera della Moda, we talk about supply chain work, with her representing the entire supply chain of clothing. It is fundamental, as Rosso always reminds us, how important it is to protect the small fashion companies that are the undergrowth of the tall trees that grow in the forest. I believe that in these three months, we have also worked to create a very close partnership relationship with the partners in the textile supply chain. We, as Zegna, are an important part because it represents a good 15-20% of our turnover. We see how important it is for service, for creating innovation, for being able to understand through our clients where to activate. So the value of the clothing supply chain is fundamental for us and also for the French, who buy, I believe, well over 50% of their product sold. I think it's called... 70% if we talk about clothing. So this is certainly a year we talked about within fashion with the presence of the Camera della Moda in primis. Let's not forget this supply chain that protects us. We have even strengthened it. We made two acquisitions, two beautiful textile companies, one with... and the other Tondi, to strengthen what is upstream, not only for us but to be an offer to 'Made in Italy' worldwide. So yes, we must believe in it, we must continue to invest. So the problem of the supply chain is one of the trades, from sheep in Australia to the service of the art.

He wanted to know about the European trade sacks, but I now connect with when you say we need to be more concrete. What is exalted? Wealth is exactly that it has an official recognition of the entity of what fashion moves. I don't understand why, if we talk about it a lot, it's all clear, but when we talk about fashion, it's not clear. So for me, Silvia Sacchi, as a journalist, could try to teach people the accounts of fashion, because it's the newspapers that have to do this. If it's Angelica, we all appreciate it very much. But if we think of fashion as something wrong, people will always want to tell futile things. Behind it, there are thousands of people working. It's not a serious thing. There is no serious attitude in approaching fashion. The term 'fashion' evidently gives rise to strange thoughts. I don't know. It's something I've never understood. I fought monstrous battles in the 90s in Sole 24 Ore on many facts that were happening then about the consolidation of companies. I remember going a lot to a newspaper, Corriere della Sera, to see Fontana, where there were two pages: one with the head of Gianni Versace and one of Giorgio Armani, and they were racing to say they made 5,000 billion, but they didn't make any. They had summed up all their direct and indirect revenues, licensees, and distributors. You see, this was the way they did consolidation. The vision of consolidation was... we saw all kinds of these attitudes in the 90s, where the race was on the number: 'I make 5 billion, I make 6,000 billion'. It was all this race. But then we saw that the companies that consolidated over time more and more are all the companies that also had the supply chain. Because we have to remember that we own the factories. We don't outsource everything. We have factories, workers. At Prada, we have 3,500 workers in Italy. Zegna, I don't know how many. But we have workers who go to the factory in the morning to work. And this is the complete supply chain. When we talk about those who work for us, we are talking about people who are controlled by us on sustainability, on working methods, on respecting all health regulations. Even in the redundancy fund, to say things: the redundancy fund that didn't arrive. We entrepreneurs continued to pay the redundancy fund. We didn't leave workers without it. And the factories that worked for us that didn't receive it, we financed the redundancy fund for companies that work with us, those that work exclusively. We financed the redundancy fund because the workers had nothing to eat. And knowing that... then you know who they are who shoot everything at the government. But I always keep in mind that the government, I don't know how much it was wrong in many situations. I believe the situation was so dramatic, but I believe it was the state machinery, INPS, or the ministries that weren't equipped. You have to consider that even the ministries, I don't know if all the people were working, they were also at home in lockdown. So they weren't ready to do all the procedures for the redundancy fund. We need to be a little more balanced. I find this clear: the person who needs the money and receives it sees their territory.

I'll step in to make a bit of history because fashion was born relying on licenses. So there were also women who produced on behalf of others. So it was a first moment where it wasn't understood, and the 80s, as with the revenues, there were those who produced externally and obtained royalties, so it's a bit different when making balance sheets. So there was a big change in fashion. With Eastwood, let's say, I was one who contributed a lot because they called me crazy when in the early 90s I bought factories. Everyone said, 'Why are you investing in factories when there are thousands of factories available to make your product?' But the problem of the supply chain for luxury or the development of a brand... just look behind Zegna: the photograph of the factory, the work of the factories. You can't think of luxury without it. It's no coincidence that the French have also acquired many factories. The tanneries in Strasbourg have all been bought by LVMH and Chanel. So the supply chain is all integrated. So ask yourself why Zegna tries to build the supply chain, buying even the raw material. Apart from the fact that he is a weaver, but even if he had become a weaver in the last 20 years, it was normal. So this needs to be recognized at a political level. This needs to be recognized as the entrepreneurial capacity of Italians. The true 'Made in Italy' of fashion are the entrepreneurs who risked everything. And when we hear about entrepreneurs who have all... even Luigi Maramotti financed the redundancy fund of companies that worked for them because they didn't have it, and the owners didn't have the means to give money to their employees, except for some who were already well off. This is the true strength of Italy. And when we talk about practical things, we talk but never go into detail: 'Look, these people did this, we reopened the factories with all the required conditions. Do you want me to show you the videos?' We did everything and more. At Prada, we have already done the serological test twice. We reopened at the end of April, and then we did it again a week ago, and we also did it in Milan. So it seems to me that this is the strength that needs to be continuously highlighted in the context of what Italian companies give to their employees. This is the question: safety. Our employees come to work willingly, they are happy to participate and work at Prada, Zegna, Diesel. Rosso also said it. There's also Brunello Cucinelli, who is a saint. We have many other things at the Camera della Moda. You saw we also have a saint, Cucinelli, a saint, seen how they do things.

And what are the internal lines to the government now? We have a lot of questions coming in. We'll send the answers on the site because we have to close. But I have to make a remark because I see you in such harmony. And in the other episode, there was great harmony with Renzo Rosso and with Marenzi. What are you Italian entrepreneurs up to, since you are staying... we made a period of bread, salami, oil. I'll explain because it's interesting. During the lockdown, I was a promoter, especially Zegna, who is a very picky guy. We got together, we exchanged points of view. We were all at home, and this way of meeting was born. We met many times on video, as we do with you, and we told each other things. Moncler was also there. So we were there, exchanging points of view. It's interesting. This is a way to have no remorse for stupid antagonism. I have always been a proponent of maximum transparency in the relationship between Italian industrialists because I believe there is no need to hide anything. The information that Zegna can give me can serve my work, and my information can serve Zegna. So I would say we are all entrepreneurs. We all know what it means to work in Italy. We all know what it means to be respected by our collaborators, that our collaborators have trust in the companies they work for. Because we have to make fashion, and above all, make quality and 'Made in Italy'. So this is fundamental. This should be clear, but it is absolutely not clear. 'Made in Italy' is a jargon that is too vague, too broad, that does not respect exactly the first and most important sector of 'Made in Italy', which is fashion. It's like saying 'fashion chapter'. It's useless to call me to a meeting about cruises. It's fashion. Fashion represents 70 billion in exports, and they call someone who contributes 10 million. I don't understand. These are things they don't understand. In fact, they called Zegna. They called me because they know I'm polemical. They called Zegna because they think he's more serious than me. But we are the same. You have been a great master. But I would say my answer is the Camera della Moda. The Camera della Moda helped us to talk, to open up. There is a president who certainly has ideas, who listens to us, and carries forward concrete projects. As for the other associations, I believe this dialogue started before Covid, intensified during it, and made all of us understand, through the table of the Camera della Moda, what the important themes are and what we must carry forward together. Rent is one of the most delicate issues to maintain our priority positions on national networks. If our locations go to the French, the battle becomes really tough. We have to look ahead together, through this information network, to do more, more quickly.

Well, I thank you. I don't know if the director wants to say something.

No, we thank the guests because they gave us two very important and interesting points of view. And above all, they made us understand how important the supply chain is. When we say supply chain, we say many things: workers, craftsmanship, high capacity to be in markets. They seem very confident about the recovery, especially in the East. A little less about what will happen in Europe and America. But we had a very interesting point of view, together with what we had in our previous conversation with... as Cucinelli said, it's true. Thank you very much for this meeting.