Luxury’s Italian Supply Chain Reckoning Isn’t Over

Sheena Butler-Young (0:08)

Hello, and welcome to The Debrief from The Business of Fashion where each week we delve into our most popular BoF professional stories with the correspondents who created them. I'm Senior Correspondent Sheena Butler-Young.

In November 2024, here at BoF, we examined a scandal that challenged one of luxury's biggest selling points, the promise of craftsmanship and quality behind the Made in Italy label. Investigators in Milan had uncovered exploitative conditions at factories supplying some of fashion's biggest names. Workers were reportedly earning just a few euros an hour. In some places, safety protocols were moved to speed up production, and in others, laborers were putting in 15-hour workdays while living in degraded conditions.

The revelations raised questions not only about individual factories, but also about the way luxury brands manage their Italian supply chains. Nearly two years later, the industry has taken some steps, but the story is far from over. Joining me is BoF Global Markets Editor Sarah Kent, who co-wrote our latest report and joined us for that original conversation. Sarah, welcome back to The Debrief.

Sarah Kent (1:16)

Thanks so much for having me, Sheena. It's great to be back.

Sheena Butler-Young (1:18)

And it's great to be back from maternity leave also. Congratulations. We're so happy you're back.

Sarah Kent (1:23)

I'm happy to be back too. It's been a while. I'm sorry if I'm a bit rusty.

Sheena Butler-Young (1:28)

No, I'm sure you're fine.

I want to, before we get into what has happened in the last two years to supposedly write the course, I want to go back to the investigation that first brought a lot of these things into public view. So take us back to 2024 What was that investigation? What were the top line revelations?

Sarah Kent (1:46)

So back in early 2024, a prosecutor in Milan began bringing cases against fashion brands. And the first one kind of went under the radar because it targeted a brand that is known in Italy, but didn't have such a big international footprint. And then the second brand he went after was Armani.

And that really got people to sit up. And then the third brand was Dior. And suddenly everyone was like, oh my god, what's happening? And what the investigations had revealed were that these very, very prominent brands who are considered some of the most elite in the industry had buried in their supply chains, factories that were essentially functioning, much like you would imagine a sweatshop. And these factories were not in far-fung places. They were in Italy. They were on the outskirts of Milan in the backyard for these brands in terms of high-end manufacturing. And this had happened, the brand said, without them being aware of it. So it raised a number of different issues. One, were the brands culpable for this?

Two, if they weren't, how was it happening that these factories were showing up in their supply chains without them knowing? And three, if these factories were in their supply chains, were the products that they were selling for such high prices? And remember that in 2024, we're at a point of peak inflation for luxury products. Were they really worth it? So it created this kind of perfect storm for the luxury industry around how they operate, how these big brands operate.

Sheena Butler-Young (3:31)

One of the phrases that I remember from that time was this whole thing of supplier of supplier. You mentioned that these conditions were at factories that were deep in the supply chain. Can you talk a little bit about this, I guess, a lack of visibility that the brands seem to have, which to your point about whether or not they were culpable, like it's kind of, I mean, I think that's interesting that you can say you don't know and therefore, like I think that's just as problematic, but maybe you help us understand.

Sarah Kent (3:58)

Well, so the luxury supply chain is really complex. You know, one of Italy's great strengths as a luxury manufacturer is you have an extreme concentration of all of the expertise you need to make these incredibly high-end products. But one of the complexities of this is that that expertise, in many cases, is distributed in lots and lots of micro-suppliers. And so you end up with this very complicated supply chain where a brand may work with one large manufacturer, but that manufacturer will be sending out to many other smaller factories for part of the work. And sometimes this work can be very specialized, like attaching the brass buckles to a handbag, for instance. That may happen in one specific location, and then the handbag will be sent back to a more central location to be assembled in other ways.