Textiles in Europe: An Interview with Verzoletto

Interview with Stefano Verzoletto, (CEO of Filivivi – Verzoletto Textile Group) 

Stefano Verzoletto, a highly experienced textile entrepreneur, is CEO of Filivivi and a shareholder in the Verzoletto Textile Group, which has operations in Italy (in Biella, Como and the Veneto region), Romania and Lithuania, produces over 10,000 tonnes of yarn per year and employs more than 1,000 people.

Today, we sit down with Verzoletto to assess the situation in the European textile industry, at a time when the sector is facing significant challenges. In the first and second questions of the interview – we attempt to analyse the serious problems currently facing the European textile industry, and then – in the third and fourth questions – we look to the future and try to identify possible solutions.

Good morning, Dr Verzoletto, and thank you for taking the time to speak with us. The Covid and post-Covid years (2021–2022–2023), marked by signs of recovery for the European textile sector, had led many observers and industry professionals to believe that a significant process of reshoring textile production to Europe was underway. But then the crisis reared its head once again. What phase are we currently going through?

The process of reshoring textile production to Europe is a phenomenon linked to temporary factors (challenges relating to intercontinental transport and global supply chains during the pandemic) and is now a thing of the past.

In general, I fear that the commodities market will increasingly move beyond our reach, particularly in the textile sector – a sector based on relatively simple types of work, where low-cost, lightly regulated manual labour can make up for the lack of automation and digitalisation.

Historically, the textile sector has been particularly successful in developing countries, and following the disruption caused by Covid and the post-Covid period, this historical trend has returned and has, in fact, become even more pronounced.

At a time when low- and middle-income consumers have less purchasing power, meaning that price becomes the only attractive factor and retail brands (which are the only players in the textile and fashion supply chain with real power) dictate lower prices, it is clear that textile imports from more competitive countries with lower labour costs and less stringent regulations are on the rise.

If we look at the low- and mid-range clothing sector, we have not seen a significant decline in sales in recent years. We have simply seen an increase in imports from Asian countries, Turkey and North Africa (Morocco, Egypt, Tunisia) and a decline in European textile manufacturing.

The luxury sector within the textile and fashion industry, that is to say the high-end market, is, of course, a different matter: in this field, Europe is the leader and European textile companies are recognised worldwide for the quality of their products. The problem is that this is now a niche market and has been undergoing a very serious crisis for over a year.

 

Why is the luxury sector in crisis? What are the reasons behind these difficulties?

This is partly due to cultural factors and the changing desires and expectations of people. At this point in history, there is a growing willingness to spend significant sums on travel, holidays and tourist experiences, whilst high-fashion clothing and accessories are attracting less interest.

Secondly, the luxury market today operates at price points that are simply too high for the casual buyer. Luxury goods are now completely out of reach for ‘ordinary’ people; they are sold at exorbitant prices and rely solely on a very high-end clientele with considerable spending power.

 

Faced with such a difficult situation, how can Europe and European countries take legislative action to protect the European textile sector, which remains – despite the serious challenges you mentioned – an important industrial sector? Does it make sense to implement targeted measures to help the sector, or should companies, so to speak, fend for themselves?

The European textile industry is not at all protected at a political or organisational level, and I believe it should be protected. But let me be clear: when I talk about protection, I am not referring to ‘solutions’ such as non-repayable grants and the squandering of public funds – practices that are highly questionable.

I’m talking about something else. First of all, we need to be consistent and resolve an obvious contradiction: we cannot talk every day about sustainability – in both an ecological and social sense – and then accept unrestricted, large-scale imports from countries that do not meet our standards in the textile industry, in terms of both environmental protection and the safeguarding of workers’ rights.

As consumers, we cannot look solely at the price tag, and as a political class – at both European and individual EU-member-state levels – we should favour more environmentally responsible and ethical production. This applies in particular to the low- and mid-range clothing market, where a revival of European textile production can only be achieved through raising awareness in this way.

As for the luxury sector, however, we are dealing with a crisis linked to other factors, one that is already reversible based on further developments in the sector’s dynamics and consumer expectations.

We must also point out that European textile companies find themselves at a significant and unequal disadvantage compared to their Asian competitors.

To give an example: the Chinese government subsidises textile companies for the purchase of raw materials and grants export subsidies ranging from 12–13% to 18–19%, whilst a player in the European textile sector must find any source of funding independently and – faced with shrinking margins – does not benefit in any way from bonuses or incentives commensurate with the situation.

In such a context, those who speak of the possible introduction of tariffs on textile imports, in Europe as well as in the United States, are, in my view, not entirely wrong.

 

What, then, should European textile manufacturers do to respond to the challenges facing the market?

I believe that European textile manufacturers should now, as far as possible, position themselves as master craftsmen serving the market, continuing to focus on quality whilst at the same time expanding and diversifying their offering – both in terms of products and the target markets they serve – by securing advantageous supply chain agreements and seeking to re-establish a stronger local presence, at a time when generalist clothing shops have become marginal and brands (in both the luxury and mid-to-low-end markets) have their own physical and online sales channels.