Export: competitiveness of the Italian companies

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Exports of small domestic appliances are growing driven by design, quality and charm of the Italian way of life. Germany and France are the main buyers. But also in Usa and Asia, small appliances conquer market shares

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By Simona Carletti

Recently, the European Commission said it is convinced that the Italian economy will return to grow again during 2015 (+0.6%) and 2016 (+ 1.4%),  mainly thanks to export, that will compensate a low domestic demand. Already in 2014, according to Istat, national exports increased by 2%, with a highest increase for the north-eastern regions (+3.5% ) and central ones (+3%).
To support the competitiveness of Italian products in the world is, above all, their quality: a survey of the Confindustria Research Centre revealed that, since 2000 until today, the quality of Italian exported goods – measured as the ratio between the average unit values ​​and the production prices – has grown much more than the other major European countries; the Italian index rose by 1.6% average per year (25% cumulative) compared to +0.9% of Germany, +0.5% of France and  +0.4% of Span. «Made in Italy products have always aroused interest abroad, thanks to their high quality» confirms Francesca Polti, managing director of Polti, company that has been operating with foreign countries since 1978, year of its founding, and that is now present in over 50 countries, with a 60% revenue deriving from export. «It is fundamental to maintain and consolidate this quality level to convince foreign interlocutors that Italian products can make a difference.»

 

Francesca Polti, managing director of Polti
Francesca Polti, managing director of Polti

Export of small appliances
In this general picture, even small domestic appliances play their role. According to Confindustria Ceced Italia, the export of small appliances rose, between 2013 and 2014, for a value of 308 million euro in Germany (+19.8%), 180 million in France (+3.8%), 91 million in the Netherlands (+36.1%) and 78 million in Spain (+18.5%).
Even the US represent an important destination, grew by 3.6% last year, for a total of 62 million euro. «The United States are among our key markets – Francesca Polti says about this – so we decided to invest in this market by opening a branch in 2012. Here we have a strong business partnership with one of the most important TV channels of home shopping.»
The exports of small appliances to Russia, instead, are declining (-19%), due to the strong slowdown in the economy of this country, now characterized by a GDP drop of -4.8% and by the depreciation of the ruble. In Ukraine, the decline was of 24.8%, because of policies tensions in this area. What drives the purchase of small appliances with Italian brand abroad? We forwarded the question to Carla Castiglioni, export manager of Trabo brand, who replies: «Italian products have an unmistakable design, very appreciated, especially in some countries, as the United States and the United Arab Emirates. Specifically, Trabo started to appear on the international markets just with a design product: its toaster, designed by Gae Aulenti in 1997, which is the thinnest of its kind, with only 7 cm in depth, and that has become the icon of our brand in the world. It must be said that the small domestic appliances sector is facing big changes: Italian production is declining and many companies and multinationals businesses have moved it to China or neighboring countries; or they buy already existing products. This is not the case of Trabo, which invests in molds, ideas and projects, also with young designers.»

Design toaster by Trabo
Design toaster by Trabo

To her words Enrico Vento adds his own, president and CEO of Bompani Elettrodomestici, company for which export accounts for 95% of the production and 80% of the turnover, «There are markets in the world that give a strong value to the made ​​in Italy, especially when we speak about major domestic appliances and cooking. In these markets, Bompani boasts a very strong presence with its products realized ​​in Italy and characterized by attention to design, quality manufacturing and tradition. For small domestic appliances, it is a different matter: Italy has not a strong production of Sda (small domestic appliances), which is now concentrated mainly in China or in low-cost countries; the export of Italian Sda is therefore essentially linked to the brand strength. Bompani has built its own imported range of small appliances, which has very precise characteristics: it is dedicated to food preparation, has a very high quality level, combines functionality and aesthetics and has, as its distinctive elements, color and design. These products complete the offer of the brand that, thanks to its strong distributors, boasts a very significant presence abroad, mainly in Europe, in all the Middle East area, in the Far East and Australia.»

Enrico Vento, president and ceo of Bompani Elettrodomestici
Enrico Vento, president and ceo of Bompani Elettrodomestici

To have success in foreign markets, small appliances sometimes undergo some changes, which make them more compliant to the demands of consumers in different countries. It also happens that some products that succeed well in Italy are not exported, because they are not considered interesting enough for abroad interlocutors. «We try to adapt our products to the needs of the customers we address to in the respective markets» declares about this matter Edoardo Pontoni,   trade marketing manager of Elica, company that since the times of its establishment has been given  ​​great importance to the foreign markets, to the point that its first customer was not Italian but foreigner. Today for Elica the export share accounts for 90% of sales, and has as referent markets: Germany, France, China, India, Russia and Latin America. «Our vocation for export has received a strong push since 2008 – Pontoni explains – through the acquisition of Gutmann company, in Germany;  in 2010 we acquired and formed respectively the company Putian in China and Elica PB in India; in 2011 we opened the Russian sales subsidiary and, finally, in 2014, it was the time of the last born, the French sales subsidiary.»
Export represents an important role also in the commercial strategy of the company Olimpia Splendid from Brescia, which opened branches in Shanghai, Madrid and Paris. «Abroad, in particular in extra-European countries, made in Italy has always had a special appeal – confirms Marco Saccone, marketing director & subsidiaries manager of Olimpia Splendid -. The appeal deriving from functionality, aesthetics and performance of our products, realized ​​in Italy, allows us to compete at international level, with very strong brands in the air conditioning sector.

Marco Saccone, marketing director & subsidiaries manager of Olimpia Splendid
Marco Saccone, marketing director & subsidiaries manager of Olimpia Splendid

To date, we pay a particular attention to the growth opportunities in geographical areas for us “new”, such as South America, Australia and South Africa.» Another company to mention when talking of strong abroad made ​​in Italy is Smeg that, today, in addition to its range of major domestic  appliances, has started to propose internationally also the small ones. «Especially starting from the last decade, we have implemented a strategy of consolidation of our presence in the world, which sees us directly present in different markets with new commercial companies, showrooms and monobrand stores – they say from the headquarters at Guastalla, Reggio Emilia -. Recently, we have enriched our offer with the launch of small appliances, whose data of ordered and sold resulted immediately very positive, and also in the first quarter of 2015. These products have received the Good Design Award, the iF Design award and the Red Dot award. In particular, the electric kettle is the device which recorded the largest volumes of sale while, as regards the color, cream resulted to be the preferred one».

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Reducing the brakes to competitiveness
So far the lights. But the Italian competitiveness is burdened by some shadows, not only with regard to small appliances, but for all the products that go abroad, according to the aforementioned data of the Research Center of Confindustria. From 2000 to 2014, the cost of labor per unit of product in Italy rose by 3%, compared to +1.2% of Spain, +0.2 of France and -0.1% of Germany. Despite this increase, the Italian manufacturers have maintained competitive prices, at the expense of profit margins. The margins erosion, however, is not sustainable for a long period and therefore it represents a weakness factor of the Italian manufacturing, because penalizes the investment capacity. For the Research Centre, the loss of competitiveness due to the labor cost caused, since 2000, a slowdown of the export growth of 0.95 annual average percentage points; while a lack of increase in exports of 0.06 average annual points is due to the contraction in investment. But there are also other difficulties, «We see – Francesca Polti explains – the lack of a real country-system to support the internationalization strategies of the Italian companies abroad, to which the high investment costs for scouting and start-ups launching are added.» The marketing director of Olimpia Splendid adds: «An Italian company that intends to penetrate foreign markets must surely respond to logistical and organizational difficulties. Moreover, it is important to overcome cultural barriers effectively communicating the brand so that it becomes familiar to foreign consumers.»

THE MYTH OF COFFEE, ABROAD
Among the Italian small appliances appreciated abroad, we cannot lack to mention the coffee machines, sector that is symbol of the Italian way of life. For these products, the main market is Germany, with a value of 122.517 million euro, followed by the Netherlands, Russia, France and Spain (source: Ice - agency for the promotion abroad and the internationalization of Italian companies). In the countries where they are exported, as well as in Italy, the most requested machines are those for portioned coffee, growing sector also thanks to a prices reduction. In Italy, the coffee machines market as a whole increased, between March 2014 and February 2015, by 15.5% in volume and by 7.2% in value, compared to the period March 2013 - February 2014; while Germany saw a growth of 10.6% in volume and 4.2% in value (GfK data).
About the evolution of this market, we interviewed Roberto Ranzoni, marketing manager of Bialetti Industrie, the historical Italian company, that already in the Fifties exported its Moka Express abroad.
Roberto Ranzoni, marketing manager of Bialetti Industrie
Roberto Ranzoni, marketing manager of Bialetti Industrie

What is the general trend of the coffee sector abroad?
Foreign countries have always been interested in the world and culture of Italian coffee and in all related products. In this scenario, manufacturers have ample margins for growth, especially in those countries where curiosity is bigger around Italy and its characteristic products.

What is Bialetti’s penetration in the foreign markets?
Bialetti Industrie operates mainly in the European markets, particularly in Germany and France, where is also present an important sales office. The presence in North America is ensured by the strategic partnership agreement signed in the first months of 2014 with an important American distributor that provides a licensing contract of 25 years. A product on which we are focusing very much is our new espresso machine with closed system Cuore, which is also arriving in the markets of Taiwan, Japan and Korea and more generally in the APAC area (Asia and Pacific).

In percentage, how much does the Italian and abroad turnover respectively account for Bialetti?
Bialetti’s turnover is mainly represented by Italy, followed by Europe with a share of 23%, by North America with 3% and the rest of the world with 4%. The greatest increase has been recorded just in the rest of the world, because of the mentioned above penetration in the Asian market.

Today the idea that the Italian industry should focus on exports is widespread: do you agree with this statement? Is it applied also to the coffee sector?
Export is surely an important step for the growth and development of a company, in the coffee sector too. Our challenge is that to invest in terms of innovation and value of the brand, maintaining that Italianism that has always distinguished us. Maximum attention is given to the development of products that follow and anticipate consumers’ needs abroad and that could adapt to the different habits in the kitchen. In the field of espresso machines, for example, the adoption of automated brewing systems is a peculiarity that allows to meet an increasingly demanding international customers in terms of practicality and functionality.

The challenge of the future
If it is true that difficulties to be solved remain, according to the Research Centre of Confindustria there are also some exogenous and endogenous factors which play in favor of exports from Italy: the euro depreciation (-8.8% the nominal effective exchange rate from the first days of May 2014 to the last days of January 2015) promotes price competitiveness of Italian businesses compared to those in extra-euro area and allows to stop the trend of margins declining; the barrel collapse cuts the energy bill for businesses, reducing the competitive gap with competitors in less dependent on oil countries and extending, also in this case, the space for a recovery of margins; Finally, the decline of the interest rates in the long term reduces financing costs for businesses. To these elements, other endogenous ones are added, such as the reform of the labor market and of the public administration. «The way is the right one – the survey of Confindustria Research Centre states -. It is necessary to go on with determination to untie the structural knots and thus increase the leverage of the great competitive advantages of the Italian companies.» In this context, export is the big challenge of the future. «We must continue to invest in the made in Italy that wins abroad, increasing the Italian presence in high growth markets such as Asia – Marco Saccone comments -. The assiduous search for solutions that meet the needs of foreign consumers can give a big push to investment in research and development, both in technological and in design field, traditionally sectors of all Italian excellence.»

SMALL APPLIANCES ON THE INTERNET: +59.2% IN VOLUME AND +38.5% IN VALUE
According to Gfk data, between April 2014 and March 2015, sales of small domestic appliances, in the e-commerce channel, recorded a double-digit growth, with an increase of 59.2% in volume and 38.5% in value. This result contrasts with the results obtained, however, by these same products in the total of sales channels (both on-line and off-line): only +0.1% in volume and +3% in value. This means that in a market that was almost static its total last year in, e-commerce however has proven alive and rising. There is then another big difference between total data and on-line data, and it is the price. On-line, the average receipt is - unexpectedly - much higher. The reason? Who sells on the internet tends to select more hi-tech and innovative products for this channel, addressed to prepared and informed customers while on the physical channel news can be found, but also less "cutting edge” products. This explains the higher price on the on-line channel. Take, for example, small appliances dedicated to the kitchen: their average price, between April 2014 and March 2015, was about 49 euro in the total of channels and 87 euro only in the on-line channel. The same situation can be seen for the small appliances dedicated to the house (79 euro in the total of the channels and 132 euro on-line) and to the person (32 euro in all channels and 49 euro on the web). We must say, however, that in comparison with the period April 2013 - March 2014, in the time frame April 2014 - March 2015 on-line prices have at least declined: -9.2% the kitchen sector; -10.2% the products for the home; -8.8% those for personal-care.

Why are they bought on-line?
Valentina Pontiggia, head of the research of the eCommerce B2c Observatory by Netcomm and Milan Polytechnic
Valentina Pontiggia, head of the research of the eCommerce B2c Observatory by Netcomm and Milan Polytechnic
The reasons why the on-line sale of small appliances works well? «The Internet today ensures different services and comforts that also arrive to exceed the services offered by the physical store - Valentina Pontiggia answers -. Via web it is possible to buy 24 hours a day, making the product delivered directly to home and, if necessary, adding the collection of used products. Moreover, the on-line choice is definitely bigger than that on the point of sale: the great international dot-com, like Amazon and Ebay, but also the national ones, like Banzai and Monclick, provide a wider range of small household appliances, because they are served by warehouses with a surface extension definitely higher than that of the store. To push the on-line purchase of small domestic appliances is also the price driver: in the world of consumer electronics dot-com operate that, to be competitive, adopt an aggressive pricing policy, made possible thanks to a less expensive channel management than that of the physical store.»