Dior supplier in Italy under fire for labour exploitation

[averagejoe]

'The clients also improve their profitability by outsourcing their production to third parties: "Manufacturing a belt for a very large luxury house costs me 9 euros, I invoiced them 39 euros, and they resold it for 750 euros," calculates Stéphane Collaert, who managed the Collaert L’Aiglon workshops before taking over Texier's leather goods production. "The staff are well paid, but they do not have the same benefits as those who belong to a large group - 13th-month salary, seniority bonus, profit-sharing, and incentives," notes Patrick Thélot, CEO of KS Groupe, a temporary staffing company for haute couture.'

I do wonder which item it is, i was almost hoping it would be the booktote as it's obvious and extremely simple construction. When the cost of the bag is 53 euros from the supplier, that doesn't mean the bag cost 53 euros to make. It cost much, much less to make, as the supplier needs to make a profit also. Not sure if materials are included in the cost if they were provided by Dior.
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The 53 Euros is just the cost of manufacturing. it excludes all materials:

I wanted to add that the 53 Euro/$57 price does not include the cost of the materials. It is just the labour cost.

Now we know how much it costs to make a $2,800 Dior bag

In recent months, Italian authorities raided Dior subcontractor workshops where people were working around the clock, they said.

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The news plays a role in trying to sensationalize the amount, by initially keeping it vague so it seems like the entire production of the bag costs 53 Euros. Some sources were even saying the mark-up is 48x, which ignored all the other costs including all the advertising, the materials, sales staff, boutique rent and maintenance, etc. (the breakdown of estimated costs is here: https://kanebridgenews.com/christian-diors-57-handbags-have-a-hidden-cost-reputational-risk/).

As you mentioned, the Book Tote is very easy to manufacture. Aside from the investment in the embroidery machinery, its construction is inexpensive because it is similar to canvas shopping bags sold by Whole Foods (for example) which can be sold for much, much less.

I agree about Hermes. Its shoes have a comparable construction and quality to other luxury brands, and are made in Italy. They may also be subcontracted out, especially based on Hermes' growth rate where even if they made their own shoes, they would not be able to produce enough to satisfy the demand.

 

[SDC2003]

I don’t think it’s coincidence Hermes came out with a video showing artisans in factories. I would like to know percentage of direct contracts versus subcontractors.

 

[Grand Maven]

*Update*

https://www.reuters.com/business/retail-consumer/some-investors-demand-change-lvmh-after-probe-into-dior-contractors-2024-07-23/

 

[SDC2003]

I am curious what percentage of Dior is vertically integrated. They said Lvmh is at 60%.

 

[averagejoe]

LVMH Pledges More Vertical Integration in Response to Dior Manufacturing Scandal

The luxury giant said it will aim to bring more production in house after an Italian investigation linked Dior to sweatshop conditions.

www.businessoffashion.com

”We accept full responsibility for what happened,” Guiony told analysts on a call for the company’s first-half earnings. “We thought we were doing quite a lot already and we will intensify.” In particular, LVMH will look to increase vertical integration at Dior, which outsources more of its production than flagship label Louis Vuitton.

I'm glad to hear this!

”This strategy didn’t begin yesterday; we’ve been implementing it for quite a while and will continue to do so and hopefully intensify and make it faster than we had in mind,” Guiony said. “That’s not easy to do, but the current situation requires further investment on that front.”

This may put a dent in their profits at a time when luxury spending is cooling, but this time investors are calling for it as well. The investors need to accept that this will impact their dividends in the near future. I wonder if this will come from investing in creating their own facilities, or buying other companies' facilities.

 

[Grand Maven]

This may put a dent in their profits at a time when luxury spending is cooling, but this time investors are calling for it as well. The investors need to accept that this will impact their dividends in the near future. I wonder if this will come from investing in creating their own facilities, or buying other companies' facilities.

It has put a dent in their profits. See

https://www.businessoffashion.com/a...enue-slip-signals-continued-gloom-for-luxury/

 

[averagejoe]

It has put a dent in their profits. See https://www.businessoffashion.com/a...enue-slip-signals-continued-gloom-for-luxury/

I meant that the commitment to investment in more vertical integration at Dior will reduce their profits, and this will be compounded with the slowing demand that their current profit decrease is demonstrating. This investment has to speed up (which costs more short-term) from the current slow pace that they claim to have been achieving, according to the article.

 

[Grand Maven]

Dior Breached UK’s Modern Slavery Disclosure Requirements

The luxury brand, which is under scrutiny for links to sweatshop labour in Italy, was behind on publishing supply chain disclosures required by UK law until last month.

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[Grand Maven]

How Loro Piana Was Linked to Labour Exploitation

LVMH’s high-end cashmere firm cultivated unassailable luxury credentials with its commitment to quality and craft. According to Italian prosecutors, thousands of its cashmere jackets were made in illegal, Chinese-owned workshops on the outskirts of Milan.

www.businessoffashion.com

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