"Made in Asia" label helps, hinders luxury goods makers

TOKYO - Years ago, when the first Armani boutiques opened in China, a furious customer walked into one of the shops, brandishing two Armani T-shirts.

He wanted to know why one of them, the one he had bought in the shop, was labeled "made in China," while the other, the cheaper T-shirt, said "made in Italy."

The second T-shirt was, of course, a fake. So was the "made in Italy" claim; Armani T-shirts are no longer produced there.

These days, many fashionistas are still confused over what is real, what is fake, and whether a product's country of origin says anything about its quality.

Even a "made in Italy" label no longer guarantees that a bag or a pair of shoes was hand crafted by artisans in a Tuscan workshop. Instead, the bag could have been stitched together by illegal workers in clandestine Italian factories, and the shoes assembled from plastic soles and leather shipped in from China.

And yet, Asian manufacturing remains a taboo in the luxury sector where image is everything.

Faced with shoppers' concerns about product quality, environmental standards and working conditions in Asia, many European luxury goods makers swear that their factories will always stay close to home.

But some are going on the offensive, arguing that new manufacturing sites can actually boost quality and creativity.

"At the end of the day, we are talking about perception. There is no reason why you can't make good things anywhere in the world, as long as you have the artisans and attention to quality," said John Hooks, deputy managing director at Giorgio Armani.

Hooks is passionate about the opportunities that a global manufacturing base offers.

Lower labor costs in Asia allow designers to spend more on expensive fabrics and elaborate techniques than in Europe, he says, and therefore the final product could actually be more sophisticated than one that was manufactured in a high-wage country.

"If we are obsessed with made in Italy, made in France, the negative side is that everything gets pared down to essentials," he told Reuters. "There comes a point where this slavish respect for 'made in Italy' cannot hold unless the product becomes extremely expensive."

He also points out that in the right context, African or Asian manufacturing can be seen as a bonus: Armani, for example, is studying the production of Emporio Armani RED goods in some African countries as part of a campaign across a range of consumer goods to fund treatment for AIDS patients.

RICH HERITAGE

With their rich cultural heritage and a history of producing silks and embroidered textiles, China, India and other Asian countries should in theory be well placed as manufacturers of luxurious clothes and accessories.

Japan, for one, already outshines Europe as a specialist for certain accessories and fabrics, especially expensive denim. Eyewear maker Luxottica, which makes Prada and Chanel sunglasses, has a factory in Japan that produces exclusive gold-rimmed glasses for the highly selective Japanese market.

Many consumers, however, would prefer not to discover a "made in China" tag on a $1,000 dress.

Asian shoppers are particularly origin-conscious as French and Italian luxury goods are important status symbols in the newly affluent region. And the opinions of Asian shoppers are beginning to matter more and more as growth in more mature markets slows down.

"In Asia, in a certain segment, you can't offer a product made in China or made in Asia," said Patrizio di Marco, president and chief executive of Bottega Veneta, on the sidelines of a luxury goods conference in Tokyo.

"They are very aware of where the product was made, and whether it was made in Italy, made in France."

Industry experts say this concern with origin varies greatly between countries. U.S. shoppers, for example, are more tolerant about where their clothes are made.

"The fundamental question is whether it's worth risking your brand equity to win a few points in the manufacturing of the goods. And I think the answer is no, so we don't do it," di Marco said.

The pricier the product, the choosier the customer. Bottega Veneta's trademark woven leather bags sell for about 200,000 yen in Tokyo for a basic model, and they are hand-made in northern Italy. Armani's super-luxury range, sold under the Giorgio Armani label, is also exclusively manufactured in Italy.

TUSCAN SWEATSHOPS

When it comes to more accessible designer brands, consumers may be less prejudiced than some producers think.

In a shop just behind the elegant Bottega Veneta boutique in central Tokyo, several Japanese women are trying on brightly patterned silk dresses by Diane von Furstenberg, which cost about 60,000 yen each. None of the women seem to mind that each dress has a little "made in China" tag.

Customers are also increasingly aware that the manufacturing process behind a garment is much more complex than the little white tag suggests.

The medieval Italian town of Prato in Tuscany sits at the very heart of Europe's fashion industry. Amid the Tuscan hills, well-paid craftsmen, low-paid immigrant workers and peddlers of fake designer handbags jostle for space.

In 2007, Prato's tax police confiscated more than 8 million forged products, including fake designer goods and kilometers of Gucci-monogrammed fabric, made in Asia or in clandestine factories in Italy.

And it's not just the fakes that are making headlines.

Last December, a documentary by Italian broadcaster RAI Tre probed subcontractors for some major fashion houses and broadcast images of Tuscan factories where Chinese workers had been sleeping, eating and sewing clothes and bags for low wages.

Luxury goods makers say they regularly inspects suppliers and sever ties when a supplier is found to violate labor laws. However, it is not always easy to keep tabs on outsourcers.

"The supply chain is long and often the headquarters doesn't even know who really makes one small part of the product because it doesn't have any relations with the last manufacturer on the list," Captain Edoardo Marzocchi at the tax police in Prato told Reuters.

Some fashion companies say the solution is to drastically shorten the supply chain and use manufacturing in developing countries as a selling point for "ethical consumers" in the West.

"Our clothes are hand-woven, hand-embroidered, hand-embellished," said Safia Minney, founder of People Tree, a UK-based fair trade fashion firm that works directly with knitters and weavers in Nepal, Peru, India and Bangladesh.

"We're working in close partnership with our suppliers -- and it builds enormous brand loyalty among our customers."

By Sophie Hardach