US: a market that is worth an entire continent for Italian enterprises

17 May 2017

The States are the main current and prospective market for high quality Made in Italy products


'Bello e Ben Fatto' (BBF), namely 'beautiful and well-made products', a group of goods condensing Italian excellencies in the food, fashion and design sectors, represents one of the core strengths of domestic exports, in terms of quantity and quality. The United States are at the centre of the map of opportunities for these sectors. The American market is not only their largest range of demand (the import of BBF products from Italy in 2016 is equivalent to 9.8 billion), but also the one offering the greatest prospects across the advanced markets in the latest edition of the study entitled Esportare la Dolce Vita.   

The affinity between the (local) demand for quality and the (Italian) supply undoubtedly stems from hard economic elements. With 37 thousand EUR per consumer worth the US are the market with the greatest degree of purchasing power among the advanced markets, as well as the greatest in the spending bands compatible with BBF products (220 million, namely the so-called middle class). 

However, the harmony goes beyond the economic sphere involving the ability of the enterprises to intercept genuine needs through the products; at times, aesthetic in nature, such as the beauty of objects, but also endowed with a strong value component such as health and the environmental sustainability of the products. These are especially favourable conditions for Italian enterprises of BBF products and recently supported the growth on the American market. Indeed, between 2011 and 2015, the Italian share increased in the food, clothing, footwear and eyewear sectors. Italy remained the larger European supplier of furniture and jewellery. 

Despite a rising market share, the positioning of Italy in the first global market is nonetheless lower than its potential (the level in the US is 5.3% as compared to 8.2% within the average range of the advanced markets) and it is, above all, uneven across the various federate states. In fact, the market shares show that Italian enterprises cover effectively only a part of the country. Along the east coast, the closest not only geographically, but also in terms of culture and attitude towards BBF products, the Italian positioning boasts levels of excellence. For instance, in New York and in New Jersey it exceeds double digits and it is in any case significant in Florida and Massachusetts, over 9% and 7% respectively. Italy has a good positioning in the states with major cities, according to a common pattern that pinpoints a more receptive demand within areas of greater urbanisation. In Illinois (the City of Chicago), in Delaware, Maryland and Virginia (the states surrounding Washington DC), the Italian share is between 3.6% and 4.3%. Instead, the share in west coast states and in the more relevant central states is below 3%

The distance factor, the difference in purchasing power and in consumer sensitivity among states contribute to these gaps. For instance, regarding to income, the figures tell a story of a North-South differential that is still quite conspicuous. Between the disposable income of the first 10 States and that of the last 10 States is worth approximately 15 thousand EUR, according to the territorial statistics drawn up by BEA. It is the same discrepancy estimated by OECD for the same indicator between Germany and Russia, two countries that are as different as to be considered as relative paradigms of advanced and emerging markets by Italian enterprises.

If the spending capacity justifies part of the divide, there are, however, cases such as Texas, that are emblematic of a potential not fully exploited, at least in terms of available demand. Although the disposable income aligns with the national average (and a total GDP that is equal to that of Brazil), the Italian share on imports, while rising, is still below 3%. Italian export into the state are almost one tenth of those absorbed by New York or New Jersey. 

In this as in other cases, a broadened monitoring thus represents one of the key elements for the future of Italian export in the country. The first 5 states (New York, New Jersey, California, Florida and Georgia) currently absorb 74% of flows from Italy, almost 20 points more than what are registered in the same indicator for Germany. This difference suggests that the structure of Italian export is often too fragile and indicates that local operators, often located at the first port of call for Italian goods, are in charge of the distribution. This solution may be convenient in terms of costs and of the array of administrative burdens that frequently prejudice operations in the US. Nevertheless, this strategy entails heavy opportunity costs, especially for manufacturers of quality goods.

Nowadays, the direct relationship with the customer is an increasingly strategic element for conveying messages as well as for grasping knowledge and experience on an American consumer, naturally endowed with a high potential, but accordingly, also very demanding. 
For an in-depth inquiry into the BBF sector and the prospects of the main international markets, see the study carried out by the Confindustria and Prometeia. Last edition published in May 2017.

Fig. 1 - Italian exports of BBF products per American state
(Million EUR, 2016)
Source: Prometeia estimates on US Trade data.
Fig. 2 - The positioning of Italy for BBF products
(Market share of Italy in the states; at current prices in 2015)

AL: Alabama, AK: Alaska, AZ: Arizona, AR: Arkansas, CA: California, CO: Colorado, CT: Connecticut, DE: Delaware, FL: Florida, GA: Georgia, HI: Hawaii, ID: Idaho, IL: Illinois, IN: Indiana, IA: Iowa, KS: Kansas, KY: Kentucky, LA: Louisiana, ME: Maine, MD: Maryland, MA: Massachusetts, MI: Michigan, MN: Minnesota, MS: Mississippi, MO: Missouri, MT: Montana, NE: Nebraska, NV: Nevada, NH: New Hampshire, NJ: New Jersey, NM: New Mexico, NY: New York, NC: North Carolina, ND: North Dakota, OH: Ohio, OK: Oklahoma, OR: Oregon, PA: Pennsylvania, RI: Rhode Island, SC: South Carolina, SD: South Dakota, TN: Tennessee, TX: Texas, UT: Utah, VT: Vermont, VA: Virginia, WA: Washington, WV: West Virginia, WI: Wisconsin, WY: Wyoming
Source: Prometeia estimates on US Trade data.