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Italy's Parliament has passed a law that imposes, among other things, the requirement that Italian manufacturers be able to prove that their products were primarily made in Italy and, if any part of the work was carried out elsewhere, a traceable location must be shown.
The ruling, which takes effect next month, would make Italy arguably the first country to regulate the "Made in xxx" label. It could not have some sooner for some Italian clothing manufacturers who have complained that, for the last decade, they have been at the mercy of fellow designers buying cheaper fabric in China, Bulgaria and elsewhere and slapping on "Made in Italy" labels - even when those garments are merely sewn in Italy.
By definition, any behaviour within the marketing function that is illegal or morally unacceptable to the larger community is deemed unethical marketing behaviour. Such behaviour has been associated with publicly reported practices such as Dow Corning's release of potentially harmful silicon breast implants and Nike's reported use of sweat-shop labour.
With the proliferation of global outsourcing of global brands, another type of unethical behaviour appears to have emerged.
The potential cost savings and revenue advantages derived from outsourcing have enticed even the luxury fashion business into the act. The outsourcing of fabrics in the case of the Italian clothing designers is one such example. It has been reported that many luxury brand items are now made on assembly lines in developing nations, such as China, where labour is vastly cheaper.
These outsourced products, however, continue to be sold at very high prices because their "marketing executives played up the companies' heritage and claimed that the items were still made in Europe by hand", says fashion correspondent and author Dana Thomas in her best-selling book, Deluxe: How Luxury Lost Its Luster.
Such companies get away with it by hiding the "Made in China" label "in the bottom of an inside pocket or stamped black on black on the back side of a tiny logo flap", she adds. "Some bypass the 'provenance' laws requiring labels that tell where goods are made by having 90 per cent of the bag, garment or shoes made in China, and then attaching the final bits - the handle, the bottons - in Italy, thus earning a 'Made in Italy' label".
"Or some just replace the original label with one stating it was made in Western Europe."
Congruence Theory postulates that individuals tend to be more responsive to people and messages that are consistent with their own beliefs and attitudes.
In considering the outsourcing option, luxury brand marketers need to consider this: Do consumers consider as unethical the practice of outsourcing of luxury brands while marketing them at a premium as handmade by artisans? Is it worthwhile to engage in global outsourcing while keeping consumers in the dark about such a practice?
Research has found that if corporate actions are perceived as unethical, the company stands to lose favour with even its most committed customers. In the long run, ethical judgments can lead consumers to accept or reject a company's business activities entirely.
As outsourcing becomes a global phenomenon with unabated growth, it becomes imperative that luxury brand marketers confront these issues.
With the further influx of luxury brands making their way to major new shopping malls that have sprung up in Singapore over the past year, shouldn't consumers know whether they are getting the "Made in xxx" value that they are paying a premium for?
- The writer, Tan Soo Jiuan, is an associate professor at the Department of Marketing, NUS Business School.
Italy's Parliament has passed a law that imposes, among other things, the requirement that Italian manufacturers be able to prove that their products were primarily made in Italy and, if any part of the work was carried out elsewhere, a traceable location must be shown.
The ruling, which takes effect next month, would make Italy arguably the first country to regulate the "Made in xxx" label. It could not have some sooner for some Italian clothing manufacturers who have complained that, for the last decade, they have been at the mercy of fellow designers buying cheaper fabric in China, Bulgaria and elsewhere and slapping on "Made in Italy" labels - even when those garments are merely sewn in Italy.
By definition, any behaviour within the marketing function that is illegal or morally unacceptable to the larger community is deemed unethical marketing behaviour. Such behaviour has been associated with publicly reported practices such as Dow Corning's release of potentially harmful silicon breast implants and Nike's reported use of sweat-shop labour.
With the proliferation of global outsourcing of global brands, another type of unethical behaviour appears to have emerged.
The potential cost savings and revenue advantages derived from outsourcing have enticed even the luxury fashion business into the act. The outsourcing of fabrics in the case of the Italian clothing designers is one such example. It has been reported that many luxury brand items are now made on assembly lines in developing nations, such as China, where labour is vastly cheaper.
These outsourced products, however, continue to be sold at very high prices because their "marketing executives played up the companies' heritage and claimed that the items were still made in Europe by hand", says fashion correspondent and author Dana Thomas in her best-selling book, Deluxe: How Luxury Lost Its Luster.
Such companies get away with it by hiding the "Made in China" label "in the bottom of an inside pocket or stamped black on black on the back side of a tiny logo flap", she adds. "Some bypass the 'provenance' laws requiring labels that tell where goods are made by having 90 per cent of the bag, garment or shoes made in China, and then attaching the final bits - the handle, the bottons - in Italy, thus earning a 'Made in Italy' label".
"Or some just replace the original label with one stating it was made in Western Europe."
Congruence Theory postulates that individuals tend to be more responsive to people and messages that are consistent with their own beliefs and attitudes.
In considering the outsourcing option, luxury brand marketers need to consider this: Do consumers consider as unethical the practice of outsourcing of luxury brands while marketing them at a premium as handmade by artisans? Is it worthwhile to engage in global outsourcing while keeping consumers in the dark about such a practice?
Research has found that if corporate actions are perceived as unethical, the company stands to lose favour with even its most committed customers. In the long run, ethical judgments can lead consumers to accept or reject a company's business activities entirely.
As outsourcing becomes a global phenomenon with unabated growth, it becomes imperative that luxury brand marketers confront these issues.
With the further influx of luxury brands making their way to major new shopping malls that have sprung up in Singapore over the past year, shouldn't consumers know whether they are getting the "Made in xxx" value that they are paying a premium for?
- The writer, Tan Soo Jiuan, is an associate professor at the Department of Marketing, NUS Business School.
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