Startups help fuel diverse economy
The outlook in Italy right now is bright, and not just because of the food, fashion and design.
Thanks to a stable and positive business climate in Europe, rising rates of employment, and increasing demand from outside the region for Italian goods and services, the economy is quietly ticking over. In Q3 2017, GDP increased by 0.4 per cent, following a 0.4 percent increase in Q2 with respect to the first quarter of 2017 and by 1.5 per cent in comparison with the second quarter of 2016.
Growing domestic demand is part of the reason for this; gross disposable income has increased slightly, though given that inflation has also been rising, the net effect on household spending power has been minimal. What is making a greater difference to demand at home are rising levels of employment. Make no mistake, the unemployment rate in Italy remains high – over 11 percent despite the recent falls – but this is a significant improvement over 13-plus percent levels seen just a couple of years ago. Jobs growth has been especially strong among women, young people, and temporary workers. The Italian National Institute of Statistics, ISTAT, describes Italian economic growth as “robust”.
Consumer confidence climbed throughout 2017 – up from 106.6 in February to 116.1 in October, before slipping back slightly in November then ending the year higher, at 116.6. Business confidence had similar ups and downs, with the broad business confidence index rising in late 2017, powered by confidence in services and retail trading, though there were slight year-end dips for manufacturing and construction. Overall, confidence levels were significantly higher towards the end of the year than they were at the beginning.
As Italians say, “piano, piano”. Slowly and softly.
Italy’s failure to qualify for the World Cup finals for the first time in 60 years is likely to have hurt consumer sentiment. The cost to the national economy of the Azzurri failing to make the finals is estimated by the business newspaper Il Sole 24 Ore as around €100 million due to lost advertising opportunities. But Franco Carraro, former chairman of the national soccer federation, says it could cost the country up to €1 billion in lost travel to the event, takings at bars and restaurants, betting revenue and a general decline in the consumer mood.
But such ups and downs have become the norm in Italy. What is new is the extent to which the composition of the economy is changing, with a rising emphasis on startups and technology-based enterprises. This has been gathering momentum since a growth decree was passed in 2013 and extended under former Prime Minister Matteo Renzi. Government initiatives gave young startups tax exemptions, more flexible employment options and less onerous bankruptcy procedures to lessen the stigma of business failure. The Smart & Start program provided government-backed loans to startups, and there were startup visas made available to entrepreneurs looking to relocate to Italy.
As a result, businesses such as Talent Garden have sprung up. A startup itself, the business provides co-working spaces or campuses numbering 16in Italy and four overseas. Other notable Italian startups include corporate carpooling platform n, journey planner Wanderio, food delivery service Foodinho, and financial services provider MoneyFarm. And, since 2005, the education and business incubation platform H-Farm has been encouraging entrepreneurs across Italy to think differently about business models and the deployment of their talent.
Official data shows it is predominantly young people who are starting businesses, and more than a quarter of new enterprises are being launched by women. In high-tech manufacturing and knowledge-intensive services, more than 48 percent of new business founders are women.
On the World Economic Forum’s networked readiness index, which assesses the factors, policies and institutions that enable a country to leverage information and communication technologies (ICT) for increased competitiveness and wellbeing, Italy ranks 45th. It is one of the fastest movers, up 10 places since the last ranking thanks in part to initiatives to foster startups, and efforts to improve access to online services for citizens. But Italy is still some way behind France (ranked 24th), Germany (15th) and the UK (8th).
Italian entrepreneurship is not centered around a particular city as it is in many other countries; in Italy, the startup landscape is more sprawling. The top-ranking Italian location among the 60 cities that make the European Commission-supported European Digital City Index, which describes how well different cities support digital entrepreneurs, is Milan, in 46th place. Rome follows in 54th and Turin in 55th place.
Large enterprises are also betting on a more high-tech Italy. Amazon has invested in a €150 million distribution center outside Rome “to satisfy growing demand”, as well as a research and development center in Turin. This is in addition to the €450 million already invested since the brand launched in Italy in 2010.
Supporting the home side
Italian giants of industry are also spotting opportunity at home. Exor, the multi-billion-dollar Agnelli family investment company that owns Fiat and Ferrari, announced plans in 2017 to take minority stakes in smaller businesses and startups.
This focus on technology and startups is helping shift impressions both at home and internationally of what Italy’s strengths are, and what Italian businesses and brands represent. It underlines the work of a 2015 government advertising campaign designed to show that Italy’s strengths go beyond stereotypes. “Italy, the extraordinary commonplace”, highlighted Italy’s excellence in aerospace, engineering and biomedical research, while still acknowledging the role food plays in the national economy.
It should be noted that while the BrandZ Top 30 Most Valuable Brands ranking celebrates the largest and most valuable brands in mainstream consumer categories, Italy is a nation of small businesses, some of which have grown to be world leaders in niche areas. Brands like this have not yet achieved the scale to make the Top 30 ranking, or are operating in categories not covered by BrandZ, but they are nonetheless an integral part of the Italian economy and Brand Italy. These include names like Beretta firearms, Technogym exercise equipment, the stable of Luxottica eyewear brands, and Agusta helicopters.
There are opportunities for brands large and small to make meaningful connections with increasingly busy and choice-rich Italian consumers. Brands can earn their place in people’s lives – both in their shopping trolleys and their hearts – by enriching people’s lives. Sometimes that enrichment is practical, and other times it’s about sharing priorities and values, creating a memory, or experiencing a moment of joy.
The strongest and most successful Italian brands are telling stories that resonate with people’s lives. Consumers here are sophisticated and discerning; they know what they want, and they expect an increasingly complex – and fairly balanced – relationship with the brands they make part of their lives.