7. Valenza Po Jewelry Cluster

I. Profile of the Cluster

Valenza Po Jewelry Cluster is an extraordinary concentration of businesses with a rate of productive specialization which has few equals in Italy. Valenza Po which is identified as città orafa or città degli orafi: a City of Goldsmiths is the province of Alessandria where around 40 percent of the working population is employed in businesses operating in the gold and jewelry sector. It is, in fact, the most important Italian centre, and a worldwide leader in the production of hand-crafted jewelry. .

Today, most of the economy of the area of Valenza Po revolves around the production and sale of jewelry, with 1300 companies (of which around 900 dedicated to production and 400 to sales). The predominant type of business is the small company (around 85% of the total), run as craftsmen's workshops, which makes the local products full of creativity and ensures high added value. The annual turnover of the companies in the district is 1,550 million euros, of which around 50% is realized through exports.

Every year, the district uses 30 tonnes of gold and 80% of the precious stones imported into Italy. Partnership firms and limited liability companies are found to be the most popular forms of organization in the majority of the family-run businesses. They tend to be small, with an average of 5-6 employees per company. Entrepreneurial turnover within the district is also high, indicating intense social mobility. The workforce specialized in gold jewelry production is almost entirely made up of local people. Sub-supply is widespread and characterized by stable and ongoing relationships between customers and suppliers13 .

Damiani, Bulgari, Pasquale Bruni (famous brands), Roberto Legnazzi, Leo Pizzo, Palmiero, Gaspari, Staurino Particolari Preziosi, Santagostino, and Moraglione are some of the major global brands of the cluster14 .

Some of the recent innovations in the cluster are diamond-trimmed writing instruments, key holders, and eyeglasses. Dramatic hammered-gold pendants and bracelets strung on multiple leather cords, gemstone spheres adorned with diamonds, with themes including symbolic, spiritual, and the Latin world are some of the recent developments which really captured the attention of high end European markets.

However, in recent years, marketing has become a critical concern for many small businesses and in particular for craft workshops. For many companies the participation in the sector's national and international trade fairs is almost the only opportunity they have to reach new markets. A majority of Valenza Po‟s firms are very small; they do not have their own brands but rather work for the few big well-known branded jewelry firms in the district.

13 http://www.drustvoantropologov.si/AN/PDF/2011_1/Anthropological_Notebooks_XVII_1_Frontefrancesco.pdf)

14 Sources: http://www.jckonline.com/article/284347-Valenza_Plays_It_Safe_With_Proven_Designs.php

Therefore a need was felt to take some collective initiatives to propagate Valenza industry as a brand15 .

II. Cluster Uniqueness

The district's strong and unique points are a rich heritage of technical and professional know-how, accumulated in a tradition of jewelry production going back over 150 years; the presence of expert workers, whose knowledge is passed on and assimilated directly "on the job"; close relationships between the businesses; and speed in adapting to the demands of the market.

The traditional specialization of Valenza Po is the production of gold jewelry and the processing of precious stones for high-end markets. Its jewel-makers are artisans, world famous for their manual and creative skills and also for their quality products

III. Branding History and Turning Points

The brand name of the cluster has evolved over a period of time. The genesis of this form of local production organization was based on small enterprises and the rise of strong collective institutions to facilitate the internationalization of SMEs. Starting in the 1920s, the most successful firms shifted their focus from production to trade, which fostered subcontracting to smaller firms and the fragmentation of production (the average firm‟s size decreased by one third from 1911 to 1927). Also the political and institutional setting of the district supported the development of jewelry specialization, entrepreneurial ventures and inter-firm cooperation, which still characterize the district today. Collective institutions played a key role in the entry of Valenza Po‟s firms, including small artisans, into foreign markets starting in the 1950s, and they shaped the competition and coordination among firms. During the 1970s-1980s, private companies played a more prominent role in local production dynamics; local lead firms like Damiani and Bulgari, which developed close ties with foreign wholesalers as well as their own branded chains, continue to be the major players in shaping the cluster‟s dynamics and brand image.

Having been one of the world‟s leading exporter of jewelry for years, Valenza was deeply affected by the impact of globalization and then of the recession on its Jewelry production and competitiveness in foreign markets. According to ISTAT (Istituto nazionale di statistica) data, Jewelry production dropped severely in two periods: the first between 2002 and 2003, with an annual decrease by 18.7%, and the second starting in 2007, following an intervening period of stable production levels. The cluster‟s Jewelry exports followed a similar path, feeling the first shock in 2003 and then the second in 2008. To a great extent, Valenza‟s struggle in exports relates to the growing competition with China, India and Turkey in the shrinking U.S. market, once the biggest export market for Italian Jewelry(32.1% in 2001) and now just the third largest export destination (10.2% in 2010), behind Switzerland and the UAE (UN Comtrade data).

These two changes in the market situations led to the emergence of organized retail systems and the blossoming of the big brands in the industry. The goldsmith artisans were

15 Source: http://www.italtrade.com/focus/5175.htm

unable to face competition, as they were focused on the product and were not investing enough on markets and marketing related activities.

Dual value chain of Valenza Cluster prevailing till 2005

The twin crisis a drop in production and also decrease in exports, led to production and exports became increasingly concentrated in the hands of the two main lead firms, Damiani and Crova-Bulgari, which are among the biggest players in the Italian jewelry industry. There was a virtual monopolistic conditions created with these two companies dominating the jewellery market. Therefore a dire need was felt in creating a strategy for strengthening and commercializing the products made by the artisans and to bring about the much needed connect with the customers. Creation of a common brand for these artisans become necessary for the survival of the artisans.

Evolution of the common brand

Under the guidance and support of several local organizations such as the Municipality, the Province, Chamber of Commerce and foundations of different banking organisations and with the involvement of interested cluster stakeholders, the government has taken an initiative to work out a strategy for the development of Valenza Jewelry Cluster. The main objective of such an activity was to encourage and enhance the Strengths of the cluster and provide solutions for its main weaknesses that was poor Advertising and Sales Promotion efforts and lack of visual identification of the cluster with the territory.

In 2007, the consortium for the cluster brand (“Consorzio per il Marchio”) and the “DIVALENZA” brand were created. The DIVALENZA (“Made in Valenza”) brand focus was to position its products as “Original” and of “Superior Quality” of jewels created by the

associated companies. The cluster brand has made it possible to create a network of jewel sellers that agree on prices and made efforts to enhance and the product image.

The brand is engraved on every product produced in the cluster and guarantees that the jewel is not imported or made with imported components. The local big companies did not react to the launch of the cluster brand, as it was conceived as an asset to defend image and price in the independent retail system, the most important channel for the industry. At this level of implementation, the cluster brand mechanism did not seem to be a competitor for the local bigger producers which had their own established brands inn the large-scale retail trade.

Logo of the common cluster brand

However success did not happen Overnight. It took AOV, the main Valenzano goldsmith association and local municipal administration almost 2 years to convince, form and propagate the common brand. Initially majority of the artisans firms were reluctant to form any consortium and opt for a common brand. They were not interested to share their designs and patterns on a common platform. The association with the help of local municipality and bank foundations had organized several sensitization programs on the importance of collective bargaining and common branding. It took six months to convince bigger players in the cluster, that a common brand for micro firms will in no way affect their established brand image. Slowly the firms started believing the concept of common marketing and today there are more than 700 micro firms who are the members of the consortium and selling their products under the common brand name.

Now the micro firms feel that the common brand is an efficient tool to communicate values at international level and to keep an effective dialogue with retailers and other partners. In order to make it more valuable when presented at international level, the brand was enriched with a catchy phrase emphasizing the “Made in Italy” emphasizing its positioning - “origin of the products. The brand still successfully maintains the idea of preservation of the product‟s origin in the eyes of the customers, playing on the high reputation of the “Made in Italy” brand.

After stabilizing the brand image in the country, the consortium “CONSORZIO DEL MARCHIO DIVALENZA” applied for registration for the trademark in USA and other European countries and started selling the cluster products through the establishment of a network of franchise outlets in these countries.

The consortium has also helped the firms in product diversification to Bracelets made of precious metals, Tiepins, Brooches, Cuff-links, Horological and Chronometric instruments, namely, Timepieces, Wristwatches, Watches, Wall Clocks and parts. This has helped the cluster firms to upgrade their level in the global value chain. This shift from a single product to multi product offerings was made possible by organizing interface meetings with reputed jewelry designers from Milan and Rome.

With series of interactive meets the members were also explained about the importance of complying to Advanced Jewelry Testing, which was major entry regulation in US markets. This testing of the range of products was a process of the evaluation of fine, precious, semi–precious, costume, or children‟s jewelry for Performance characteristics in addition to regulatory requirements. Regulatory testing can determine if products comply with requirements such as lead in surface coatings per 16 CFR part 1303, as well as California Proposition 65. Performance testing to customized standards for jewelry can identify how a product will perform for the consumer.

Thus a combination of regulatory and performance testing provided the consortium members with the ability to better manage risk and protect the common brand16 complying to the regulatory testing and performance testing increased the confidence of the customer on the originality and geniuses of the product for its quality standards. This also helped increase the brand image of the product leading to a higher acceptability among the target customers. It provided the much needed cutting edge to face competition from international brands of large conglomerates.

16 Source: http://www.italtrade.com/focus/5175.htm

Domestic Wholesaler / Retailer Own Brand Chain (e.g. Italy, US, Japan) Bulgari

Foreign Wholesaler / Retailer (e.g. Europe, US)

Domestic Market

Valenza Po

CONSORZIO DEL MARCHIO DIVALENZA Commercial Agent

Subcontractors

DIVALENZA

Artisan Workshops Crova

Foreign Market

Jewelry Fairs

Market

IV. Conclusion

Relational Captive

Dual value chain of Valenza Cluster – Post Branding period

Hierarchy

Outcomes/impacts of branding

The cluster is under transformation from a Vertical – big firms dominated structure to a horizontal system where in micro artisan firms started doing integrated production and marketing.

Formation of consortium and common brand helped the micro artisans to go for direct marketing both at domestic and international level. The dependency on bigger companies for marketing has been reduced by more than 50%. The cluster firms understood the importance of maintaining quality standards and regulatory norms important importing countries and started following the same since last two years.

The aggregate turnover of the micro firms which used to be less than 30% at cluster level has been increased to 55%. The downsizing of employee strength during the recession period has been stopped and a positive trend is expected by the end of 2015.

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17 Source: http://www.decon.unipd.it/assets/pdf/wp/20120150.pdf