Luxury brands pay contractors $57 to make women’s handbags that are sold for $2,800, reveals probe

Gulf Today Report

The Italian authorities raided the factories of a number of international fashion companies, including Dior and Armani, for employing illegal immigrants, only to discover that the luxury women's handbags they sell for $2,780 cost only $57 to manufacture.

Law enforcement officials told the Wall Street Journal that luxury fashion manufacturers behind famous brands, including Dior and Armani, have hired contractors who pay workers at least $2 an hour to make handbags, which they then sell at Thousands of dollars per piece.

Dior, the French multinational luxury fashion house headed by business tycoon Bernard Arnault and his family, pays the supplier approximately $57 to manufacture a handbag that it sells in stores for approximately $2,780.

Armani pays $270 to a supplier to manufacture handbags, which are then sold in the retail market for just under $2,000, according to the newspaper.

The Italian authorities obtained these numbers after the police carried out a series of raids on workshops and temporary factories that employ illegal immigrants and others “outside the law.”

Prosecutors in Milan accused the companies of hiring subcontractors who employed Chinese immigrants and other foreign workers, for wages of between $2 and $3 per hour.

The prosecutors added that the companies used Chinese labour instead of manufacturing them in China, so that their products would bear the phrase “Made in Italy.”

The newspaper's report indicated that workers often sleep in the workshops and are forced to work from dusk until dawn, including holidays and weekends.

Last month, Italian judges ordered a subsidiary of Dior, Armanti, as well as Alviero Martini SpA, another luxury fashion maker known for its map-printed bags and other products, to be placed under court administration, after ruling that its manufacturing units mistreated migrant workers. .

Armani outsources the manufacturing of its products to GA Operations, an in-house production company.

In response to the raids, the fashion house denied any wrongdoing on the part of GA Operations, which produces clothing, accessories and home decor for Giorgio Armani Group brands.

Armani’s statement said: “The company has always taken control and prevention measures to reduce violations in the supply chain. The company’s operations will cooperate in the utmost transparency with the competent bodies to clarify its position on this issue.”

According to police, GA Operations hired a subcontractor, who in turn hired unlicensed Chinese contractors, who also hired subcontractors, some of whom were in Italy illegally.

They allegedly ignored health and safety regulations as well as rules governing working hours, breaks and holidays.

Police said the operation was part of the “caporalato” system, the illegal brokerage and exploitation of workers often associated with the agricultural sector.

Four Chinese factory owners are facing a separate criminal investigation due to their role in this case.