Recent investigations have brought to light the stark contrast between the production costs and retail prices of luxury handbags, particularly those of Dior. Documents from a comprehensive investigation into subcontractors reveal that two Italian luxury giants, including Dior, spend a minuscule amount to manufacture handbags that sell for thousands of dollars.
Italian Police Raid Dior Suppliers
The Italian police have raided several suppliers for LVMH’s Dior, uncovering shocking details about the production of these luxury items. Italian prosecutors found that Dior paid only $57 to produce bags that retail for about $2,780. This cost does not include the raw materials such as leather, but it highlights a significant disparity between production expenses and retail prices.
Exploitation of Workers
Italian prosecutors have uncovered concerning labor practices within Dior’s supply chain. The investigation revealed that third-party suppliers, primarily Chinese-owned companies, were exploiting workers to produce Dior bags at a fraction of their retail price.
Details of the Allegations
Workers were reportedly forced to live and sleep in the factories to meet the demand for 24/7 production.High electricity consumption data suggests production continued through nights and holidays, highlighting the extreme working conditions.Authorities documented a lack of proper oversight by Dior, who failed to verify “working conditions or the technical capabilities” of these suppliers.Two workers were found to be undocumented immigrants, and seven others lacked the necessary work permits.
These findings raise serious ethical concerns about Dior’s commitment to responsible sourcing and fair labor practices.
Safety Violations and Legal Consequences
The investigation also uncovered severe safety violations. Safety devices on gluing and brushing machines were removed to speed up operations, further endangering workers. As a result of these findings, judges in Milan have placed units of both Dior and Giorgio Armani under judicial administration for one year. Despite this, these units are allowed to continue operating during this period.
Giorgio Armani’s Involvement
The investigation also reached Giorgio Armani contractors, who faced similar allegations of insufficient supplier oversight. Documents examined by Reuters revealed that Armani paid contractors $99 per bag, while these bags retailed for over $1,900. As with Dior, Armani did not promptly respond to requests for comment.
Fabio Roia, president of the Milan Court, emphasized the twofold issues of labor exploitation and unfair competition. He told Reuters, “The primary concern is the mistreatment of workers, encompassing labor laws, health and safety, working hours, and wages. Additionally, there’s a significant problem with unfair competition that drives compliant companies out of the market.”
The prosecution emphasized that such violations of labor rules are not isolated incidents but rather a widespread and entrenched practice within the luxury goods industry. These practices allow luxury brands to maximize profits at the expense of labor rights and fair competition. “It’s not something sporadic that concerns single production lots, but a generalized and consolidated manufacturing method,” court documents stated.
In light of these findings, Dior provided a memo outlining enhancements to its supply chain, according to The Wall Street Journal. LVMH, Dior’s parent company, operates an extensive network of suppliers and subcontractors, comprising 2,062 suppliers and having conducted 1,725 audits last year, as noted in its environmental and social responsibility report.
 The Impact on the Luxury Market
The findings from the investigation have significant implications for the luxury goods market. They not only expose the exploitation of workers but also raise questions about the ethics and sustainability of the luxury fashion industry. The disparity between production costs and retail prices, coupled with the harsh working conditions, tarnishes the image of these high-end brands.
The investigation into Dior and Giorgio Armani’s production practices sheds light on the hidden realities of the luxury fashion industry. The exploitation of workers and safety violations reveal a darker side to the glamour and exclusivity associated with luxury brands. As these companies are placed under judicial administration, it remains to be seen how they will address these issues and whether they can rebuild trust with consumers. The revelations also prompt a broader reflection on the need for greater transparency and accountability in the fashion industry, ensuring that ethical practices are upheld across all levels of production.
