Why in Italy you have to sell at high prices

Three reasons, in order

The why of my system comes down to three points. The first: Italy has some of the highest production costs in the world, so selling a product at high prices, by building a high-end brand, is a necessity. The second: advertising costs rise every year. The third: the value of the company is determined by the positioning and the value of its brand, because positioning affects the margin and the selling price, and so the profits.

In this article I focus on the first, the one business owners often underestimate because they are in it every day.

Electricity: second in Europe

Let's start with motive power, the energy I use to make bags, window frames, furniture, or the electricity I need for the offices. When I first did this analysis, on data from Il Sole 24 Ore, an Italian SME paid a bill much higher than the European average, and 20 points more than France. I thought there was a mistake and checked: it was true, partly because the Eastern European countries, where everything costs less, had joined the Union.

Then came 2022. The wholesale price of electricity in Italy averaged €304 per megawatt hour, with a peak of €543 in August: three and a half times the year before. Companies with no margin closed there and then. In 2025 the price went back to between €90 and €110, but Italy's position hasn't changed: according to Eurostat, in the first half of 2025 an Italian business paid €23.40 per 100 kWh against a European average of €19, second in the whole Union after Ireland. If you look at the real tariffs an SME pays, at the end of 2025 Italy was 54% above the European average. And France, meanwhile, cut its prices by 14% in a year.

Road haulage and tax

The same goes for the cost of road haulage. Do I have to take the furniture to the port of Genoa? A Frenchman taking the same kind of load to Marseille has always had an advantage over me, not to mention the rest of Europe. Today diesel in Italy is the most heavily taxed in Europe: excise duty and VAT make up 61% of the pump price. And the reference operating costs for road haulage, updated by the Ministry in June 2025, rose by another 6–8%. France, together with Italy, is among the countries with the most highly positioned companies in luxury: costs for the French are very similar to ours and its labour policy is very similar to Italian legislation.

Then we have the most complex tax system in Europe. We have the best accountants in Europe because a normal person, a business owner who works all day, understands nothing of our tax system. When I wrote the book, the World Bank and PwC ranking put Italy near the bottom of 94 systems, with only Turkey and Brazil more complicated, and the CGIA of Mestre counted 100 different taxes paid by businesses. That ranking no longer exists, but the others say the same thing: in the Tax Foundation's 2025 International Tax Competitiveness Index Italy is 37th out of 38 OECD countries, ahead only of France; in TMF's 2025 complexity index it is the seventh most complex jurisdiction in the world out of 79. And the tax burden, says Istat, reached 43.1% of GDP in 2025, the highest in eleven years, almost two points above the eurozone average.

When I shared the first figures on Facebook, all hell broke loose: some people left combative comments, claiming the numbers weren't correct. We might be a couple of places higher and not at the bottom, of course. But these are figures from the World Bank, PwC and Istat. And this is what a business owner has to pay in a calendar year.

To put it the way I do in the classroom: what a business owner pays when he opens the factory in the morning, between tax on profit, tax on labour and all the others, regional, waste, and so on, is 20 points in Luxembourg. We are at 60. Then there are the maps of companies in crisis that the newspapers publish, and the politicians who say everything is fine. The real situation is the one above.

Italy against the United States and Japan

Not content with all these examples, I had made a comparison with the United States and Japan (I left out China, where production costs less). In 2017 the result was that producing in Italy cost more even than in those countries, and the example was that it cost less to build a Mazda in Hiroshima than a Fiat 500X in Melfi.

I'll be honest: on labour costs alone that is no longer the case. An hour of work in Italy in 2025 costs €32, below the European average of €34.90, while in American manufacturing it costs between $45 and $52. But low labour costs haven't saved us, because it is energy, tax and bureaucracy that make the difference. The Fiat 500X went out of production in November 2024. In 2025, 32,760 cars came out of Melfi: less than half the year before.

What happens as soon as the economy slackens

So, as soon as the economy slows a little, what happens? Just read the newspaper headlines from those years: “High costs and stalled productivity: how Italy scares businesses away”. “Companies in crisis, the banks won't help”. “Bankruptcies without end”. “In 6 years, 294 companies closed in the furniture district, more than 2,500 jobs lost”. This is the North-East, where there is low-quality production.

Today's numbers are worse. Between 2019 and 2024 Italian manufacturing lost 59,000 businesses, 10.6%: fashion lost 15,000, furniture 3,576, 14% of the sector. In 2025 the balance for manufacturing is still negative, almost 4,000 fewer businesses, in a year in which the total number of businesses grew. Court-ordered liquidations, which used to be called bankruptcies, numbered 9,795 in 2025, and in the first quarter of 2026 they rose by another 23%. Wood and furniture as a whole is holding up, with €52 billion in revenue and Brianza first for exports: the shake-out is among the small companies, those that produce without a brand.

On the same page where you read about the 294 closed companies there was a paid banner from a major kitchen manufacturer, in liquidation, advertising offers. It was paying for advertising to say it was in liquidation and to promote the discount. You couldn't make it up: a perfect example of what not to do in marketing.

If you offer the right value for money, you close. Sadly, this is no longer the Italy of the 1970s.

The right value for money will close you down

Point one of the system, then, is why you should create a high-end brand and sell at high prices: because otherwise, if you offer the best value for money, you can't stay open and you go bust.

Because that correct value for money was exactly what the 294 companies in Veneto were offering, making a kitchen and selling it at a list price of four or five thousand euros, or even less, just to keep going. But then, what about margins? You have to pay suppliers, workers, depreciation on the machines, electricity, transport, the fitter, you have to cover marketing and advertising costs to promote your product. And you have to sell, because otherwise you have no revenue.

On advertising, the second reason: it costs more and more, every year. In 2025 the cost per thousand impressions on Meta rose by 20%, the cost per click on Google by 13%. Global spending on digital advertising in 2026 exceeds $800 billion, three times the 2018 figure. Only those with margin can pay for it and stay visible on their clients' screens.

On the other side there are the politicians who tell us everything is fine, one after another, all with the same refrain. The real situation is the one described above. But there are also those who manage to do well, and that is exactly what the system is for.

The wall of cash

So the only option left is to sell at high prices, to earn a large margin, so as to generate a positive, steady and continuous cash flow. You get there by correctly carrying out the other six steps of the system: brand, marketing, distribution, publicity, advertising and sales.

You have to sell at high prices to build a wall of cash around the company that can protect it from future crises and from a rising tax burden. Since 2021 the wall has been needed three times: in 2022 with inflation at 8.1%, the highest since 1985, and energy through the roof; in 2023 with ECB rates at 4.5%, the highest since 2008; in 2025 with American tariffs of 15% on almost all European goods, which according to Confindustria cost Italian exports €16.5 billion. None of the three could be predicted with precision, and all three could be withstood only with margin. Because when the state has to find fresh resources to cover the deficit, it comes knocking at the door of businesses. And businesses without margin are the first to close.

From my book Direct from Milano and from my classroom courses. Figures and examples updated to September 2026.