Prada finally shifts focus to e-commerce
Prada reported disappointing results last week, with sales slipping 10.4 per cent in the 2016 fiscal year to reach €3.1 billion (US$3.3 billion).
As one of the slowest luxury retailers to embrace e-commerce (Prada only sells handbags, shoes and accessories online), this was a wake-up call the brand should have foreseen.
It is in stark contrast to competitor LVMH, which is opening a new online luxury department store this May and recently reported a 15 per cent increase in sales across many of its brands in the latest quarter.
But operating under the concept of ‘better late than never’, Prada has unveiled a more comprehensive e-commerce strategy than ever before.
This includes expanding the brand’s online presence and syncing it with the in-store experience, as well as investing more in digital advertising, shifting focus to younger consumers and closing under-performing stores.
“Customers have changed deeply over the last 10 years,” said Prada CEO Patrizio Bertelli last week, finally acknowledging that the luxury category is not immune from those changes.
Besides the company’s lack of progress in e-commerce, Bertelli pointed to external factors as hampering growth in 2016.
“The business climate was mired in uncertainty because of ongoing geopolitical tensions of global impact, as well as new events that have suddenly changed economic balances around the world,” the Hong Kong-listed group said.
Meanwhile, stabilisation of some currency trends paved the way for a recovery in domestic consumption, as in China and Russia, although growth in these markets has not yet compensated for the drop in cross-border tourism.
The group also focussed on store renovation with a massive restyling program to create more intimate, exclusive environments, updated to meet new aesthetic guidelines for Prada and Miu Miu.
During the year the group also made industrial changes under a three-year plan adopted in 2015, which aims to strengthen control over the production process by insourcing “some of the most delicate phases”.
These investments are aimed to help preserve the craftsmanship at the heart of the group’s business model, while underscoring its ties to the Italian community and the sustainability of its manufacturing cycle.
A version of this story first appeared on our sister site, Inside Retail Asia.