Prada’s U.S. Growth Plan

MILAN -- Prada has an American Dream.<BR><BR>While various Italian houses have been making lots of noise about building their U.S. presence, Prada is the only one that actually put together a show for the recent New York fall collections. The move was...

MILAN — Prada has an American Dream.

While various Italian houses have been making lots of noise about building their U.S. presence, Prada is the only one that actually put together a show for the recent New York fall collections. The move was part of a broader strategy to expand in the U.S. Included in those plans are several shops across the country.

Sparked by growing demand in the U.S. for its trademark bags, shoes and trend-oriented apparel, Prada showed under the big tents in New York, signed a lease for a flagship store on Madison Avenue, signed another one for a Miu’ Miu’ store (Prada’s younger, funkier line) in SoHo and is looking at opening another eight to 10 stores across the U.S. and in Canada in the near future.

Prada’s New York debut last month in Bryant Park marked the first time the Italian apparel and leather accessories house presented its designs to the American public.

“It’s one thing to show to an American audience here, and a whole other thing to show to an American audience in the States. This should be seen as our commitment to investing in the American market,” said Patrizio Bertelli, managing director of I Pellettieri D’Italia SpA (IPI), the company that produces and distributes the Prada lines, in a joint interview with his wife and Prada designer/co-owner, Miuccia Prada. The Prada business, which was founded by Miuccia’s grandfather Mario Prada in 1913, is jointly run by Miuccia and Bertelli.

“The U.S. attraction has always been very strong. It’s the place where things happen; it’s dynamic. To be a success in New York is the most difficult, but also gives the most satisfaction,” said Miuccia Prada during a recent interview at the company’s stately Milan headquarters in Palazzo Manusardi.

Bertelli said the showing in New York was not a onetime event; more shows are planned as part of Prada’s U.S. growth campaign. Still, this doesn’t mean Prada will abandon Milan. The fashion house plans to keep showing here as well, Bertelli and Prada said.

“The whole notion of saying, ‘I’m here (in Italy). If you want me, you have to come to me,’ is OK, but I think you need to give a little. This is a new approach to the fashion business — that of mobility,” explained Bertelli.

The Madison Avenue store, a space that was reportedly much sought after by a number of Italian designers, should open sometime in 1995, after renovations are completed. It will carry Prada’s apparel, bags, accessories and shoes, as well as the small but growing men’s collection, which includes some apparel (mainly blouson jackets) and shoes. The third floor will be used for office space. Prada’s existing store on 57th Street will be dedicated exclusively to accessories.

Prada is also scouting store locations in Los Angeles, San Francisco, Chicago, Boston, Houston and Miami, in addition to Toronto and Vancouver in Canada.

“Development is a necessity,” said Bertelli. “You can’t ever stop; you have to keep growing. The difference between one company and another is how it chooses to develop, which strategic decisions it makes.”

He added that with the U.S. push, which comes under a global expansion campaign Prada is putting together, the company hopes to boost U.S. sales to 30 percent of total exports from 22 percent currently. The Prada group posted aggregate sales in 1993 of about $183 million (300 billion lire), of which 60-65 percent came from exports. Currently, the European market represents 33 percent of total exports and the Japanese market, 45 percent, according to Bertelli, whose goal is to achieve an equal distribution of exports among the U.S., European and Far Eastern markets.

Fifty percent of revenue derives from Prada’s core business in leather bags and accessories, while 30 percent comes from shoes and 20 percent from the apparel business, which was launched in the fall of 1989. Bertelli declined to release net profit figures, but did say the firm was able to finance itself from its earnings.

The Prada operation today includes IPI, a production company based near Florence that also handles distribution. The group directly employs 330 and indirectly some 600, as IPI works with a range of local production companies.

IPI also controls 20 percent of Prada’s total production outside its main factory, through direct stakes in small local manufacturing companies, Bertelli added. Furthermore, through a structure of cross-holdings, the two companies together control 24 boutiques, including the new stores on Madison and Wooster.

Although the group has another 27 boutiques under franchise agreements, Bertelli prefers to have control of the shops in order to develop the Prada name, rather than a specific product.

In fact, Prada’s 15 Japanese franchises are slated to become wholly owned in 1996 under terms of the contract, Bertelli said.

“We believe that Prada has become a name that is synonymous with a certain kind of lifestyle, rather than a name that is tied to a specific product,” said Bertelli, explaining that this goal has led to a series of strategic decisions.

“That means we don’t do so-called ‘second lines,’ we don’t do duty-free, we don’t do licensing contracts, we don’t do franchises anymore because that way, we don’t lose control and the customer doesn’t become numb to the product. It’s an obsession of mine, to have control,” Bertelli admitted.

This hands-on, down-to-earth approach also characterizes the way Miuccia designs the collections.

“My way of thinking about the product is linked to a lifestyle; it isn’t theoretical or abstract. My approach is where style and reality meet,” she said. “It’s a style that has to do with the way we live and what women need in their lives.”

Looking ahead, Bertelli is also working to open 40 to 45 Prada stores around the world in the short term. The first, probably in London, could open as early as September, although the location isn’t definite; another boutique is planned in Japan, where Prada already owns six boutiques and has 15 franchises. In addition, a new boutique for Granello, a long-time footwear and leather accessories label held by IPI, is being planned for Tokyo under a bid to develop the line.

The first Granello shop opened on Via Sant’Andrea here last year. Prada shops are slated to open in Dusseldorf and Munich by yearend, and an additional four shops in Germany are to come later, though the cities have not been determined.