Prada eyes mainland production base
Italian maker of luxury goods also expects pace of sales in China to double in next five years as buying habits change
The chief executive of Prada Group said yesterday that the proportion of goods sold to Chinese would double over the next five years and that it might manufacture in the mainland in future.
Patrizio Bertelli was speaking before his keynote address today at a Business of Luxury summit at the former Hall of Sino-Soviet Friendship in central Shanghai.
Mr Bertelli said the Far East region, including Japan, South Korea, Taiwan, China, Hong Kong and Singapore, accounted for 33 per cent of the group's global sales, with ethnic Chinese accounting for 10 per cent. 'This proportion [of 10 per cent] is likely to double by 2010, with more and more Chinese visitors replacing Japanese in Europe.'
Prada has eight stores in the mainland, including two in Beijing and others in Shanghai, Guangzhou and Chengdu. 'We would like to open an epicentre store in Shanghai and are looking around the Bund area. It will be designed by Rem Koolhas and the design depends on the location,' Mr Bertelli said.
A Dutch architect, Mr Koolhas has designed the controversial new centre for China Central Television in Beijing and two of Prada's three epicentres - in New York and Los Angeles. The third is in Tokyo. 'The epicentre is more than a flagship,' Mr Bertelli said. 'It is an image vehicle and relates to younger people.'
He said the buying habits of Chinese were similar to those of Japanese. 'But they are more easygoing and more open to new trends. China is a newer, younger market, very buoyant. They are less conservative than Japanese.'
Prada makes 90 per cent of its products in Italy, the rest in the Mediterranean area and none in China.
'We are exploring the possibility of buying semi-finished goods and raw materials in China. We may produce in China in the future, such as leisure shoes and ready-to-wear shoes. The quality of leather has not reached the quality of Italy but the level of nylon and technical fabrics is quite good,' he said.
'For the next 10 years, labour costs here will remain low, even with changes in customs duties and the yuan. The real issue is how to exploit best the resources of China. How do we integrate Italian companies with Chinese labour? This does not mean that we eliminate Italian labour. They are the holder of the know-how and understanding of our products.'
Mr Bertelli was relaxed about counterfeiting. 'We have been copied since 1980. It is a symptom of our success. Some companies are sorry that they have not been counterfeited. It will never be totally eradicated. If I were angry, I would be angry in Italy. China is just coming out of communism and needs to create millions of jobs,' he said.
After a spate of acquisitions since the late 1990s, Prada carries debts running into hundreds of millions of euros and a Euro700 million ($6.88 billion) convertible bond due to mature next month.
It has been considering an initial public offering but Mr Bertelli said a listing could wait.
'We will start to think of it in 2007. We can handle the debt and will renew it in a way that is not like a bond. The banks are happy with this.'
Shop till you drop
Prada has eight stores in China, including two in Beijing
The group is planning to open an epicentre store in Shanghai
It would be the fourth after New York, Los Angeles and Tokyo
