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Fashion in Hong Kong and China

Why is Prada eyeing restaurant business in China?

PUBLISHED : Friday, 29 January, 2016, 10:23pm
UPDATED : Tuesday, 02 February, 2016, 12:35pm

Italian luxury goods maker Prada is looking for space to open its first restaurant in China, joining other designer labels expanding beyond their core fashion businesses into the food and beverage sector as a slowing Chinese economy begins to dent their bottom lines.

Shanghai Plaza 66, a high-end shopping centre owned by Hang Lung Properties in Shanghai, is the likely venue for Prada’s food venture as it takes a leaf out of Gucci’s book.

Luxury brands are facing challenging times in China as sales have slumped in the wake of a slower economic growth and the government’s ongoing crackdown on corruption.

Property consultants said luxury retailers are diversifying into other areas to enrich their brand image as well as raise brand awareness in these difficult times.

READ MORE: With new Shanghai restaurant, Gucci serves up taste of Tuscany to grow sales

Such strategies create new forms of profitability based on experience-oriented consumption as well as create additional sales opportunities for physical goods by attracting more shoppers to spend time in the physical stores, CBRE said in its research report released late last year.

“Opening restaurants is something we will do,” a spokeswoman for Prada said. “It could be in China or anywhere,” she said. “We are still looking for locations,” said the spokeswoman, neither denying nor confirming the restaurant would be at Plaza 66.

She, however, said the plans to open a restaurant was still in the preliminary stage.

But sources said the luxury retailer is considering opening a 500 square metre restaurant on the fourth floor of Plaza 66. Prada currently has a three-storey shop at the same shopping centre.

Philip Chen Nan-lok, managing director of Hang Lung Properties, which owns Shanghai Plaza 66, said the group’s flagship mall in Shanghai had started a process of “asset enhancement” in September.

“The programme includes an overall improvement of the mixture of tenants. Some of the better-performing tenants have expanded the size of their stores and Prada is one of them,” he said, but refused to disclose the details of Prada’s expansion plans.

A spokeswoman for Hang Lung Properties said Prada has increased its store size to 2,300 square metres.

‘It is very unlikely that Prada will continue to expand its traditional fashion business as sales have dropped in China sharply,” said an industry source who did not want to be identified, indicating the additional space could be for a different line of business.

In December, Prada reported a 37.6 per cent fall in its net income to 46.5 million in the August-October period as sales plunged in China, Hong Kong, Macau and Taiwan.

Fashion brand Gucci opened 1921 Gucci restaurant in Shanghai IAPM, owned by Sun Hung Kai Properties in the Puxi district of the city.

As part of its diversification, Versace opened a cafe in Grand Gateway 66, according to the CBRE report.

CBRE expects more big brands such as Hermes, Armani and Dolce & Gabbana to introduce restaurants and cafes to China to tap a new engine for revenue growth.