Prada losing grounds to competitors Vuitton, Hermes and Gucci

Since the spectacular art project developed in South Korea in 2009, PRADA has only been making headlines with its financial difficulties - banks reluctant to restructure the almost EUR 1 billion financing  and rumours of a take over by the Qatar Royal family and Richemont Group. Of these news, a possible take over by Richemont Group has been making headlines since the beginning of 2010.

Although unofficially confirmed, PRADA has been looking to copy the Vuitton expansion strategy and that is to open directly operated store. This seems like a questionable strategy taking into account the current international crisis which is not showing signs of major improvements.

In some key markets such as DUBAI or ISTANBUL this strategy has made PRADA lose ground to its direct competitors Vuitton and Gucci. Almost 2 months ago the only PRADA store in Dubai closed at the Burjuman Mall and since, the brand has no presence in Dubai. Mention should be made that the Burjuman store was a franchised operation. In ISTANBUL, Prada opened in November 2009 their directly operated store in a location which has been losing its attraction, the downtown streets of Nisantasi district, while most of the top luxury brands are making the majority of their sales at the leading luxury mall ISTINYE Park.

Another region where PRADA is absent is Central and Eastern Europe, having been terminating agreements with many multibrand stores and without replacing them with  directly operated stores. Prada is therefore absent from Bucharest (Romania)*, Budapest (Hungary)**, Kiev (Ukraine)***, Prague (Czech Rep)****.

Competitor brand presence (monobrand stores):

*Louis Vuitton

**Louis Vuitton, Gucci

***Louis Vuitton, Gucci

****Louis Vuitton, Gucci, Hermes

CPP believes this situation is caused by two factors: the lack of experience of Prada’s commercial team to develop directly operated stores and the confusing international strategy, most likely in disagreement with financing banks.