Prada’s Rise Was Built by the Fashion Industry, Not Luxury Legend

Each week, QDaily publishes an illustrated guide to a luxury brand. What makes these famous names successful? What makes them memorable? And how do they convey “luxury”?

In 1913, Mario Prada opened a small family leather-goods shop in central Milan. He called it Fratelli Prada—“Prada Brothers” in Italian—and sold handbags, suitcases, leather accessories, and vanity cases. Many of the trunks came from England. Mario ran the shop cautiously for the next 60 years. Only after more than half a century of quiet business did its fortunes change.

In 1978, Mario’s granddaughter, 17-year-old Miuccia Prada, inherited the shop. A gifted designer, she met Patrizio Bertelli, a young man skilled at managing the production of luxury goods who would later become her husband. He urged her to turn Prada into a business. With Miuccia as chief designer and Bertelli as CEO, the pair turned a small Milan shop into an international company in just 30 years. A leather-goods supplier that had sold imported English trunks became a luxury group with brands including Church’s, Car Shoe, and Miu Miu, and products ranging from shoes and bags to perfume and even mobile phones.

No heritage to invoke, no craftsmanship to invoke—just a value chain

No luxury group’s financial reports read more like the orderly, comprehensive case studies in a business-school textbook than Prada’s. At its earnings presentations, the PDFs dispense with the ornate backgrounds and glossy photographs favored by other luxury groups. Instead, they contain practical tables, including analyses of each link in the value chain. That says something about Bertelli. Born into a family of lawyers, he showed an early gift for business and dropped out of school to start a leather-goods company. His first move after joining Prada was to stop importing leather goods from England. He set about building Prada’s own value chain, with distribution channels around the world and a system for mass production.

That value chain laid the groundwork for Prada’s international expansion and growth. As the chart below comparing Prada’s growth with that of the global luxury market shows, Prada grew far faster after 1978 than the market as a whole. Most strikingly, its sales increased more than tenfold between 1994 and 2010—just 16 years. Along this chain that traces the development of the fashion industry, what did Prada get right?

Seizing the opportunities in a new material

When 17-year-old Miuccia Prada took over the family business in 1978, she left the commercial side to Bertelli and immersed herself in the design work she loved and did best. In the warehouse, she noticed the black nylon fabric her grandfather had used to cover the heavy trunks shipped from England.

More than 50 years had passed since DuPont invented nylon, but its use in fashion had barely extended beyond stockings. Designers—especially those working at the high end—had little regard for this new petrochemical material.

The conservative, patrician Hermès still clung to its prized crocodile and ostrich skins. LV’s effort to court younger customers had gone no further than canvas. Miuccia Prada, meanwhile, made a series of handbags from the discarded black nylon. They looked unlike other bags. They were also light, waterproof, and unexpectedly modern in feel.

To promote these expensive novelties, Prada stressed that the black nylon was the same material used in parachutes, immediately suggesting strength and durability. Prada was, in effect, the originator of the “aerospace materials” pitch now common across industries. The nylon handbags became known as “parachute bags.” Before long, they were must-haves for the fashion-conscious—and Prada’s first hit product to break into the fashion world.

After the handbags took off, Miuccia pressed on. Between 1988 and 1995, she launched women’s and men’s ready-to-wear collections. Together with the shoe line introduced in 1979, they gave Prada the full range expected of a high-fashion house, from clothing and handbags to accessories. In 1993, Miuccia drew on her own wardrobe to create Miu Miu for young socialites seeking adventurous fashion and precise tailoring. It won their favor almost as soon as it appeared. Its marketing had much to do with that.

From Milan to Paris, fashion week gave Prada its halo

Have you ever wondered why the famous film is called The Devil Wears Prada, rather than the name of some other brand?

Consider the model for its formidable editor: Anna Wintour, editor-in-chief of American Vogue. She loves Prada’s clothes and accessories and is close to Miuccia Prada. Without the fashion world’s embrace, Prada would not be what it is today. The company knows how to win over fashion editors and buyers.

As early as the beginning of the 1980s, Bertelli tried putting the black nylon bags in prime display spots at upscale department stores and boutiques, hoping to catch the eyes of fashion editors and people alert to new trends. Prada debuted its first women’s ready-to-wear collection at Milan Fashion Week in 1988. The show drew enthusiastic reviews from the fashion world. Milan Fashion Week had been established 30 years earlier.

In 1943, an American fashion-industry association staged the first New York Fashion Week to challenge Paris’s dominance and introduce American designers to the world. Extensive coverage in magazines such as Vogue, whose pages had previously been filled largely with French fashion shoots, helped American labels rise. London and Milan followed New York’s example. By the 1980s, fashion week had become an annual event with worldwide influence.

Young Miuccia Prada’s Milan Fashion Week debut drew praise for its clean, crisp style.

A Prada promotional photograph in a fashion magazine in the early 1990s

In 1993, Miuccia launched Miu Miu, a secondary line inspired by her own wardrobe. To her, it was a way to explore new territory. Prada expressed her pursuit of minimalism; Miu Miu was more playful. Its colors and cuts caught the fashion world’s attention at once, particularly among young socialites.

This time, they chose the youthful, celebrity-filled New York Fashion Week as Miu Miu’s first stop. In 1995, the brand staged its first New York Fashion Week show, with Kate Moss leading the runway lineup.

Kate Moss led Miu Miu’s debut show in 1995, drawing attention from the American fashion world.

Miu Miu appeared at London Fashion Week in 1997, then moved to Paris Fashion Week in 2006. By then, Miuccia Prada had shown at all four of the world’s major fashion weeks. Between 1993 and 1995, she won two major awards from the CFDA, including its most prestigious, Designer of the Year. The acclaim gave Prada standing in fashion circles; fashion media then carried its name around the world.

Kate Moss in a Miu Miu cover shoot for British Vogue.

From the outset, Miu Miu’s marketing has centered on young female stars. Actresses just making their names in film or television are especially likely to find a place in its front row—almost certainly so if they have won a few awards, such as an Oscar for Best Supporting Actress.

The image below shows the front-row seating plan for Miu Miu’s 2014 Paris show. Around Rihanna, the R&B singer at the height of her fame, sat a constellation of stars: Lupita Nyong’o, who won the Best Supporting Actress Oscar for 12 Years a Slave; Elizabeth Olsen, who appeared in Godzilla and The Avengers; and Elle Fanning, the star of Maleficent. Margot Robbie, the leading lady of The Wolf of Wall Street, stood out in a red coat.

Opening stores despite the debt—and making them super-flagships

As more people discovered Prada through celebrities and fashion editors, Bertelli wasted little time putting stores near them. Prada opened stores in New York and Madrid in 1986, followed by London, Paris, and Tokyo.

In the United States, Prada found great success with a working-class theme. Bertelli worked to put its bags in prime display positions at every major American department store. In its publicity, he sought to set Prada apart from traditional luxury brands such as LV, touting “a union of high art and fashion,” “Anti Status,” and “Reverse Snobbery” to build a younger image. “Art is for expressing ideas and a vision; my job is to sell,” as Miuccia Prada famously put it.

Starting in 1996, Prada spent lavishly on vast, carefully designed “super-flagship” stores around the world. It commissioned OMA, renowned architect Rem Koolhaas’s firm, to design stores on Broadway, in Beverly Hills, and elsewhere. Nearly every one became a local landmark. The noted architect Roberto Baciocchi and the Swiss firm Herzog & de Meuron later designed a number of Prada flagships, while OMA designed Prada show venues on several occasions.

By January 2014, Prada Group had 540 directly operated stores worldwide. Asia, including Japan, had the most with 146; Europe, including Italy, came second with 106.

Measured by total store count, Prada and Miu Miu combined ranked second among the world’s major luxury brands, behind only Burberry and ahead of LV and Gucci. On its own, the Prada brand—built up in less than 40 years—ranked sixth.

Following LVMH’s lead: buying status, boosting profits with accessories

Stores were only part of the expansion. In 1999, Prada bought the British luxury shoemaker Church’s. In 2001, it acquired Car Shoe, the Italian brand known for soft-soled driving shoes. It also once owned Helmut Lang, later sold to Uniqlo’s Japanese parent, Fast Retailing, and Jil Sander, which it used as a bridge into the German market. The latter deal even prompted Jil Sander herself to resign; the brand was later sold to Change Capital Partners, the investment firm associated with Carrefour chairman Luc Vandevelde. Prada also teamed up with LVMH to beat Gucci and take control of Fendi, though it later sold its 25.5% stake to LVMH. Many of those brands were subsequently discarded or sold, but the purchases of established high-end names secured Prada a place in Europe’s luxury industry.

Changes in store counts across Prada Group’s brands, 2012–2013

The acquisitions also brought considerable debt. Fendi was performing poorly when Prada bought in, and Prada Group took on its debts—debts it is still working through. That directly derailed several attempts to go public.

In 2001, hoping to repay debts of US$850 million, Prada planned to offer corporate bonds amounting to 30% of the company on the Milan Stock Exchange. The IPO was then postponed as the luxury boom faded in Japan and the United States. Prada Group finally listed on the Hong Kong Stock Exchange in 2011, becoming one of the few luxury companies to choose Hong Kong.

Prada Group recorded revenue of 3.587 billion euros in fiscal 2013, its fourth straight year of growth above 20%. Asia-Pacific, including Japan, accounted for 46% of revenue, while leather goods supplied an unsurprising 66%. More striking was the 17% from “other” products—almost as much as ready-to-wear. That category included perfume, skincare, sunglasses, and even a touchscreen phone developed with LG. Such high-margin accessories have become a standard way for luxury brands to find new sources of profit.

QDaily’s previously published illustrated guides to luxury brands include: Burberry, Ralph Lauren, LV and Hermès. If you’d like to learn more about luxury brands, leave us a comment.