What Are The Problems Of Prada Financial Report In Waterloo, China?

Editor's Note:

The days when Chinese women's wardrobe will add Prada products may be gone forever.

The luxury goods manufacturer in Italy is going through a difficult period, struggling to refresh its brand image in the younger generation, coupled with the recent decrease in the consumption of luxury goods by Chinese consumers, which has made the company's profitability become the focus of attention again.

Prada S.p.A., a parent company listed in Hongkong, has high-end brands such as Prada, MiuMiu and Church. In March 18th, it issued disappointing 2018 full year earnings, operating profit fell 10% to 366 million US dollars.

The growth of retail sales in the first half of 2018 was completely destroyed by the weakness of the second half of the year, as demand for both Chinese and overseas customers had shrunk.

The expected result resulted in an evaporation of $864 million on the day's market value, indicating that global investors expressed new concerns about the future of Prada.

Fashion tycoons claim that there are several reasons for the financial difficulties, including a decline in tourism consumption in China, especially in Hongkong and Macao, as well as a slowdown in China's economy in recent quarters.

However, we continue to see that other major brands such as LVMH, Kering group and Herm s continue to include the growth of the Chinese market.

"Chinese customers are our most important consumer groups," a Prada spokesman said.

"They account for over 30% of the group's sales in China and abroad."

The statement shows that the company's current financial position is very dependent on the market and partly explains the company's losses.

However, the problem of Prada in the Chinese market may be buried deeper.

Craving for sex

"Prada is not my starting point for the new package this year," said Kiwi Zheng, a luxury consumer working in Shanghai's financial sector.

"This brand doesn't have a IT'bag."

Tian Xu, a luxury shopper in Ningbo, responded to Zheng's comments.

I don't think Prada is popular.

My budget may be used for brands like Dior, Chanel or Gucci.

What I want most now is Dior's Saddle package.

"Renee Hu, a luxury purchasing agent in Shanghai, also tells us that Prada bags are not popular among her customers. Many people still ask about the styles of Chanel, LouisVuitton and Herm s.

However, the fact that Prada does not have a "IT" package is a bit misleading.

Many years ago, the brand's "Galleria" series, or consumers' well-known "killer pack", can be regarded as the most popular handbags for white-collar women.

Over the past two years, the company has also launched a series of "Sidonie", "Belle" and "Odette" series to meet the worldwide trend of interest in small fashion bags.

Therefore, the key question is whether Prada's current products can enhance the attractiveness of brands in Chinese consumers.

However, the consumer response we observed is not good.

"I think that compared with other luxury brands, they are doing a very bad job in marketing new products," Zheng said. "I haven't heard of Prada for a while."

Tiffany Qiu, a luxury shopper who works in an investment bank in New York, adds, "this killer pack is out of date for office ladies.

Now we prefer SaintLaurent's Sac de Jour or Celine Box. "

Quality problems

Luxury consumers Zheng and Qiu have noticed a more noteworthy question: "the quality of Prada is doubtful," Qiu said.

There are many consumers' complaints on the Internet.

Some people even say that if you buy a Prada bag, leather will not wear in a year, it may prove that it is a fake bag. "

Fast search on Chinese websites can see many related results combining keyword "Prada" and "quality".

For example, many people complained about the poor quality of the brand in the little red book. Some people wrote, "when I used the most five times, the thread of the belt dropped a little, and I didn't use it very much."

On another overseas electronic business platform dealmoon, there is another post saying that Prada has become the first card to bear the brunt of quality failure.

Mainstream Chinese media such as Sohu have similar articles.

Qui added, "so if I have a budget for Prada I'll go to buy Louis Weedon, because the quality is good and it's really worth it."

Dealmoon's article: "this is a bag / shoe that you will never buy when you save money."

In response to Jing Daily's investigation of the Prada quality problem reflected by Chinese consumers, Prada issued a statement stressing its continuous efforts to ensure the quality of its products.

Hope for change

Can the brand come back as soon as possible? In the current situation, it looks not optimistic.

The current state of Prada is likely to last until 2019.

WalterWoo, an analyst with China Merchants Bank International Securities Co., told Bloomberg that "in the first fourth months of 2018, there was no significant rebound in [Prada] sales in China in the first two months of this year."

Even PatrizioBertelli, chief executive of Prada group, mentioned the challenges facing the brand during a recent conference call.

"The Chinese market is even more challenging than before."

Bertelli added, "we must do more and more work in this market."

However, Prada still has the chance to regain its prestige in China.

It has restored a historic residential house in 1918, Shanghai, which has become a new cultural center of the city and a popular card punching place for Chinese Millennial and Z audiences.

The brand also launched a Chinese e-commerce website in December 2017, which is a wise move aimed at providing services to domestic digital consumers and attracting new, younger and more fashion conscious consumers.

Only time will tell whether these measures will help Prada regain consumer confidence and increase its market share in the increasingly competitive luxury market in the process.