Prada has been struggling recently, with the company posting its worst profits in five years earlier this month. Profits fell by 27 percent in the past year.
Prada blamed the declining profits on several factors, including the terrorist attacks in Europe that have affected other luxury brands and currency fluctuations. It has suffered in part because it has a limited presence online and sells its products at higher prices than other brands.
The greatest factor contributing to falling profits is China. The Asia Pacific region and Europe each account for 35 percent of Prada’s sales. China makes up to the bulk of sales in Asia, but Asia and China were the only regions with falling sales figures last year. Sales went down 8 percent in China, or 22 percent if the effect of changes in exchange rates is excluded. This is due to declining GDP growth in China and a campaign against extravagance pushed by the Chinese government. China’s luxury goods market shrank by 2 percent last year. Prada’s brand value fell more than any other luxury label.
Many customers are trying to enter the luxury market for the first time. They often decide to buy smaller items with lower prices as an introduction to luxury brands. Some brands offer items specifically designed to appeal to customers who are new to the luxury market. Prada wants to distance itself from the luxury market. The company wants instead to offer customers better value for their money.
Prada is hoping to increase its sales by offering goods at more affordable prices. It also plans to close some stores and offer some products, such as shoes, online. Prada will extend its social media presence to incorporate Snapchat starting in October. The company hopes to double its online sales over the next two years.
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