Prada SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Growing luxury product market in India: India is considered to be the second largest luxury market after China. It will be an important market for international luxury brands looking for new avenues of growth. The growth of the market is driven by changes in FDI policy, Make in India focus, rise in income of the middle class and strong manufacturing industry. The FDI policy change that allows 100% FDI in single brand retail has received appreciation from international fashion brands. India’s ‘Ease of Business’ ranking has also improved. Prada has already made inroads in the Indian market by selling its products in India through e-commerce firms like Snapdeal and Flipkart.

2. Increasingly knowledgeable consumers and rising disposable income driving luxury market growth in Middle East: The luxury goods market in the Middle East is expected to grow at CAGR of 8.1% during 2017-2025 to reach a value of USD 22.4 billion by 2025. Middle East consumers are the tenth highest spenders on luxury goods, according to Goldstein Research. The Gulf Cooperation Council countries – Saudi Arabia, Kuwait, UAE, Qatar, Oman and Bahrain see rising demand for luxury products despite economic slowdown. 70% of Middle East consumers have increased their luxury goods spending, compared to 53% in Europe, Japan and USA. Luxury goods companies are increasing their presence in the region by extension of their distribution network and opening new stores. A major growth driver of the Middle East luxury goods market is the growth in knowledgeable and inquisitive consumer population in the region, as well as rising disposable income, especially in UAE and Saudi Arabia. Prada is in expansion mode in the region, having announced in May 2018 that they would open a new flagship store in Dubai. This comes 6 years after the opening of its current flagship store in Dubai.

3. Technology roll to boost e-commerce, operational efficiency and digital customer experience: Technology has a great potential to boost a company’s performance in today’s world. Prada is in the midst of a massive tech roll out will drive its growth and open up new opportunities in the coming years. In 2018, a new website for Miu Miu was launched in Europe. In 2019, the focus is on launching e-commerce platforms for Prada’s brands. The in-store app Clientsphere has been upgraded. A new merchandise planning tool is being rolled out to improve effectiveness and efficiency. The company is working on developing a seamless remote customer experience and has launched new concierge functions in 5 regional hubs. Prada is also integrating CRM with AI. The company has set up a data science team and implemented cross-channel marketing automation process for generating campaigns based on analysis of customer behavior. Digital communication initiatives like Prada Linea Rossa, Prada Delivery Man and Miu Miu Iconic Wardrobe are launched. Prada has also launched new digital channels through Twitter Japan, Kakao Talk and Spotify.

Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Fashion Pact to reduce environmental impact of the fashion industry: At the G7 summit in August 2019, French President Emmanuel Macron announced the Fashion Pact, which is a set of shared objectives for the fashion industry to reduce its impact on the environment. This pact has been initiated because of the difficulty that fashion brands are facing in reducing the impact alone. It was decided a collaborative effort would be better. The pact is an attempt to get competing brands to work together for a common goal of environment protection. Prada is one of the leading companies that have joined the pact.

2. Rising trend of fur-free fashion: Today there is rising awareness of the harm caused to animals while making products using fur. As a result, luxury brands are increasingly using fur-free products to appeal to the new sensitivities of the customers. Prada has announced a ban on fur in May 2019. The ban has come into effect in September for the company’s spring/summer 2020 collection for women. Prada has made this initiative in collaboration with Fur Free Alliance, which is a group of 40 animal protection organizations across the world that are trying to prevent animal cruelty. The company said that fur products were not among its major selling products so there will be very little impact on the bottom line but it will be a major boost to the company’s marketing and brand image.

3. Responsible relationship with the environment: Younger generation of luxury consumers are conscious about the impact that their purchase decisions have on the environment and society. They are more likely to buy products from a company that shares their own personal values. 85% of global growth of luxury sales is driven by millennials and Generation Z, which makes it important for luxury brands to become more conscious of the environment. Prada ensures its manufacturing and storage facilities are environment friendly. These buildings are spread across Italy, occupying an area of more than 200,000 square meters. Five of these buildings are newly constructed, three of them are a result of industrial archaeology projects and many buildings are converted from abandoned sites. Prada’s logistics hub in Levanella and the Valvigna factory are structures that fit very well in the local environment. Their design is harmonious with the natural surroundings.