The luxury goods market enjoyed steady growth before the coronavirus pandemic hit the world economies, albeit in different proportions. Before the pandemic, the demand for most luxury items, including apparel, jewelry, shoes, high-end watches, costly bags, and accessories, was on the rise. In fact, the overall sector had been projected to hit a value of around $430 billion by 2026 (Silvers & Dalton, 2020). However, the pandemic shattered this expectation as the sector experienced a downfall following the shutdown of the economy. The expectation was that the luxury goods market would take years to recover as companies prioritize protecting the health and safety of employees, consumers, and business partners. In particular, Italy suffered major effects following the devastation from the disease that crippled the healthcare sector resulting in many deaths. This greatly affected the operations of Prada Group, a renowned Italian fashion conglomerate.
Prada distributes luxury goods, including leather footwear, ready-to-wear collections, fragrances, and eyewear. The company has established a network of over 635 stores spread across 70 countries (PradaGroup, 2018). It also retails its products through selected department stores and e-commerce channels spread across different parts of the world. The company owns over 23 factories and employs close to 13000 people.
The world has shown a strong recovery from the coronavirus pandemic. Prada Group can take advantage of the improving economic environment by looking for new markets even as it expands in the traditional markets. The company is heavily dependent on the European market and the United States of America, where it operates 228 and 103 stores, respectively (PradaGroup, 2018). There is a need for the company to tap into the Chinese market, which has shown strong positive growth. In particular, personal luxury items are promptly gaining favor in secondary cities and suburban areas. The development means the market is expanding over and above the conventional focus on tier-one cities.
Growth in China is propelled by a rising youthful working-class population. Young people generate income from employment opportunities created as economies expand. The Chinese people are also becoming more conscious pertaining to the benefits of using quality products, further driving up the demand for luxury items in the future. China is further experiencing a rise in tourism activities, which is expected to stimulate the sales of luxury products to travelers who are conscious of the evolving fashion trends. However, the company has to approach the Chinese market with tailored products. The country is characterized by complex geo-political and cultural differences with Western luxury brands (Pajic, 2019). The young and prosperous Chinese Gen Z shoppers have the money but are spending more on local brands, which they consider to be much more aspirational and attractive. Unlike the millennials or Gen X, Gen Z shoppers are particularly excited by their Chinese cultural legacy and prospects. Therefore, Prada has to focus more on products aimed at gen Z customers even as it remains mindful of the cultural nuances in China.
Furthermore, there is an increasing concern about the damaging effects of climate change. Consumers are more and more increasing their expectations for the company to embrace sustainability. The company recognizes the value of sustainability and seeks to play a major role in the industry and beyond in matters involving corporate social responsibility. This is in line with the growing demand from the stakeholders, including the customers and regulators, for accountability and sustainable business policies. Customers are demanding more personalized items that are also aligned with their values and belief system (Osman et al., 2019). They are raising a strong voice on social issues as they demand real action, which has resulted in a major shift from the conventional view of luxury goods based on their logos, status, and exclusivity.
The desire for inclusion, diversity and social responsibility has provoked the need for increased innovation to drive growth. The company should continue to enhance its presence by engaging in a relentless process of re-invention and innovation. This is to ensure that their luxury products evolve in line with current tendencies and, at the same time, preserve the unique legacy and makeup of each brand (Ryan, 2020). The modern consumer is looking for a spectrum of on-trend products that acknowledge their needs through multimedia and technology-propelled interaction and engagement with brands.
Additionally, in the backdrop of major financial crises in the past decade, consumers are now more cautious about spending. This, combined with the escalating push for sustainability, is coming to define the pertinent purchasing considerations in mature markets. In the main, the trend has inspired the rise of the secondhand luxury market. This new market has risen by over 65% in the past half-decade compared with 12% growth over the same period in the firsthand luxury market (Arienti, 2017). Furthermore, it has permeated some items in the luxury goods portfolio and now accounts for around half the size of each of the three top personal luxury goods items. This development should not escape the consideration by Prada Group since it presents a new segment in the luxury goods market.
Another opportunity that Prada Group should embrace is the rising trends among the male gender to consume more luxury products. The company has traditionally focused in providing luxury items mainly focused on women. However, men are increasingly starting to buy luxury products as they change and improve their spending habits and shopping experiences. Even as women account for 65% of the market share in the global luxury goods market, male performance will continue to show strong growth. Additionally, the company should continue to focus on maintaining its physical presence in stores. The physical mode of sales remains a major force in defining the success of the company in the coming times. This entails growing the store network as they provide the primary channel of generating revenue as customers have an opportunity to closely interact with items in flagship stores, physical stores, retail shops, and brand outlets. Ryan (2020) notes that physical locations account for around 90% of the total sales revenue in the luxury goods market. Prada can additionally use the physical stores as distribution centers to support its e-commerce segment, further enabling the company to better manage the supply and logistics.
In summary, the luxury goods market has shown a strong recovery from the coronavirus effects. The crisis has also provided an opportunity for the company to plan for the future. There are different factors that will drive the growth and success of Prada Group in the coming times. The company has to create a greater presence in the Chinese market, apart from the United States and Europe as the country experiences impressive growth. Sustainability and innovation will help in the creation of products that meet the individual needs of different shoppers. Lastly, even as women account for a greater proportion of the luxury items market share, men are starting to increase their interest in the goods and should be a center of focus for future growth. Prada should also continue to grow its store network to be able to reach more clients who have the opportunity to interact closely with the company’s brands.
References
Arienti, P. (2017). Reaching the new luxury consumer. WSJ. Web.
Osman G.M., Intisar A.M., Mostaquim-Al-Islam, Ahmed C.S. and Omar F.M. (2019). Factors affecting consumers’ purchase intention for counterfeit luxury goods in Bangladesh. Innovative Marketing, 15(4), 27–41.
Pajic, M.A. (2019). Consumer behavior factors and contemporary trends on the luxury goods market. Notitia, 5(1), 101–117.
PradaGroup. (2018). Group Profile. Web.
Ryan, C. (2020). Luxury brands follow Chinese shoppers back home. Web.
Silver’s, E. and Dalton, M. (2020). In luxury goods, the pandemic shows bigger is better. Web.