Prada ponders outsourcing to China
By Adam Jones in Shanghai
Published: May 20 2005 03:00 | Last updated: May 20 2005 03:00
Prada, one of the world's leading fashion houses, could move production of some less exclusive products out of its native Italy to cheaper factories abroad in countries such as China.
Patrizio Bertelli, chairman and chief executive, revealed at the first Financial Times Business of Luxury summit that Prada was in the early stages of evaluating the benefits of partial outsourcing - still a taboo for some in the luxury goods industry.
He also argued against a protectionist response to rising Chinese textile exports to the US and Europe. It did not make sense, he said, to build a "great wall" against Chinese-made clothing.
The US has reimposed restrictions on some types of Chinese textiles since a big increase in imports followed the abolition of worldwide quotas on January 1.
European retailers and clothing brands have expressed increasing alarm at the possibility that the EU, under pressure from France and Italy, might follow the US lead.
"I believe China should be seen as a major opportunity for all our businesses - including Italian businesses - and not as a threat to our work," said Mr Bertelli.
Luxury goods groups such as Prada are flocking to China to sell to its newly wealthy elite. Prada currently makes all of its clothes and accessories in Italy. About 40 per cent of this production is in Prada- owned facilities; the rest is handled by external Italian partners under close supervision by Prada.
Mr Bertelli said it made "perfect sense" in cost terms to manufacture high-volume luxury goods outside Italy, either in a cheaper Mediterranean country or further afield. That would not necessarily hamper either the quality or perceived quality of a brand, he said.
However, Mr Bertelli said the general movement of some production to lower-cost markets should not trigger a "religious war".
He predicted that over the next 10 years, Italy would "simply not have enough labour to manufacture everything that the market requires".
He outlined a potential system where the declaration "made by Prada" would suffice if the garment was made outside Italy, while keeping "made in Italy" for domestic production.
In an interview with the Financial Times, Mr Bertelli explained that his unusually direct public comments were an attempt to "throw a stone in the water" on a topic on which many in the industry preferred to remain reticent.
He stressed that most Prada production was certain to remain in Italy: "We are currently evaluating a series of opportunities. We haven't finalised decisions yet." But he highlighted sports and leisure wear as areas where Chinese manufacturing was good quality.
However, Umberto Angeloni, the chief executive of Brioni Roman Style, the Italian tailor, articulated the opposition of some quarters of the luxury goods industry to the outsourcing of production to lower-cost countries.
He said many newly rich consumers of luxury goods were particularly wary of such changes. A product's origin was "a basic element of the dream factor" for such a consumer, he argued.
If there were a shortage of Italian tailors, Mr Angeloni said he would prefer to bring Chinese tailors to Italy and train them to work there rather than move production to China itself.