Prada, which has had an on-again

Prada, which has had an on-again, off-again initial public offering for over a decade, will finally list on the stock exchange this year but don’t expect that to happen in Italy. The company has chosen Hong Kong as the place
to list. At press time, the IPO was scheduled for July and the timing couldn’t be better. Prada’s net profit for the year ended January 31 was €250.8 million ($342 million), a 150.4 per cent increase on the previous year. Banca IMI-Intesa Sanpaolo Group owns 5 per cent of Prada;  Miuccia Prada and her husband and CEO, Patrizio Bertelli, own the remaining 95 per cent. According to WWD, the Hong Kong IPO will be a listing of a 20 per cent stake that could value the company at $US9.5 billion.

Prada’s revenue from China increased by 75 per cent for 2010 to €389 million, which is approximately 20 per cent of the total turnover for the company. It has 14 stores in mainland China, nine in Hong Kong and two in Macau. This year the company plans to open nine stores on the mainland in cities such as Harbin, Guangzhou, Changchun and Hangzhou and another 11 in 2012.

Tapping China’s appetite for luxury goods requires investment. Right now Hong Kong has the hottest stock exchange in the world for IPOs (French company L’Occitane listed there last May) and its investors understand this appetite. Credit Lyonnais Securities Asia expects consumers from Greater China (which includes Hong Kong, Macau and Taiwan) as well as Chinese nationals who purchase abroad to account for 44 per cent of global luxury sales by 2020, up from 15 per cent now. Overall, CLSA expects the Chinese market for luxury goods to grow at about 25 per cent per annum for the next five years, followed by about 22 per cent thereafter. What that means in monetary terms is a €74 billion domestic luxury market in China by 2020. Add to that the €86 billion Chinese tourists are expected to spend on luxury goods when abroad and by 2020 China will be purchasing luxury goods totalling the equivalent of today’s entire luxury market.

Staging elaborate, expensive fashion shows is only one part of the strategy to seduce wealthy Chinese. Compared with other luxury brands in China, Chanel is relatively underdeveloped. It has eight stores in mainland China, six of which carry ready-to-wear and two jewellery and watches. Chanel’s small footprint, however, didn’t stop it from holding a spectacular event in Shanghai in late 2009. Designer Karl Lagerfeld staged a fashion show on a custom-built barge on the Huangpu River with Pudong’s neon-lit futuristic skyline as a backdrop. The Paris-Shanghai Metiers d’Art Collection, as it was called, consisted of 71 looks inspired by “the idea of China, not the reality,” he said. Since then Chanel has done much to subtly educate Chinese customers. It partnered with the Museum of Contemporary Art in Shanghai to stage Culture Chanel, a retrospective of Coco Chanel’s life, the aim being to teach Chinese customers about the culture of the House of Chanel. It was also a sales pitch.

Christian Dior, on the other hand, created a special version of its best-selling Lady Dior handbag and shot the print advertisement for the bag in Shanghai. Diane von Furstenberg has two stores in China: one opened four years ago in Shanghai, the second last year in Beijing. According to an interview she gave Newsweek last month, the Beijing store has already exceeded its initial sales projections by 30 per cent. To further raise her profile, von Furstenberg threw a party in the Shanghai studio of conceptual artist Zhang Huan for more than 500 people, including actress Jessica Alba and shoe designer Christian Louboutin (who also plans to open stores in China). She followed that with an exhibition called Diane von Furstenberg: Journey of a Dress at the Pace Beijing gallery, the first big New York gallery to open a branch in the Chinese capital. The exhibition runs until May 14 and features portraits of the designer by some of the most celebrated artists of the past four decades, including Andy Warhol and Helmut Newton, along with a retrospective of DVF fashion spanning the past 40 years.

Louis Vuitton, one of the first luxury brands to open a store in China, is also going down the exhibition and education path. Last year Louis Vuitton, which operates stores in 29 Chinese cities, partnered with the French Pavilion at Shanghai Expo and this month an exhibition opens at Beijing’s  National Museum of China featuring the brand’s trunks and innovations in luggage-making.

The connection luxury brands are making with the art world in China is not mere happenstance. In China you can’t access Facebook or YouTube. Even the popular, and fairly innocuous, fashion blog The Sartorialist is blocked to Chinese IP addresses. Restrictions and censorship of traditional media, literature, art and popular music remain despite China’s many leaps forward. But fashion is one avenue of self-expression that is open to the Chinese and they are taking to it with gusto. The only problem facing luxury brands is not when will the boom in China end but how will they continue to meet the demand for their often hand-made products.