Is the luxury business model broken?

Over the last two years, demand for luxury fashion has softened as aspirational shoppers have pulled back and consumer fatigue has crept in. Yet, Prada Group has continued to grow, by prioritising brand DNA, employing disciplined curation and creating strong connections to  contemporary culture.

“Prada is culture, culture is discussion, culture is opinions. The more you’re discussed, the more you’re able to be influenced by other people's opinions. I think this is unbelievably fruitful,” says Guerra. “This is not a vertical thing; it's a total constant confrontation and change of opinions. This is how things are born in the Prada brand – and I love it.”

This week on The BoF Podcast, BoF founder Imran Amed quizzes Mr Guerra on the luxury business model from developing pricing strategies to the importance of creative tension and cultural relevance.

Key Insights: 

• To navigate a shaky market, brands need to simplify and go back to their DNA. “Brands have gone all over in the past 10 years. And I think that today it's a time that you simplify and you do your own thing,” says Guerra. “Your brand has a DNA, and that DNA cannot be killed in the long term …This is where people are recognising you, so you need to go back there. There are certain things we need to do better again, but better again means to go back some years. ” 

• On the industry’s post-pandemic price hikes, Guerra says “If I’m not able to sell you an emotion, then we discuss pricing. If we discuss pricing, then I’ve failed on the first part.” Some brands, he adds, have been spoilt by certain trends, like inflation. “At a certain stage for some brands it was easy just to increase prices,” he says. Now Guerra says, “we’re back to normal” — and the conversation should return to “creativity, innovation [and] our ability to tell people about emotions.”

• The decision to acquire  Versace was a strategic, long-term bet.. “Versace is a fantastic Italian, authentic, unique, credible brand which has a huge complementary role inside our group … hitting different aesthetics, different consumer bases,” yet sharing roots in culture. The mandate is steady, patient value-building. “There are no broken things. We have an opportunity, and the opportunity is long term. I’m not expecting any sort of tangible numeric result tomorrow morning. We have fixed certain milestones which are very important, but it will take time. And we have the patience.”

• For Guerra, durable desirability is born from managed friction. “There is a history of relationship and tension between the DNA of a brand and a creative impulse, and this tension in the long term must be a positive equation,” he says. “When I talk about culture, we are doing culture ourselves … When you are buying a Prada product, you are buying an opinion, and I am happy that you’re buying an opinion.”

Additional Resources:

• BoF VOICES 2025: Untangling the Fashion Industry’s Future 
• Prada’s Lorenzo Bertelli to Become Versace Executive Chairman | BoF 

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