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Prada’s contract manufacturer takes the retail plunge

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The shoe is now being tested on the other foot as far as fashion footwear is concerned. Stella International, a Taiwanese contract manufacturer which makes shoes for Prada, has opened its first overseas boutique on Boulevard St. Germain in Paris selling luxury pumps and heels under its own Stella Luna brand.

For years, the pashas of European fashion agonised about the risks to their brands of sourcing their exquisite calf-skin and brocade creations from factories in Shanghai. Eventually, they gave in to the lure of margin advantage and were grateful that customers did not turn up their noses. Hardly surprising, therefore, that the suppliers of cheaper product are now testing their own creations on the streets of Paris, targetting the affordable luxury market of €200 to €600 ($271.49 to $814.53) per pair.

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Chinese consumer product manufacturers have been cautious in pushing their brands on Westerners. The few successes have been firms, such as Lenovo, selling mass-market electronics rather than high fashion or goods with an exclusive cachet. Nor have Chinese companies been big investors in consumer companies overseas, preferring to buy technology and natural resources, rather than brands. But there are now signs of a few movers, such as the purchase by a Chinese investor of Savile Row tailor Gieves & Hawkes, and the investment earlier this year by Fosun, the private equity group, in Club Med.

Stella is not alone in paying for posh real estate in pushing its brand. Bosideng, the Chinese clothing retailer, last year acquired a prime site on South Moulton Street in London to test its international ambitions. Close to the high-fashion emporia of Bond Street, the site was clearly chosen to pitch the brand well above its traditional mass-market Chinese business. With 7,500 outlets in China, Bosideng's business was built on selling down jackets but in London it is targeting fashionable young males with £400 ($628.30) suits.

It could all go horribly wrong; the Chinese will not be the first retailers to come a cropper by going abroad. An unknown brand, expensive real estate and a high fashion product; put it all together and you get loads of business risk. Yet, Chinese firms have no alternative. The reason to buy an expensive lease in London's West End is not to achieve big inroads into Western markets but to bolster their own brand's goodwill at home. Success abroad will give them the status boost they need to sell more higher-margin products and expand into other Asian markets.

The fashion pashas in Paris and Milan may sniff, but before they turn up their noses, they should follow the noses of their customers and see where they go.

Carl Mortished is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights .

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About the Author

Carl Mortished is a Canadian financial journalist and freelance consultant based in the U.K. With a career spanning investment banking, journalism and consulting for global companies, he was for many years a financial writer and columnist for The Times of London. More


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