Prada Japan Accused of Forcing Staff to Buy Its Merchandise

In 2009, as cash-strapped consumers slashed expenses, luxury retailers around the world felt the pinch. Some companies closed shops; others desperately sought ways to boost sales. According to court documents and accounts from several former employees, Prada Japan may have hit upon a creative -- if unethical -- method for keeping its numbers up. On Friday, Prada's lawyers and executives return to court to respond not only to accusations of gender-based discrimination and abuse of employees, but also to charges that it forced employees to buy Prada bags and other items in order to mask its falling sales.

Many of the charges have been brought by Rina Bovrisse (pictured), a former senior retail manager at Prada Japan from April 2009 to March 2010. Bovrisse has already faced the luxury retailer in complaint court in Japan,an industrial tribunal, where she aired her grievances. The complaint court ruled the case "unsettled," paving the way for Friday's civil lawsuit.

A Plea for Purchases

Among other charges, Bovrisse and two other former employees claim that, beginning on January 7, 2009, the company forced its workers to buy Prada bags and other items in order to hide its falling sales. According to a former store sub-manager, Prada Japan's retail operations manager, Satomi Oyabu, called the store an hour before closing: "She told me both the Manager and Sub-Manager [had to] purchase a minimum of $1,500 worth of products from Prada's 'New Arrival' collection within the day... I convinced Ms. Satomi Oyabu that $1,500 was a lot of money to spend, but she said it was an order that $1,500 would be deposited as 'campaign' salary in February and if we didn't have money that day, we could purchase by our credit cards."

Oyabu also told the managers that these sales could not be entered as employee purchases, which would have at least given them a discount. "I purchased $1,700 from the 'New Arrival' collection and entered the sales as customer full price purchase. My sub-manager did the same," says one former employee. By entering the purchases as customer-generated, full-price sales, Oyabu gave Prada Milan -- the worldwide headquarters of the brand -- the impression that Japanese stores were meeting their sales targets.

Prada Japan's human resources department reimbursed the managers and sub-managers out of funds earmarked for the company's holiday party. The payments were marked as "campaign" salary, effectively camouflaging the program. However, as the former manager later recounted, she was held responsible for taxes on her $1,500 "bonus," as well as any expenditures over $1,500. Given that there were no items priced at exactly $1,500, she said she had to buy $1,700 worth of Prada products, leaving her on the hook for $200.

Reimbursements Run Dry

According to the former manager, Prada Japan's senior human resources manager, Hiroyuki Takahashi, returned to the well in February, forcing every employee to buy at least one piece of store merchandise. This time, however, there wasn't any money to reimburse the managers. According to three former Prada Japan employees, Sesia and Takahashi told them that they would have to purchase further products, or the company would be forced to downsize. As the former manager recounts, "Till I was pushed to resign in June, 2009 almost every month, we were told to purchase to increase sales, but after this January 2009, the corporate office didn't have any more money to reimburse us... so we were told to purchase with 30% employee sales out of our salary, otherwise, the store staff would be downsized."

Bovrisse arrived in April and first learned of the employee purchase program in May, when "I was asked to make an announcement to all stores to purchase products to increase sales." By this time, forcing employees to purchase products was becoming standard procedure: staff at the stores say that they heard from Takahashi and the company's retail operations and retail business development managers on a monthly basis.

From February to July, employees bought wallets, key rings, and other relatively low-priced items. But, in August, the program escalated as Prada Japan began forcing staff to buy four bags per store, says Bovrisse. Prada bags range from hundreds to thousands of dollars, and Bovrisse herself began to feel the pinch as she says she also had to make compulsory purchases: in the course of her tenure at Prada, Bovrisse says she personally bought $20,000 worth of products. For her, this was a strain, but for the average Prada salesperson -- who makes approximately $1,600 per month -- the bag requirement was brutal, and Bovrisse began hearing from desperate employees: "They couldn't continue purchasing out of their pocket. They couldn't pay their bills but they were also scared to lose their jobs," she says

Did Headquarters Play Ignorant?

Bovrisse believes that Prada Milan didn't know about the program at the time. In October 2009, she contacted Sebastian Suhl, the company's global COO, to explain about the compulsory purchases. Afterward, the program stopped. Still, despite Bovrisse's efforts, Prada Milan has claimed ignorance of the program. In response to a recent request for information, the retailer offered an obliquely-worded (and vaguely threatening) statement: "Prada considers the accusations against the company to be offensive and image-damaging... the company will oppose these claims in the appropriate ways and means."

Bovrisse insists that Milan is now aware of the employee purchase program: "In April, a current Prada Japan employee informed Milan that the program ran from January 2009 to August 2010. Still, Prada Japan denies and continues to ask its current employees to write false testimonies stating that there was no bag purchase program. Milan knows about this, but they refuse to admit it to the media," she says.

According to the former manager, a representative from Prada Milan came to Japan earlier this year to investigate the allegations against the company, "but she didn't seem to find the truth as she only listened to the ones introduced by [Prada Japan CEO Davide] Sesia, Takahashi and Riccardo Emi (the General Merchandising Manager), who were the main players on this case... They made sure that employees who might speak the truth had no chance to meet or speak."

Bovrisse believes it's imperative that Prada Japan rectify the situation, not just with workers but also with its customers. "Culturally, Japanese customers won't come back to a brand once they lose their trust. Milan and Prada Japan need to make a public, ritualized apology if they want to keep their business in Japan."