It's hard to tell from the outside of the Milan-based headquarters that Prada is one of the world's most successful luxury brands... You enter Prada through an anonymous portal-like oak door—there is no name, no plaque, nothing—and are greeted by a security guard dressed in gray. Everything is gray: the security office, the cobblestone courtyard, the various factory-like buildings surrounding it, and many of the cars parked in it. The only thing that gives the place away is the guard's uniform: it is not the typical formless security garb but tailored Prada with its stark—some would say neofascist—lines....

I was taken to a room I had read about often. It is officially Miuccia Prada's office, and it is as stark and contrived as her designs: poured concrete, a slew of orange and yellow molded plastic Eames chairs; and, sticking up in the center of the floor, a metal tube slide—by artist Carsten Holler—that runs three floors down to the parking lot and is titled The Slide No. 5. Prada has whizzed down it when asked to by reporters.

Prada entered the room as if it were her salon and she had been ushered in by her trusted butler rather than her communications director. This was a woman who had been raised in haute bourgeois society, with servants and grandeur and politesse. Unlike her competitor Donatella Versace, who so obviously came from nothing, Prada's airs are not airs at all: her snobbery is in her bones.

[...]

Her grandfather Mario Prada came from a family of civil servants. "They must have had money, because they traveled," she said, and Mario soaked in the luxury lifestyles of Europe's upper classes. In 1913 he opened a shop called Fratelli Prada with his brother Martino.... Miuccia Prada told me that, contrary to the oft-recounted tale, Fratelli Prada was not a luggage shop or a "travel company," like Louis Vuitton, but a boutique that specialized in "luxury objects...."

Miuccia said she didn't know how the shop weathered World War I, but it did, and sometime afterward Martino got out of the business. Mario opened a second shop on the nearby Via Manzoni, not far from La Scala. The company survived World War II, too, though Mario did close the Via Manzoni store then for good. After that, Miuccia became vague about family details. She claimed it was because she's not interested in the past, which may be somewhat true: the only thing historically referential in her designs is the little enamel triangle label, which is based on her grandfather's trunk labels. Her reticence could stem in part from her traditional upbringing. But I felt that there was a bit of mystery, something the family—or at least Miuccia—was hiding. When I pressed her on it, she bristled and answered hesitantly, if at all. What she wouldn't tell me, I discovered from sources close to Prada.

Mario married a woman named Fernanda—Miuccia wouldn't tell me her name, and they had two daughters, one being Luisia, Miuccia's mother. (Miuccia wouldn't tell me her aunt's name either.) Sometime in the 1940s, Luisa married a man named Bianchi, "from a wealthy, eccentric family," Miuccia said. She wouldn't tell me anything further about him—if he worked, if he supported the family, if he underwrote the company—except to repeat that he was "eccentric." She wouldn't even tell me his first name. "My mother would be very upset. She would think I've already said too much," Miuccia explained. His name, I later learned, was Luigi, and everyone called him Gino.

The Bianchis had three children, Alberto, Marina, and Maria—who later became known as Miuccia—and they lived in a four-story, late-nineteenth century palazzo on the Corso Porta Romana, where Miuccia, as well as other family members, still resides today. When I asked then why she was Miuccia Bianchi Prada, and not Miuccia Bianchi, she said, "My name is Miuccia Bianchi Prada. Some women keep their names. It's done in Italy." In fact, according to sources at Prada, Miuccia Prada was officially named Maria Bianchi until the late 1980s, when she had her elderly unwed maternal aunt adopt her, thereby officially changing her name to Miuccia Prada.

Purse-party ladies are the drug dealers of the counterfeit trade: they buy from the wholesalers and sell to suburban users, folks with a craving for the goods but not enough dough for the real thing. Like teenagers gathering at a friend's upper-middle-class home to buy a couple of joints with their allowance or babysitting money, suburban women converge in well appointed rooms for wine, hors d'oeuvres, gossip, and fake Vuitton or Gucci handbags. The women hosting these fetes will make a killing—they double their investment—and never declare it to the IRS. Take Virginia Topper, the wife of a lawyer in Long Island, New York. When she was busted in 2003, she had $60,000 in cash stashed in her underwear drawer and a Jaguar in the driveway. She was found guilty and sentenced to community service. "She was the ultimate Amway lady," [New York security expert Andrew] Oberfeldt laughed.

Most purse party ladies don't see buying or selling fake handbags as a real crime.... In a survey by the Anti-Counterfeiting Group, one-third of those questioned said they would knowingly buy counterfeit goods if the price and quality were right, and 29 percent said they saw no harm in the selling of fake goods unless the purchaser was at risk. "We'll go on raids in Chinatown wholesalers and we'll find five or six suburban women standing there—customers," Oberfeldt tells me. "We'll say to these women, 'The dealers take you down dark corridors, through locked doors. The police say, "Open up!" The lights are turned out, and everyone is told to be quiet. At what point did you realize something was amiss here?'"

[...]

Like the drug business, counterfeiting has become a professional racket run by organized crime. In New York in the 1980s until the mid-1990s, gangs—like a group of Asian American kids called the Born to Kill Gang—were in charge. "If we showed up to do a raid, women would take counterfeit watches, shove them up their shirts, and say, 'I'm pregnant, don't touch me!'" remembers Oberfeldt. "Once I saw a three-month-old baby in a milk crate that sat on top of a case of M-80 explosives. The gangs came after us with bats, they'd slash our tires, throw knives and significant explosives. It was terrorism. They tried to intimidate us. We videotaped them and locked them up and we got a lot of street cred when we manned up from ten to forty men and kept going."

Today Canal Street is run by grown-up gangs from China, like the Fukienese gang, as they are known in New York, whose members come from Fujian... They speak a Fujian dialect among themselves and run the north side of Canal Street, west of Broadway. And they freely let the police seize goods rather than get arrested for fighting back. The network is tight.... [T]hey all have direct-connect Nextel radio: if a police car turns the corner, the message is relayed down six blocks instantly and everything is shut down. They use homeless people as lookouts, giving them walkie-talkies. Random killings don't happen. "It's bad for business," notes Oberfeldt.

Handbags are the engine that drives luxury brands today. According to annual consumer surveys conducted by Coach each year, the average American woman purchased two new handbags a year in 2000; by 2004, that number was more than four. At Louis Vuitton's immense four-floor global store in Tokyo, 40 percent of all sales are made in the first room, which sells only monogram handbags, wallets, and other small leather goods.

"With the bag... there are no leftovers because there are no sizes, unlike shoes or clothes," Miuccia Prada told me. "It's easier to choose a bag than a dress because you don't have to face the age, the weight, all the problems. And there is a kind of an obsession with bags. It's so easy to make money. The bag is the miracle of the company.

In 2004, luxury brands collectively sold $11.7 billion worth of handbags and other leather accessories, and the segment is only getting stronger. While the luxury market grew by 1.2 percent each year from 2001 and 2004, leather goods sales increased by 7.5 percent each year. A large share of those sales are "It" bags: the latest hot designs that—thanks to luxury brand campaigns and fashion magazine articles—become the must-have of the season.

[...]

And women got hooked, some disturbingly so. As I noted in the Introduction, there are Japanese girls who work as prostitutes to buy Louis Vuitton, Chanel, and Hermes bags. I read about a woman who played backgammon for Hermes bags. In September 2005, victims of Hurricane Katrina used their Red Cross cards to buy $800 bags at the Louis Vuitton boutique in Atlanta. (Once the story hit the papers, Louis Vuitton executives instructed their salespeople to stop accepting Red Cross cards for payment and reimbursed the Red Cross for purchases already made.) Web sites such as BagBorroworSteal.com have cropped up for women to rent luxury and designer handbags for a fashionably short period of time instead of buying them—that way they can change their bags more often.

[...]

To see how an Hermes bag is made is to understand what luxury once was and what it is no longer. On a cool spring morning in March 2005, I visited the Hermes special orders workshop in Pantin, a seedy suburb north of Paris, to get a glimpse.

[...]

The artisans in the Pantin workshop dress in aprons and white coats. Some wear earphones to listen to music on their iPods while they work. The workshop is perfectly silent except for the occasional tapping of a hammer or the short burst of stitching on a sewing machine. No one speaks. They just build bags. Even with a lot of practice, making an Hermes bag goes slowly. It takes fifteen to sixteen hours to make an average-size Birkin or Kelly. The bigger bags take twenty-five to thirty hours. In 2005, Hermes twelve leather ateliers in France produced 130,000 handbags. Thanks to the waiting lists, Hermes didn't suffer losses after the terrorist attacks of September 11, 2001, which caused one of the worst retail years in recent memory. In fact, sales went up. "After September 11, a lot of people came in to buy that one special scarf or tie or bag," Robert Chavez, CEO of Hermes's American subsidiary in New York, told me. "They'd say, 'I just want to have one special thing.'"