The Hermès Way: From Saddles to Sino-Markets

With annual revenue of roughly 6.8 billion, global luxury sales leader Hermès has defied the odds by continually growing its market share in China, even as the market undergoes its first slowdown in over a decade. That, of course, begs the question: What is Hermès doing that everyone else isn’t? For the answer, you have to start at the beginning. In 1837, Thierry Hermès opened a modest workshop in Paris where he handcrafted harnesses, bridles, and reins for horse carriages. His expert craftsmanship was noticed, and his clientele consisted of European noblemen. It was a lucrative trade for Hermès. Fast forward to 1880, when his son, Charles-Émile, not only took over the family business but also famously moved it to 24 rue du Faubourg Saint-Honoré, where the Maison flagship store remains today. From there, Hermès continued to slowly cultivate a range of luxury products into the global empire that it is today — all while maintaining its regal sense of exclusivity, affluence, and refinement. Hermès has been listed on the Paris stock exchange since 1993, and the family (now the Dumas family via Hermès’ son-in-law) still owns a majority stake despite, in 2010, when Bernard Arnault, chairman and CEO of LVMH, launched what the Hermès family considered as a “hostile takeover” of the company. The battle with Arnault came to an end in 2014, when Hermès confirmed that LVMH would agree not to buy a larger stake in the French Maison. Why they're famous Over the decades, the brand has developed iconic products like the Kelly and Birkin bags and fragrances like Un Jardin Sur Le Nil and Kelly Calèche (in collaboration with one of the most sought after noses in the industry, Jean-Claude Ellena). But Hermès has also courted the spotlight over the years via collaborations with a variety of well-known designers, from the publicity-shy Martin Margiela (1997-2003) to the hyper-creative maverick Jean-Paul Gaultier. The Hermès-Margiela pairing — an unusual but very successful and authentic collaboration — was, in fact, celebrated worldwide in 2017, with a traveling exhibition that showcased the items developed by the Belgian designer, which were also compiled in the book Hermès: The Margiela Years. All of this and more have granted Hermès the status of a “true luxury brand” in fashion circles, not simply because of its high-priced products, but because of its careful and thought-out brand positioning over the past century. Because of this, and its staunch reputation for quality and craftsmanship, the fashion house always seems to have a waiting list for its rarified products. Hermès Today 2018 was quite a year for the famous French Maison. It increased its global revenue by 7.5 percent, which helped it record 6.8 billion in sales. On top of that, all of its product categories have registered positive growth in every region in the world, especially the China market (Asia-Pacific excluding Japan), which tops the list at 10.1 percent growth. Furthermore, the brand opened its first store in China, in Beijing, in 1996 and is well positioned for continued growth after launching their e-commerce store, hermes.cn, in October of 2018. With a reputation for discrete and understated products made with the finest quality craftsmanship, it’s not surprising that Hermès has won the hearts of Chinese customers. But the French Maison has chosen to drive their growth in China — just like everywhere else — in a sustainable way, without quick fixes that might harm the brand in the long term. And Hermès’ success has been well noted. Their successful style is now being employed by several other luxury brands at this year’s New York, London, and Milan shows. The company’s "less is more" attitude was all over catwalks, where a greater focus on solid, bold colors (instead of flashy prints) and highly refined suiting was noticeable. "Polished" rather than “party” seems to be the keyword this year. While other brands follow trends, Hermès does not While other high-profile brands like Gucci and Balenciaga are reaching a saturation point from their accelerated growth, Hermès continues to grow and evolve at its own pace, and their commitment to the “long game” is paying off. When asked to put budget constraints aside, Chinese customers agreed that Hermès was their most desired brand, according to the annual ranking of the world's 500 most valuable brands from Brand Finance. And in 2018, Hermès was one of the few true luxury brands that saw their value increase. That’s because when an economy stabilizes or slows down — as it is now in China — customers are less impulsive and more discerning about brands and products. They’re more likely to prefer items that keep their value due to their timeless qualities, attention to the detail, and artisanal production. They also value exclusivity over trends. The Hermès way to luxury is the most challenging because it never appeals to the lowest common denominator. A luxury brand must resist the temptation of becoming accessible and democratic by opening dozens of stores to reach more potential customers or outlets where products are found at half the price. The Hermès way takes integrity and strength, which is why the brand is so adored. Because it offers us proof that there is indeed something truly extraordinary out there.

The Hermès Way: From Saddles to Sino-Markets

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Published March 19, 2019

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The Hermès Way: From Saddles to Sino-Markets