How Hermès Won China's Heart

In the luxury world, Hermès’ iconic Birkin bag is one of the ultimate status symbols. A Birkin has become, for many, the Rolls-Royce Phantom of leather accessories: something so rare, precious, and exclusive, that we instantly associate it with royalty, celebrities, or fashion icons. But despite its prominence and popularity, not many people realize a Hermès bag is a good financial investment. Hermès bags are primarily about heritage, savoir-faire, craftsmanship, and patience. The long history of artistry behind Hermès’ flawless bags has been lauded worldwide, but there’s more to the human element than just skills and knowledge. As Brian Sumers from Skiftstates, “at its core, Hermès is still mostly an old-style retail operation that focuses on the human element,” and the brand is well aware of their status. According to Robert Chavez, President and CEO, Hermès of Paris Inc., “Every store director from all over the world goes to Paris, twice a year, to buy the next season’s product.” This allows their store directors to buy products in line with their customers’ needs and requirements. Chavez says that this internal policy forces the staff to “to know their client much more intimately than anybody else is going to know that client.” But what’s remarkable is the way Hermès’ has made its renowned craftsmanship a part of the brand’s DNA. The company employs around 2,500 leather artisans who work in 14 ateliers across France, producing Hermès leather goods with the same processes that brought success to the business nearly two centuries ago. The Straits Times emphasizes how “it still takes one artisan about 15 hours to make a bag employing a classic saddle stitch that has been in use since the 19th century.” Amazingly, each craftsman manufactures an entire bag from start to finish. Another important reason for Hermès’ exceptional value is how the company limits its production. Thanks to the many work hours required to make a Hermès leather product, exclusivity is guaranteed not only through pricing but also through a smaller inventory. In fact, Hermès has made ‘exclusivity’ a synonym for their brand. With a restrictive hand over distribution and expansion, Hermès naturally keeps the demand for their products high. The French leather manufacturer currently has about 300 stores worldwide and stays away from luxury department stores and malls. Additionally, the French heritage brand sells its products exclusively on their Hermès online store and not through third-party websites. Even Hermès’ marketing plays a part in the investment status of their products, as the brand communicates that elite value across all channels, helping them to maintain an aura of uniqueness and exclusivity. Brand communication and marketing campaigns are tightly controlled, and every message has to subtly communicate the company’s core values and philosophy. But having tradition be a source of legitimacy doesn’t imply that Hermès is a conservative, old-fashioned luxury brand. On the contrary, the company employs innovative management strategies and is a real trailblazer in the social media realm. According to Business Insider, Hermès launched a free app that teaches users how to wear and tie brand scarves. The Hermès Silk Knots app offers step-by-step tutorials and styling ideas. Meanwhile, men can download Tie Break, a mobile app that comes with related games and videos. Despite its eccentric character and unconventional platform, Tie Break provides valuable information to clients and acts as a window in the Hermès world. Additionally, the company has launched a virtual pop-up store and is now even organizing art shows. By incorporating apps, avant-garde technology, modern exhibitions, and social media channels into its brand strategy, Hermès has fostered excellent communication with younger consumers (millennials and Gen Zers). They have ensured that the world’s most demanding and tech-savvy consumers now follow the brand quasi-religiously, and this has boosted the brand’s global sales with surging demand in China and improved sales across the entire Asia-Pacific region. According to the South China Morning Post, Hermès “sales for the April to June period rose 14.7 percent on a reported basis to $1.87 billion and were up 12.3 percent at stable exchange rates.” And on the mainland, Hermès also revamped its e-commerce website for the mainland, registering positive momentum during the first half of 2019. With these points, we can now analyze the distinctive elements that helped transform Hermès into a success story in China: When first approaching China, Hermès employed one of the company’s core values: patience. While most heritage and premium brands rushed into the mainland, Hermès kept its cool and didn’t target the country aggressively. Despite a two-decade-long history in China, while earning strong revenue from the outset, Hermès only opened one flagship store per year instead of inaugurating multiple stores simultaneously. Furthermore, all flagships communicate the ideas of exclusivity and French savoir-faire. As mentioned in various reports, Chinese consumers gravitate toward heritage products that communicate craftsmanship and an elitist lifestyle. In an interview with Launch Metrics, Xia Ding, President of International Fashion, JD.com and Head of TOPLIFE, said that “Chinese consumers are attracted to the idea of exclusivity.” Jing Daily notes that “with no memories of the anti-intellectual Cultural Revolution, Chinese Millennials have a voracious appetite for knowledge and discovery. And they are searching for more meaning from their purchases.” Moreover, since 2016, the Chinese government started promoting the “craftsmanship spirit.” A report published by MediaCom titled “From Bling-Bling to Craftsmanship”states that in Imperial China, luxury took on a life thanks to the country’s passion for craftsmanship. “The Master is revered and his skill admired. And the concept of luxury was not so much one of exclusivity but one of perfection. The more perfect an item the more it was adored — and the admiration went to the maker of these artifacts, not to the owner,” says the report. The respect and passion for craftsmanship are lingering in modern China, and brands that incorporate this into their marketing strategies will continue to win big. Hermès’ values are in harmony with the times. “The CPC released its eight-point rules on frugality in late 2012 to reduce undesirable work practices,” and under President Xi Jinping’s leadership, the frugality code was further consolidated. The crackdown on corruption and the gift-giving culture have pushed extravagant brands to the sidelines while a more discreet and refined elegance was embraced. Insert Hermès, with its detached elegance, in a time when moderate is the new chic and simplicity is celebrated, transforming the French heritage brand into a success in China and around the globe. Bespoke requests and personalized products are appreciated in China. Affluent consumers want singular pieces and customized products, and Hermès creates custom-made objects. From unique furniture pieces to yacht accessories and customized leather upholstery for luxury cars, Hermès offers unmatched luxury in every segment, which perfectly aligns with the needs of ultra-high-net-worth Chinese buyers. As stated above, Hermès is a trailblazer in social media use. Jing Daily’s Yiling Pan mentioned that the French heritage brand is using WeChat “to offer a top-notch experience for its digital customers.” And according to Forbes, “Hermès should be regarded for the creative content it is pushing out across channels.” For Forbes, Hermès stands out thanks to its kooky videos and “pop-up e-stores that tick every box associated with the brand craftsmanship it is engaged in.” Last but not least, Hermès focuses on exhibitions and collaborations with artists. For the Hermès Editeur collection, artists such as Gloria Petyar and Ding Yi have designed special editioned scarves, and the brand opened exhibitions such as Wanderland and Hermès Heritage, seamlessly unifying the worlds of luxury and fine art under one powerful brand message. “The line between luxury and art is blurring across the world, but it’s doing so especially quickly in China,” says Jing Daily’s, Liz Flora. Indeed, this form of branded exhibition is gaining momentum in China, and Hermès is fully leveraging the potential of this new and exciting format. Hermès surely owes some of its global success to the overall rise in demand in China, but, because of the many reasons listed, there’s little doubt that their short-term and long-term outlooks should both be considered positive.

How Hermès Won China's Heart

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Published August 15, 2019

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How Hermès Won China's Heart