Core points:

  • Hermes has once resisted the temptation of mass production of machines and nurtured a batch of handicraft talents to ensure the scarcity of its own brand;


  • Hermes has further increased the value of its scarcity through the “Palleting System”, and its profits have continued to grow;


  • But changes in the market environment and users have forced Hermes to rethink its strategy.

    The black swan struck, and the “home movement” has not yet ended, and luxury brand stores are inevitably deserted. Although the mall has resumed work and is making various efforts to attract consumers, the expected “revenge consumption” has not yet arrived.

    At present, online sales that have high expectations have not been able to save offline losses, and the performance expectations of the luxury goods industry and related retail companies are quite pessimistic.

    A report from Bain & Company shows that the loss of the entire luxury goods industry in February this year may reach 30 to 40 billion euros (about 307.6 billion yuan), which means that industry revenue will fall by about 15% and losses will reach 10 billion EUR.

    Even Hermes, which has continued to grow for many years, has encountered the embarrassment of being “involuntary” and announced that it will temporarily close 42 factories in France until the end of March.

    At the same time, judging from the various signs on the consumer side, it is not optimistic-“I went to Hermès twice, and BK30 ostrich and crocodile skins did not even need to be ordered!” The sigh on the faint reveals the danger of top luxury.

    In the fashion world, Hermès is at the top of the chain of contempt. It is a rare luxury company that insists on independent family management.

    In 1837, Thierry Hermès founded Hermès in Paris, France. It started as a factory for manufacturing high-quality saddlery on the Bastille Avenue in Paris, and now has branches all over the world. According to the financial report, by the end of 2019, Hermes had 15,417 employees. In the “BrandZ Top 100 Most Valuable Global Brands 2019”, Hermès ranked 37th with a brand value of 30.966 billion.

    The 183-year-old luxury goods giant has survived many financial crises. Can it maintain its resilience during the epidemic? Can it continue to use its ability to rise against the trend?

    Standing at this special time point, we take Christianity’s “Luxury: Hermes Memoirs of the President” as the starting point and combine Hermès ‘market operations today to analyze Hermès’ management and standing and see if it can Cross the cycle and cross the crisis again.

    Horse brands become luxury leaders

    In today ’s ad copy, a common saying is “Hermes in toothpaste / tea / ice cream” —the words “Hermes” have long been synonymous with excellence in quality.

    The reason why Hermès can become today’s luxury giant is the sense of scarcity created by industrialization and adherence to high-quality manual production. In order to engrave such a mark on the brand, Hermès once paid the hardship of “going backwards” in the industrial revolution.

    The story of Hermès can be traced back to 1883. The Hermès family opened its first shop in Paris, specializing in saddles and reins. The story of Hermès as a luxury giant emerged in the early 1920s: After obtaining a two-year zipper patent in Europe, Hermès decided to expand its product line and start making luggage and ready-to-wear.

    At this point in time when Hermes started to expand its horse equipment factory to more categories, the French industrial revolution is in full swing, and machinery is in full swing.It is an inevitable trend for factories to significantly replace manual workshops. Hermes’ pride and inheritance of handmade skills are actually “unusual” in the industry. “Retrograde” Hermes resisted the temptation of mass production of machines, and chose to establish a cooperative teaching relationship with middle schools, allowing the school to cultivate batches of handicraft talents in accordance with Hermes’ requirements, in order to adhere to its own handmade Doctrine.

    At Hermès, all products are handmade by Hermès artisans until today. Upon completion, there will be a product quality check and the name and completion date of the artisan will be engraved. Each handbag is a work of one person. “If sewing often requires the use of machines, it is to improve the quality.”

    Hermes’ production process is extremely meticulous, and this has not changed. Craftsmen need to use a double magnifying glass when sewing details. Hermes’ old saddles now only produce about 400 sets per year, and it takes 30 to 40 hours to make a set of saddles. Now Hermes “must buy classic” “Kelly” “(Kelly) bag, one takes 15 hours, and a” Birkin “bag takes 18 hours.

    This is why Hermès products even have a very high value retention ability: When the Hermes Platinum Bag was born in 1984, the price was only over 2,000 US dollars. Today, the lowest price for a platinum bag is about $ 10,000. Looking on average, the annual price increase exceeds 10%, and it is even more valuable than gold.

    In 2017, a white Himalayan crocodile platinum bag from Hermès was sold at 2.94 million Hong Kong dollars, becoming the world’s most expensive bag, which can be called “a suite with one hand”.

    White Himalayan Crocodile Platinum Bag sold for HK $ 2.94 million

    Because of its resistance to industrial production, until 1970, Hermès was only a purely handicraft family factory. But just 15 years later, Hermès has developed into a super multinational company that produces high-quality boutique products. This is because in the 1980s, Hermes, like many luxury goods companies, chose to acquire it through capital means.Some other luxury goods group shares have been added to enhance the company’s internal product production skills and increase revenue.

    But unlike many luxury giants that have fallen, Hermès has not only strengthened its strength in its expansion, but has also maintained its position in family management. While continuously acquiring external companies, Hermès retains all management rights of the company within the family, and the unity of the family members ensures Hermès independence.

    For example, Hermes was spotted by LVMH in 2008: since 2008, LVMH has secretly purchased Hermès stock; by 2010, the LVMH Group has acquired 17% of Hermès shares.

    At the time Hermès CEO Patrick Thomas gave a “spicy” comment: “If you want to attract and seduce a beautiful girl, you should not try to ‘aggress’ her from behind in the first place.”

    Facing strong opponents at the door, the Hermès family is highly united. Through rare consistency, Hermès shares were not sold under the temptation and pressure, and finally resisted the external acquisition pressure. With the insistence of Hermès, in September 2014, the two parties reached an agreement: LVMH Group will give up most of Hermès shares it holds and will no longer acquire it in the next 5 years; Hermès will terminate all outstanding between the two parties. Legal dispute.

    This recognition, persistence and solidarity of the family brand is probably related to the way Hermès manages the family: According to the Hermès Creed, family members must go through an apprenticeship before entering the management of the company to understand and inherit The family’s persistence and uncompromise on product quality, and carry forward this culture.

    The crafts of making saddles and leather goods are not easy to learn. Christian wrote: “In 1996, when I first arrived at Hermès, I first spent a week in a workshop and learned to sew. I can bear it. Sin, back pain. “

    But this experience also allows Hermès’ management to have a deeper grasp of the company’s cultural philosophy. For example, in Christian ’s cognitionThe measure of “luxury” is time, “take time to do things well, have your own current time, share your precious time, or leave time to yourself, and truly consider that time can bring something Just like the fate it gives everyone, it is a concentration, an opportunity, a value. “

    Growing profits and non-existing “marketing”

    Opening Hermes’s financial report, we can find that Hermes’s revenue and net profit have been increasing in the past 10 years. It seems that it has never been affected by external wind and rain, and the upward trend has remained unchanged.

    Sales in 2019 rose 15.4% to 6.883 billion euros, a record high. Operating profit rose 16% to 2.396 billion euros, and net profit rose 8.75% to 1.528 billion euros.

    Hermes 10-year revenue and net profit changes Source: Hermes Financial Report

    From 1992 to 2019, Hermes’ revenue growth was the most stable among the four major luxury goods groups. Except for the negative growth in 2003 (-1%), the operating income of the remaining years were all positive growth. Even after the financial crisis in 2008, Hermes’ revenue growth rate remained at about 10%. Among the four luxury goods companies, Hermes’ net profit growth is also very stable.