Why Does Hermes Still Consider Large Price Increases In 2016?

Recently, Axel Dumas, the chief executive of French luxury brand Herm s International and the successor of family business, said that despite the huge exchange rate causes, the price differences between Asia and Europe were huge, but AiKeSaiEr Du said Hermes The pricing principle will remain, and a wider range of price increases will be considered in 2016.

Luxury brands in France Chanel In March, after a sharp cut in prices in China and other countries and a sharp rise in prices in Europe, a number of luxury brands followed up for price adjustment.

However, AiKeSaiEr Dumas Axel Dumas, the chief executive of French luxury brand Herms International and the Family Business successor, said in June 2nd that despite the huge price gap between Asia and Europe, Hermes will still maintain its pricing principles, and will consider a wider range of price increases in 2016.

Why does Hermes take advantage of the pricing strategy? Luxury industry insiders say that the existing capabilities and brand positioning of Hermes can support its price increase, and the different price strategies of different luxury brands are related to their market segmentation positioning. In the future, there will be more obvious two levels of differentiation in the luxury market.

　　 Why did Hermes dare to go up in price?

As early as March 2015, Chanel announced the global price adjustment for reasons such as exchange rate fluctuations and purchasing trend. Titiago, Patek Philippe, Dior, Cartire and other brands joined the price reduction army. However, Axel Dumas at that time, in an interview with the media, made it clear that the group would not adopt similar strategic adjustment in order to stimulate sales in China.

At the annual general meeting of the company in June 2nd, Axel Dumas said again: "in the face of the weakness of the euro, we will probably make some adjustments, but we will still take our pricing policy as the criterion. In 2015, we will raise about 4% of the price in Switzerland. " He also said that a wider range of prices would be considered in 2016.

Axel Dumas said that Hermes has an annual exchange rate balance policy, which can ease the impact of the weakening euro on profits. He said the company always believed that the price of the product should reflect the cost of production, especially in the famous brand platinum producing area, France. He said: "this is why we do not adopt such a solution to" reduce prices in some places and then raise prices in France ", because this is unreasonable for French consumers.

Hermes continued to rise in price, probably from its general downturn in the luxury sector. In 2014, sales of Hermes Group continued to push up to 4 billion 119 million euros, with a sales growth rate of 9.7%, ranking the first among the major luxury goods groups, far away from the annual revenue growth of 3.9% of its largest competitor and the world's largest luxury group LVMH fashion leather goods department. At the same time, Hermes group's profit reached 859 million euros, the annual growth rate was two percentage points higher than that in 2013 (9%), and the same store sales increased 12.7% year-round.

"Existing capacity and brand positioning can support the price increase of Hermes," said Zhou Ting, director of the luxury goods expert and Research Institute of wealth quality. First, Hermes has adopted a temperate way of development. When the luxury market is developing at a high speed, other luxury brands are expanding their sales through shop expansion. Hermes is prudently expanding, keeping the growth rate of single digit stores for many years, and even constantly adjusting stores in some countries and regions, so as to ensure the high-end group in proper channels. The visibility of the body.

Secondly, Hermes has always maintained its core business customization service, while many other luxury brands have cut off less profitable customized businesses in the fast developing market and developed more rapidly growing standard garments and other businesses. Hermes has maintained and enhanced the stickiness of high-quality old customers through customized services, while other brands in the "consumption upgrading" and "industrial upgrading" will find that they are losing old customers and the quality of new customers is relatively low.

Third, the original product positioning price of Hermes is separated from other luxury brands in the market, which excludes the low assets crowd and attracts high-quality customers. The price increase strategy based on Hermes not only does not affect its sales.

It is worth noting that the development strategies of the expansion stores are significantly different from those of the major luxury goods groups. The number of global stores in Hermes group has been decreasing in the past three years. In 2014, only 311 stores were retained, returning to the level before 2008, but sales and profit margins were not affected.

　　 Which is better for different pricing strategies?

Starting in nineteenth Century, Kylie has become a luxury group covering silk, garments, watches and perfume. Its most famous feature is Birkin and Kelly. Despite the slowdown in China's luxury market, Hermes is one of the few luxury brands that continue to thrive in the Chinese market.

Although it did not disclose its sales figures in the mainland of China, the largest market for Hermes, in 2014, remained double-digit growth with a growth rate of 13% after excluding exchange rate effects. Far beyond competitors. Axel Dumas has said that the situation in China will be more and more beneficial to Hermes, because Chinese consumers have gone beyond the stage of flaunt luxury brands and begin to enjoy the connotation of luxury brands. In September 2014, Hermes opened the first "Hermes house" in mainland China in Shanghai, the fifth in the world after Paris, New York, Tokyo and Seoul.

For the different pricing strategies of luxury brands, it is hard to say which is better. Guzez, an international brand management expert and KEDGE Michel vice president of France, told the first Financial Daily reporters that each luxury brand has its own positioning and market segmentation, and its pricing strategy is also corresponding to its market segmentation, which determines who they compete with.

For example, although each brand has high priced products and low price products, it is also about handbags. GUCCI Instead of competing directly with Chanel, it competes with TOD S and Paris. The average price of Chanel's main products is more than 2000 euros. The average price of GUCCI's main products is 1214 euros, while the average price of TOD 'S and Paris home are 1036 euros and 1033 euros respectively.

As for the adjustment of the price strategy of luxury goods, the Clemens Pflanz, founder and chief executive officer of Meisterkreis Luxury Association, said in an interview: "price adjustment will not affect brand image, but you have to choose and stick to your brand strategy, and consumers are willing to pay the price equivalent to product value".

At the Christie's auction in Hongkong in June 1, 2015, Hermes broke the record of the highest price of handbags in the history of auction. The price of a $222 thousand and 900 (1 million 381 thousand and 200 yuan) price of a Hermes purple red crocodile PPG bag is estimated to be 15% higher than that of the auction.