How Does Hermes Make Big Money In The Worst Year Of The Luxury Market?

It is reported that this year can be called the worst year of the luxury market after the collapse of Lehman Brothers.

According to a recent report by Bain, the world's leather goods, watches and fashions in 2015 are among others.

Sales are expected to grow by only 1%, down 6% from 2013.

Under such circumstances, the performance of Hermes, which seems to be mainly selling leather goods, is not going down.

According to Hermes, the net turnover of the company in the first half of 2015 was 2 billion 300 million euros, which is up by 21% at current exchange rate, even 9% based on fixed exchange rate.

In addition to the 1% decline in the watch business, Hermes leather goods and harnesses increased by 14%; clothing and accessories increased by 8%; perfume was 4%; and the overall category including jewellery, tableware, and home grew by 12%.

BusinessofFashion, a fashion business news website (BoF) recently visited AxelDumas, the chief executive of Hermes, and published an exclusive interview with Hermes on how to find vitality in a slowing luxury market.

According to this article, we summarize several principles for Hermes to deal with the market.

Do not open shop crazily because of good market, and do not stop expanding because of weak market.

For Hermes, the concept of "balance" exists not only in sales, but also in stores.

{page_break}

Unlike most luxury brands in the Asian market dominated by China, the retail expansion of Hermes is stable and geographically balanced. After the outbreak of the global financial crisis, the ensuing recession has affected the luxury consumption around the world, but the pace of Hermes opening has not been disrupted.

Take the flagship store in Miami, which opened in 2014, for example, as the third flagship store in the United States, it is positioned to "seize the rich Latin American group coming to Miami to consume".

This is consistent with the expansion of Hermes in the United States. In the past three years, Hermes has extended and upgraded 8 of the 28 stores in the United States, and opened a separate perfume shop in the new Brook field shopping center (BrookfieldPlace) in downtown Manhattan this year.

Regarding the wisdom of investing in the US market under the financial crisis, RobertChavez, chief executive of Hermes, said that the US economy has a solid foundation on the macro level. Compared with the past, people today "want to buy the East West which can be used for a long time".

Perhaps because of this, Hermes can still maintain enough flexibility in the period of luxury failure.

Although analyst LucaSolca said in a recent report that Hermes's growth over the years has been "probably close to the peak of its profits", Dumas still told BoF that the company's plan is long-term, and that keeping balance is the reason why Hermes continues to invest in mature markets such as the United States, Europe and Japan.

"We will not say that we have invested heavily in a new country, but we are discounting it in another country," Dumas explained.

For example, in Japan, which has expanded the luxury brand stores with tourism and exchange rates, herm herm has opened its stores in Nagoya and Tokyo before the yen is weak, laying the foundation for the first step.

"Yen"

Depreciation makes the tourist economy profitable, "Dumas said." but even without tourists, we still have some good growth.

Hermes's sales in Japan increased by 20% in the first half of this year.

Unlike most luxury goods, Hermes believes that relying on tourists is unreliable.

No matter where the market is, Hermes will devote energy to customize the product that meets local characteristics.

For example, if you walk into the flagship store in Miami, you can find a rare leather handbag that is richer than any Hermes store in the world. This is the response to the local market demand.

Dumas said that relying on tourists is unreliable, and there are too many uncontrollable factors. Therefore, it is very important to have connections with local customers.

"We don't have a marketing department.

We provide enough choices to let customers decide what to sell well, and then we can see which products are attractive.

Obviously, we see that our fashion business is excellent and our shoes are strong.

We believe that this fashion house has great potential. "

Dumas told BoF, he said that geographical factors and "handicrafts" are the two pillars of Hermes, and that this is the reason why brands can be satisfied.

{page_break}

Hermes also has a weakness, which is the watch, but Hermes is determined to strengthen the weaker category.

Any brand has a relatively poor sales category, and this is the weakness of Hermes.

In the first half of this year, the performance of watches declined by 1%.

The brand has also increased its investment in watch business.

In the spring and summer Basel exhibition this year, Hermes launched a new watch series called "Slimd Herm s", which has recently won the Geneva high horological watch. In September this year, AppleWatchHerm s was introduced. Cooperation with apple not only attracted attention to the weaker category, but also introduced the accessible products to consumers who wanted to contact Hermes.

At the same time, the richness of the Hermes watch band, with a handsome profit, is the two win.

Do you want to keep up with digitization?

Hermes thinks the answer is yes.

In 2015, a year of luxury brand e-commerce blowout, Hermes followed the trend and intensified its investment in digital business.

So far, the official website of Hermes is still separated from the e-commerce platform.

But according to BoF, in the middle of 2016, the company will "integrate two websites".

"Digital business is a great opportunity and will become more and more important," Dumas said.

According to Solca, between 2013 and 2020, at least 40% of the sales growth of luxury goods will be driven by numbers and networks.

Hermes will not let go of this opportunity.

"In 1970s, there was a big discussion about whether we should become internationalized. At that time, people thought that you didn't need internationalization at all, because everyone would come to Paris.

Internationalization costs money and risks.

We are fortunate to have taken the step of internationalization.

I think this is just the same as the current topic of digitalization.

Dumas told BoF this way.

Keeping control is equal to maintaining the rarity of the brand.

As a commercial business that emphasizes luxury experience, the exposure of luxury brands needs to be strictly controlled.

Dumas believes that Hermes has learned from 1970s that controlling brands is more important than ever.

In 1970s, many luxury brands expanded their businesses in a franchise way, saving energy while making quick money.

However, when they open a shop, they spend a lot of time and invest heavily, but after 15 years, most of the fast expanding brands lose their original image, and the extensive business license has already been lost.

Of course, we need to maintain creativity while controlling brand. Dumas also mentioned: "Hermes has a part of" resistance ", that is, keep your value, protect yourself in the future, and believe in creativity.

In fact, when a brand has been in its 180 year history and has gone through several ups and downs, it is natural to believe in brand remodeling and reinforcement.

Innovation is an eternal topic. Just like Dumas said, "if we are just making harnesses, then our stores will be so big now."