Hermes, Which Is Based On Scarcity, Is No Longer Rare.

Scarcity was once the most precious feather of luxury brands, but the emergence of the Internet changed everything.

According to the latest New York Times report, with the growth of the resale market and the emergence of new resale platforms, cheaper second-hand luxury goods have attracted many ordinary consumers. The luxury stores in Japan have greeted tourists from all over the world. The Hermes platinum packages that were once available for sale were no longer difficult to buy.

Bernstein luxury analyst Luca Solca said that at present, the number of platinum packages on the global market has exceeded 1 million.

Julie Zerbo, a fashion critic, has investigated several luxury resale websites overseas. The resale website Priv. Porter from Miami has nearly 80 new Hermes platinum packages every day. It can be easily purchased with just a click of the mouse.

In less than five years, Priv e Porter has sold over 60 million dollars worth of handbags, most of which happen in social media Instagram.

Recently, the goods sold on resale websites are becoming more and more valuable, and the large handbags at the price of Hermes are more than 10 thousand dollars.

Resale business website The RealReal has more than 300 platinum packages available for sale, including rare color matching materials such as crocodile skin and bright red.

The resale website StockX is famous for its sports shoes, and has now extended its products to handbags. At present, there are more than 230 kinds of hermes handbags available for consumers.

What is even more disturbing is that since 2017, Hermes has focused on increasing production capacity.

The group recently issued a statement saying it plans to build a new leather factory in Normandy and employs 250 workers to meet the growing demand of consumers for high-end leather products.

In fact, Hermes has opened a factory near Bordeaux.

Hermes said in October 2017 that it planned to add two French production workshops by 2020.

At present, Hermes has a total of 52 production plants, of which more than 40 are located in France.

According to the latest report of resale platform The Real Real, Hermes, Gucci and Canada goose are the most resale value luxury brands in 2018. The average price of Hermes Constance handbags increased by 67% over the same period last year.

Vestiaire Collective also lowered its commission percentage last week, and the price of its products also dropped by about 10%.

The company said the move was aimed at attracting more target customers and introducing more luxury goods.

According to Vestiaire Collective estimates, the resale industry now accounts for about 8% of the luxury market, which will double in 2022.

Now, consumers have more shopping channels than ever before, and it is easier to buy the once mysterious Hermes handbag.

But what this means for Hermes is very alarming.

For luxury brands based on scarcity, they are always on guard against the danger of dilution of brand value.

Few brands, like Hermes, have long occupied the pinnacle of luxury. Handbags are of strategic importance to Hermes. Platinum bags are located in the center of Pyramid, and become the representative of Hermes' luxury attributes.

This is a non emblem bag made of high grade calf skin. In 1984, French actress Jane Birkin met with Herm s chairman Jean-Louis Dumas on the plane, and her same name handbag came into being.

In fact, in the past 35 years, the high value of platinum bags in handbags is very important because people are still hard to get it.

Hermes's distribution system and waiting list are almost as well known as platinum bags and become well-known "secrets".

It is reported that consumers need to buy another 60 thousand to 80 thousand other products if they want to buy 80 thousand yuan handbags.

Although stores have waiting lists, the list is often hard to manage because consumers want to buy too much, and brands always give priority to VIP customers.

Jonathan Rimer, former director of the Hermes flagship store in Beverly Hills, California, believes that enthusiasm for platinum packages comes mainly from one of the simplest supply and demand problems.

The Robert Chavez, chief executive of Hermes and chief executive of the Americas, also told this year's Skift global forum that consumers' demand for platinum packages is much higher than that of supply.

But in the past two years, some subtle changes are taking place.

In October last year, Hermes opened a new version of the Chinese official website in China after six months in the official website of the European Union. It joined the Louis Vuitton, Gucci and Prada Chinese business camps, officially started selling handbags online, while CHANEL was still absent.

Earlier, the official website of the Hermes website only sold silk scarves and accessories on the Internet. The new version of the official website includes 8 categories of handbags, garments, shoes and perfume.

Although in order to maintain the mystery of the brand, the core bag product of Hermes, which is in short supply, is still unable to buy online, but the industry has been able to feel the active layout of Hermes for Kelly.

Unlike other luxury brands, Hermes has a stronger dependence on its bag business, and any change of the latter will have an important impact on the brand.

Therefore, the pfer of handbags from the offline to the online is an important turning point for Hermes and even the luxury goods industry.

Even two years ago, buying an Hermes handbag online is probably unthinkable.

Indications are that every step of Hermes is closer to selling platinum bags online.

To the industry's surprise, Hermes did not even exclude the third party e-commerce platform.

Last September, Hermes CEO Axel Dumas said in a media interview that it is considering selling products in China through Jingdong platform, which means that the last fortress of the luxury goods industry refusing to enter the domestic e-commerce platform will be breached.

"We have to step back and ask ourselves, where are our consumers?" Sara Gergovich, vice president of digital and electronic commerce at Hermes, said in a forum earlier this year.

The answer to this question is obvious, online.

But in the Internet age, luxury brands have to consider the problem of consumption scenarios.

The long criticized distribution system was also denied by Hermes officially.

According to the morning post news, the customer service of Hermes China formally responded, saying that as long as there was stock in stock and not scheduled, it would be sold to consumers. If the sale allowed consumers to distribute goods for the purchase of bags, consumers could complain if they violated the provisions of the company, and the brand would be dealt with seriously.

In March of this year, Hermes, whose core business is leather handbags, has finally decided to take a bold step, and will formally enter the beauty industry. It plans to launch a large-scale cosmetic product in 2020.

In an interview with French media Le Monde, Axel Dumas, chief executive of Hermes, revealed that in the increasingly fierce competition in the industry, it is very necessary for the brand to fully distribute the cosmetics, perfume and personal care market, so as to enhance the competitiveness of the brand itself.

Some analysts believe that Hermes has launched its make-up because it has realized the seriousness of the core product being too single.

RBC analysts believe that Hermes should reduce its reliance on platinum bags and Kelly handbags, and diversify the handbag products as much as possible so that the products can increase by about 9% to 10% a year in order to keep consumers fresh.

With the continuous improvement of the new generation of consumers' environmental protection concept, since 2017, the luxury industry has started a wave of stopping animal fur. The most mainstream luxury brands such as CHANEL, Gucci, Buberry and Versace have become members of the international zero fur alliance.

According to fashion headline data, Hermes has a high degree of dependence on handbags compared to CHANEL, Louis Vuitton and Gucci luxury goods groups, accounting for more than 50% of its revenue, and platinum accounts for about 15% of its handbag sales.

Gucci and CHANEL have abandoned animal fur for an obvious blow to Hermes. Under such circumstances, Hermes, who still insists on using rare animal skins as raw materials to earn a high profit, has been isolated and will face enormous challenges and pressure from public opinion.

According to a research report released last year by online service GreenMatch, 90% millennial consumers said they would turn to other brands because of their different values. Z generation also admits that they are more interested in brands that take the initiative to adopt sustainable development and assume moral responsibility, and believe that these values are more important than prices.

As early as 2015, 72% of the Z generation expressed willingness to spend more money on products produced in a sustainable way, compared with 55% in 2014.

The data also reflect the performance bottleneck of Hermes to a certain extent.

According to fashion headline data, although sales of Hermes in the second quarter of last year maintained a high single digit growth, the Department of handbags and harness slowed sharply, while the relevant departments recorded a growth rate of 3.6%, a sharp decrease from 10.5% in the same period of 2017, and the lowest growth rate in addition to watch business.

In the 2018 fiscal year ending last December 31st, Hermes net profit increased 15% to 1 billion 400 million euros compared with the same period last year, operating profit increased 6.4% to 2 billion euros, and sales rose 7.5% to 5 billion 960 million euros over the same period last year.

Hermes said that the increase in performance was mainly due to the growth of consumer demand in Asia. It revealed that the group would distribute a special bonus of 1000 euros to all employees and increase the monthly salary of the employees in the French area by 100 euros.

This month, Hermes, which has always opened shop in the best location or the most high-end store in the golden lot, has opened a boutique in the meat processing area of New York, USA, 46 Gansevoot, with an area of 5330 square feet. The first cafe shop has been set up to provide consumers with coffee, tea or wine.

Axel Dumas said Hermes decided to explore new areas, and the principle of shop opening has changed. It is estimated that the new store will be a high flow shop and will attract more new consumers to the brand.

Obviously, this is a sign that Hermes begins to tilt to traffic.

In addition to Hermes, CHANEL is the most cautious brand in luxury industry.

Compared with Hermes's control of "open source", CHANEL handbag supply is even more abundant, but it keeps the scarcity of products through constant price increase mechanism and resolutely intolerance to the dilution of brand value.

Recently, CHANEL has fired at The Real Real, a second hand resale website.

In November last year, CHANEL filed a trademark infringement and counterfeiting lawsuit against The Real Real, accusing the resale website although it claimed that the product was 100% authentic, but actually sold fake CHANEL handbags.

In March of this year, The Real Real asked the federal court of New York to revoke the lawsuit, but CHANEL counterattacked recently, and again initiated the lawsuit on the same grounds.

CHANEL challenged the verification method of The Real Real opponent's bag, and expressed distrust for experts who used training to verify Chanel products.

The brand claims that knowledge of training and certification exists only within the brand, and only CHANEL knows what the real product is.

In response, The Real Real spokesman Christine Heerwagen responded that CHANEL was just trying to stop consumers from resale their second-hand products or buy them at discounted prices. CHANEL has not responded to the new lawsuit.

In March last year, CHANEL filed a lawsuit in New York for What Goes Around Comes Around (referred to as WGACA), the first lawsuit between luxury brands and second-hand retailers.

CHANEL also called WGACA misleading customers, believing that the retailer had a formal partnership with CHANEL, and explicitly rejected WGACA's request for official cooperation.

Although many luxury brands have begun to accept resale sites, CHANEL is clearly not one of them.

Julie Wainwright, the founder of The RealReal, said in an interview last year that the company was negotiating partnership with LVMH group and Kai Yun group, but she pointed out that at least one brand, beginning with the C letter, did not want to cooperate with it.

What it means is that CHANEL also issued a formal statement that its brand name is written in all capitalized CHANEL, which is used in the whole line of business including advanced customization, clothing, accessories, perfume and so on. Meanwhile, the name of the legendary designer of the founder is also capitalized.

In the statement, the brand sincerely requests all editors, advertisers and other trades who may use the trademark to use the correct method, otherwise CHANEL will have the right to pursue its legal liability.

CHANEL's maintenance of brand image is also reflected in its non palliative attitude towards fake markets such as fake goods and purchasing.

Last year, CHANEL made three price rises, raising the price of three classic handbags Timeless Classic, Boy CHANEL and 2.55, up by 6%.

The price rises in China range from 1000 to 2000 yuan.

This is CHANEL's product price rise after adjusting the price of some markets in May and July last year. The brand has become the largest luxury brand with frequent price adjustment.

Behind this is the strong demand and enthusiasm of consumers for CHANEL handbags.

In the past two years, CHANEL has almost kept the frequency of prices rising every few months.

From the long-term trend, CHANEL handbag price increase has not been up to 20%, but has maintained an upward trend.

In the past 5-8 years, some of CHANEL's handbags have increased by 70%, and CHANEL has undoubtedly become one of the most valuable handbag brands, which means that counterfeiting and maintaining scarcity are effective.

It is noteworthy that Louis Vuitton, Gucci, Prada and so on were recently lowered due to the domestic value added tax, and decided to adjust their product prices from April 1, 2019 to around 3%.

It was only a year since the last Louis Vuitton price cut in China, and CHANEL and Hermes have not moved yet.

CHANEL reiterates its brand value at all costs.

But at the same time, Hermes chose to uncover the mystery and unlock the strict control of supply and demand.

The Boston consulting company mentioned in a report that the digital development of luxury goods group is a contradictory process. They must face and overcome the tension and contrast between the traditional luxury brand exclusiveness and Internet popularity. The more the goods are exposed on the Internet, the easier it is to obtain the brand image, the more easily the brand image is cheaper.

At the crossroads between the Internet and digitalization, Hermes needs to be smart enough to find a balance between lack of innovation and excessive exertion, and any inch of deviation may lead to years of painstaking efforts.

It should be kept in mind that the scarcity of luxury goods is the most important asset of a brand.

Author: Drizzie