Hermes: What You Can't Buy Is Always In Turmoil.

Those who can't buy Birkin will always be in a turmoil, and the favoured Hermes will have no fear.

In 2018, Hermes group's revenue reached US $7 billion, of which gross margin was US $4 billion 900 million, net profit was 1 billion 900 million, net profit reached 17%, net profit increased 76 times since it was launched in 1993.

Hermes seems to be slow in globalization, but has maintained a rapid growth in the luxury market. Its market value is comparable to that of the whole open cloud group (Gucci, YSL, and the parent group of Paris family).

What did Buddha Hermes do right? What is the inspiration for us to understand the luxury consumer goods industry?

In the near future, Guotai Junan retail team published the special report on "born and expensive, casting brand Classics - Hermes", and analyzed where the hidden rules and high profits of Hermes came from.

1. is more cyclical than the gold "Hermes".

In 1984, the Hermes platinum package was sold at a price of only $more than 2000. Today, the lowest price of platinum packages is around $10000.

On average, the annual price increase is more than 10%, even more than gold.

However, not all luxury brand packages have such value. A Hermes platinum bag with an original price of 60 thousand yuan has been sold to 100 thousand and is still sold out, but it is obviously not possible to replace it with other brands.

The mystery behind this is scarcity.

Like antiques, the more classic, limited and scarce luxury goods are, the greater the room for future appreciation. Even better, this appreciation potential is not directly related to the economy.

From 2008 to 2011, Hermes was not affected by the financial crisis, and the net profit growth rate in 2011 was 47% higher.

Compared with the other three luxury group's annual revenues, Hermes also showed a stronger anti cyclical nature.

In 1992~2018, Hermes's revenue growth was the most stable among the four luxury goods groups. In addition to negative growth in 2003 (-1%), operating income in the rest of the year was positive. Even after the financial crisis in 2008, Hermes's revenue growth remained at around 10%.

The other three companies were obviously affected by the financial crisis, operating income has entered a negative growth. Among them, Kai Yun group was the most affected by the crisis. The growth rate of revenue from 2009 to 2011 was -21%, -19% and -27% respectively.

Behind the high net profit margin is Hermes's amazing "no marketing" business model.

In the 2014 issue of the 9 edition of Forbes's English magazine, there is a supporting article on the global innovation enterprise list, which highlights the fact that Hermes has no marketing department.

"Why should we have it? Just like McKinsey has no consulting department, and Microsoft doesn't have a software department, marketing is Hermes's core business." The author Susan Adams (Susan Adams) wrote so.

Opening Hermes's earnings report can find that Hermes's investment in advertising in the past 10 years is far lower than the other three luxury goods groups.

Data show that the marketing cost of Hermes has been stable at around 5% in the past ten years, while the marketing cost rate of LV and peak is approaching 40%.

We can only understand this way, just like Moutai's "wine is not afraid of alley", when the luxury brand has reached a certain height, the brand itself is an advertisement.

2. pure handmade, hungry marketing originator

The unique marketing method of Hermes is to emphasize absolute scarcity, to form top-level word-of-mouth by product quality, and to minimize advertising cost. This Internet hot game has been well known by Hermes for decades.

Although Hermes will also use some spokesmen to do brand marketing, its choice people have certain status and status, such as Queen Elizabeth and princess Grace Kelly of Morocco.

In retail, Hermes is a panacea. Cake, car, wine, whenever want to flaunt their own quality, the best expression is to call itself "the Hermes in the circle". Behind this endearment, it reveals the supreme recognition of the quality of Hermes in and outside the industry.

Hermes handbags are of high quality, first derived from the high requirements of Hermes for leather.

The world's best leather suppliers, the French HAAS leather factory and the German WEINHEIMER leather factory, have always given the first round of leather priority to the expensive Hermes.

This allowed Hermes to get the best leather, and then made many rigorous selection to remove possible defects. The final decision to use leather accounted for only 10% of the total leather.

Secondly, Hermes insisted on the whole handbag making process. Many other brands, when making a package, usually divide their work in order to improve their efficiency. A craftsman is responsible for a part of the package.

For example, a Chanel 2.55 handbag usually takes 10 hours to complete by 6 craftsmen. The Hermes handbag insisted that only one craftsman participate in the whole process.

Hermes explains that this ensures that the details of the leather are complete and specific, because each craftsman's style of making, punching and handling details are always the same.

A Birkin requires a skilled artisan to calculate 48 hours. A Hermes package workshop can produce only 15 handbags a month.

It also brings about the system of waiting for the purchase of hermes handbags, as well as the consistently high price.

In order to better control the upstream of the supply chain, Hermes also purchased cowhide tanneries (Tanneried 'Annonay and Tanneries Du Puy) in 2013 and 2015 respectively, wholly owned by crocodile tanning tanning company SOFICUIR and the Gordon-Choisy that specializes in handling rare leather to ensure the quality of raw materials.

3. strict membership system, forever Waiting List

Despite its high price and long waiting period, hermes handbags are still highly sought after. Its top two bags, Kelly and Birkin, have been holding customers' waiting lists for several years (Waiting List).

Some people say that the furthest distance in the world is that Birkin is lying in Hermes store, and you are still at the end of Waiting List. Of course, the farther distance is, you can't even get Waiting List up.

In Hermes, only those VIP customers who have accumulated a certain amount of consumption are eligible to queue up for hot packages such as Birkin and Kelly.

Customers can become a lifelong member of Hermes if they consume one time, regardless of the amount.

In order to better understand each customer's situation, Hermes has implemented a strategy of "identity not sharing", that is, every store's customer information is not shared with other stores.

In order to ensure their rights and interests, customers will choose to purchase the same SA in the same store. SA will set up special files based on customer information and assess whether it qualifies as a VIP member and is eligible to purchase a more high-end bag.

Hermes's other strategy, "no discount all year round", reflects its strict brand positioning.

If scarcity is the essence of luxury goods, then discount is a taboo for luxury goods such as Hermes.

On the contrary, one of the ways to maintain the image of luxury goods is to raise prices regularly, that is, "preserving value". This explains why sometimes the price of second-hand hermes bags is higher than the original price.

In terms of channel expansion, Hermes is also very conservative and cautious.

Among the four luxury goods groups, the number of stores in Hermes is far less than that of the other three (currently only 219 in the world, plus franchised stores worldwide, with only 310 stores). It is only the 1/14 of 1/5 and LV of the two peaks and Kai Yun group.

However, Hermes's revenue has always been stable, and the principle of "less" is the essence of the brand. Although the growth of global stores is slow, the growth of single store income is obvious.

Since 2006, Hermes's single store income has increased from nearly $7 million 550 thousand to $22 million 730 thousand in 2018, an increase of nearly 3 times.

4. China market -- new battlefield for Hermes

The rapid growth of Hermes in recent years is inseparable from the contribution of the Chinese market.

From the global distribution of Hermes stores, by the end of 2018, the two largest markets for Hermes global stores were Asia (126) and Europe (113), accounting for 77% of the two major regions.

From the point of view of income area, the income of Hermes is mainly from Asia and Europe, and its income accounts for 80%.

Among them, 2010! In 2018, Japan and France accounted for a rapid decline in revenues. Japan's revenue share fell from 29% in 2005 to 13% in 2018, while France's share of revenue fell from 19% in 2005 to 13% in 2018.

In the same period, Asia's other regions accounted for a rapid growth in revenue. In 2018, Asia accounted for 35.91% of the rest of the rest of the world, and the growth rate was the highest in all markets (13.51%), mainly due to the layout of Hermes in China and other countries, showing the potential of consumption in the Asian market.

But at the same time, the performance of Hermes is not without hidden dangers.

In 2015, Hermes fell into the crocodile killing. International organization PETA has accused the Alligator Crocodile supplier of killing crocodiles and released relevant videos, causing widespread controversy.

To the industry's surprise, Hermes, which has been questioned, has never had any plans to cut production or to stop selling animal fur.

In fact, this is related to the serious dependence of Hermes on rare fur. Hermes is a high-end leather bag, and rare fur is the core of its luxury. According to Guotai Junan Research Report data, fur products account for about 50% of Hermes group's revenue.

By the end of May this year, 90% of the top luxury brands had announced the ban on animal fur. Only the Hermes and LV have yet to formally declare their luxury brands.

The isolated Hermes will not escape the challenge of greater environmental protection and pressure from public opinion in the future.