The Hermès game: Carefully-guarded craftsmanship or scarcity-driven marketing gimmick?

SOUNDING BOARD: With a market valuation of over US$218 billion in 2023, Hermès has managed to rise above the tidal wave of uncertainty sweeping across luxury brands. So, what's their secret to success? Industry experts weigh in.

The Hermès game: Carefully-guarded craftsmanship or scarcity-driven marketing gimmick?

Founded in 1837 by French businessman Thierry Hermès, today, Hermès is perhaps the most easily recognisable brand pertaining to wealth, status and all things luxury. From its origins as a manufacturer of horse harnesses on the Rue Basse du Rempart in Paris, the brand has a rich history rooted in serving the likes of the Parisian beau monde (fashionable society) and European royalty, including Napoleon III himself. Ask any runway-conscious enthusiast, and they'll tell you the artisanal craftsmanship of Hermès' saddles, trunks, handbags, and leather accessories evoke nothing short of reverence amongst the haute société. 

But what makes Hermès so special? After all, there's no shortage of luxury brands cropping up in the market today, be it mighty conglomerates such as LVMH and the Kering Group or independents like Telfar and Jacquemus. Despite the presence of other historic and prestigious French brands in its midst (think Louis Vuitton and the such), Hermès' mind-whopping $218 billion market valuation in April of this year makes it an undeniable standout from its competitive crowd. For one, the brand is still primarily owned by the Hermès family through its holding company, H51 (LVMH's Arnault family did officially purchase a 20% stake in the brand earlier this year, however). This means less mass production, a greater focus on artisanal skills and craftsmanship, as well as a short, sharp lease on availability. The brand creates demand by maintaining strict control over its distribution channels, primarily selling its products through its own boutiques, which are carefully located in select cities around the world. By limiting the number of stores and their strategic placement, Hermès has managed to maintain a sense of prestige and exclusivity, ensuring that customers always perceive Hermès as a high-end and exclusive brand, driving up demand for its products.

And therein, perhaps, lies the secret sauce. Through leveraging exclusivity as its primary marketing technique, Hermès has managed to perfect the formula of gamifying the luxury landscape in a way no other competitor has really been able to before. Open any TikTok video and search for the brand's iconic 'Kelly' (named after Grace Kelly) or 'Birkin' (named after Jane Birkin) bag, and you'll find thousands of men, women and everyone alike, vying to play the 'Hermès game.' The rules are simple: Purchase as many items from Hermès as you can until you've reached an undeclared spend amount, which is decided by a random sales associate (that you often have to spend months building a purchase history with). If you manage to do so consistently and to their liking, they might put you on a waitlist and, eventually, offer you the chance to spend your own money to obtain a coveted 'quota' bag, beginning at $10,000 and up. 

Grace Kelly with the 'Kelly' bag created in 1935 after the actress. Photo: Getty Images
 
Jane Birkin holding the 'Birkin' bag, introduced in 1984. Photo: Getty Images

In other words, strategically heighten the allure and desirability of the products by limiting their production and access to signal scarcity, so consumers will be driven to value them and engage in purchase loyalty in order to procure them. Some call this strategy genius, others call it marketing manipulation. Whatever the lens through which you might see it, the numbers certainly don't lie. In July this year, the French luxury fashion company reported $2.45 billion in profit for the first six months of the year at a 25% constant growth rate, largely attributed to sales from Asia, with no signs of slowing down.

Campaign asked industry experts to weigh in on what makes Hermès tick, why it continues to outshine the competition, and if the brand's exclusivity play is the key to long-term success or just a short-lived gimmick. 

Johanna Worth
Global head of Luxury, Amplify

Hermès is a fascinating brand in more than one way, and its outstanding financial performance clearly participates in the myth. In a world of fleeting trends, increased marketing noise and bling luxury, Hermès, both timeless and timely, masters the art of balancing relevancy and permanence like no other luxury brand.

The House has certainly benefited recently from the growing 'quiet luxury' trend around the world, including in Asia, but its amazing and steady growth over the past decades has nothing to do with trends. Much to the contrary, Hermès has stood as a paragon of excellence in the fiercely competitive realm of luxury for decades, owing its longevity and success to an amazingly consistent blend of profound heritage, unrivaled craftsmanship, unwavering commitment to exceptional quality and communication that celebrates the Hermès lifestyle rather than directly sell products.

I love that Hermès does not have a marketing department, that no two stores have the same product selection and that the two core drivers of the company’s business engine are intuition and creativity.

Pierre Alexis Dumas, the artistic director of Hermès since 2011, said one day: “I think Hermès objects are desirable because they reconnect people to their humanity… Our customer feels the presence of the person who crafted the object, while at the same time, the object brings him back to his own sensitivity because it gives him pleasure through his senses.” 

When you acquire a Hermès product, you buy a piece of history that will stand the test of time. You access a uniquely poetic world of emotion and fantasy that elegantly celebrates humanity and elegant creative self-expression. A promise that deeply resonates in our complex, uncertain, evermore virtual and fast-paced world and one Hermès fans are understandably happily ready to wait up to a few years to experience.

Anshul Garg
Managing partner and head, Publicis Commerce India

For nearly two centuries, Hermès has preserved its luxury brand legacy and remained true to its fundamental principles of craftsmanship, quality, and exclusivity. The brand's creation of numerous iconic products, now timeless symbols of unparalleled luxury, has generated substantial demand and fostered trust and loyalty among customers. 

Hermès embodies three crucial elements that define the behaviour of the luxury product buyer cohort: A sense of desirability, scarcity, and luxury brand image. Its one-of-a-kind design vibe, coupled with peerless artisanship, guarantees that each item represents quality and sophistication. Hermès strategically employs human psychology to enhance its brand allure by carefully managing product availability. Collaborations with ultra-luxury brands such as Rolls-Royce and McLaren Automotive, as well as prominent artists and designers, help Hermès further amplify its luxury brand image globally. 

Marina Mathews
Publicist, founder of Marina Mathews Communications

Hermès has tactically secured an unparalleled stance within the luxury market, meticulously leveraging scarcity with undisclosed bag production and a curated product range, evoking an aura of exclusivity and prestige. Through a strategic choice to forgo celebrity endorsements, embracing the essence of quiet luxury, and shunning a conventional marketing department, Hermès distinguishes itself in a crowded landscape of luxury brands.

Moreover, this deliberate absence of marketing-driven strategies emphasises the focus on timeless craftsmanship and the brand's rich legacy, fortifying authenticity and desirability in every piece.

The 'exclusionary' approach poignantly underscores Hermès' dedication to the inherent value of their offerings. In contrast to rivals adopting akin tactics, Hermès' steadfast adherence to these principles has solidified its peerless and timeless standing at the apex of luxury, attracting discerning consumers willing to invest in the brand.

Antony Yiu
CEO, PHD Hong Kong

Hermès has been very consistent in its approach to showcase its quality, durability, craftsmanship, and heritage. They have never gone through the route of only leveraging celebrities in their advertising and marketing. Because of their famous 'Birkin' bag’s quality and heritage, they have created celebrity and socialite followers, which, in turn, helps generate a lot of free press coverage throughout the years. People now view luxury items to build their confidence rather than treat them as status symbols.  Hermès' subtle style across all its products coincides nicely with the trend of quiet luxury.

I don’t think this is a marketing gimmick that they use. If that’s the case, you would not be able to see the longevity of driving ongoing demand. It works well because they highlight their craftmanship and quality control process, leading to their products' scarcity.

Stephen Millikin
Chief operating officer, Sinclair 
 
For nearly 200 years, Hermès has remained a company that is majority-owned by the founding family. This unwavering control over brand and image has been paramount to its success. Unlike other luxury fashion houses led by conglomerates that are more pressured to put profits first, independence has served Hermès well and provided a clarity of direction that has not been diffused. So, what is the key to the success of Hermès in today’s highly competitive luxury market? Control.

Since its inception, Hermès has always maintained product quality and craftsmanship as the foundation of the brand. In the 1970s, when other brands started turning to synthetic materials and components, Hermès resisted and maintained its reputation for using only natural materials and having the highest quality standards in the luxury goods market. Eventually, this commitment to quality created a backlog for products, which, as we all know, only makes a brand even more desirable in the minds of consumers. More than a mere marketing gimmick, consumers have put their faith in the Hermès brand promise, knowing that they will receive superior goods. Why else would you wait up to six years for a handbag?

With such demand for their products, prioritising existing customers on their waiting lists helps to ensure that these repeat buyers keep returning year-on-year, driving growth, while simultaneously stoking the flames of desire amongst the rest of us waiting to be anointed as one of the chosen few. While some may consider this approach elitist, it is also simply smart business. Hermès may be French, but when it comes to a Kelly bag and the laws of supply and demand, even égalité has its limits. 

(Matthew Keegan contributed to this story.)
 
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Sounding Board: APAC experts speak on marketing and comms issues

 

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Campaign Asia

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