How Hermès Became a Status Symbol

How Hermès Became a Status Symbol

Why have H-embossed bags been coveted for years?

Currently its shares surpass Louis Vuitton LVMH and Gucci.

Over the past year, Hermès shares have risen more than 30% despite a slowdown in luxury spending amid economic uncertainty and a cash squeeze from the pandemic, while LVMH barely gained and Gucci Kering shares fell.

Hermès' secret, experts say, is that it hasn't tried to appeal to the masses. Instead, it has embraced the minority and preserved its quality.

"For other luxury companies, it was not such a good year," Axel Dumas, the sixth-generation CEO of Hermès, said earlier this month during its annual earnings presentation. "There seems to be a polarization in our industry: Those who are very successful and those who are less so."

But as the nearly 200-year-old family-run company opens more stores, grows its team to include thousands more artisans and expands into cheaper — and easier to buy — products, can it maintain its luster her?

Hermes' success has been fueled by scarcity

While many luxury brands have embraced social media marketing and celebrity partnerships, Hermès has not. Its core products haven't changed much in decades, it doesn't have TikTok and it doesn't give celebrities free handbags.

This product-less approach helped Hermès achieve annual revenue of $14.5 billion last year and a market cap of over $250 billion. With more willing customers than available goods, he epitomizes luxury. The brand is equally controlled in its approach to the press.

The famous Birkin bag embodies the Hermès approach

Birkin is more than a fashion accessory. Since its introduction in 1984, the bag - which has a starting price of around $10,000 but can go into six figures - has been among the most coveted handbags of the super-rich.

It's not something you can buy at a department store, walk off the street and buy at a boutique, or order online.

To buy directly from Hermès, customers must cultivate a history with the brand. Experts say Birkin owners have to loyally shop at Hermès for years — and some say spend hundreds of thousands of dollars — before they have the chance to spend five figures or more on a Birkin bag.

When it comes to its iconic scarves, each handmade item is part of a limited, numbered production run, which means exclusivity.

The brand is also consistent in its commitment to core products.

Hermès doesn't have a lot of "ancillary products," which is "very different from Gucci, which has shoes, socks, sweaters, perfume.

From the US to China, Hermès is expanding

Yes Hermès is growing. Last year, it opened two factories in France: one in Louviers, which will focus on the Kelly bag, and one in the Ardennes region. Storefront opened in Aspen, Colorado; Naples, Florida; and Nanjing, China, and another is in the works in New Jersey.