For Hermès, we do not consider fast or slow, we are thinking about what is the technology of such a craftsman, whether we can do a good thing, this is our strategy, not the market, but It depends on our own capacity.
——DANIEL TALENS, Managing Director of Hermès Asia Pacific.
之外 Outside France, Hermès only produces a small number of products in Vietnam, and only produces some Hermès showcases in China.
——Former Hermes China executive.
爱 On March 21, 2014, Hermes released the 2013 annual report. Operating income reached 3.755 billion euros, an increase of 13.0% (fixed exchange rate). All regions and departments of Hermès have grown steadily, with double-digit growth rates in parts of Asia.
In July 2013, Hermès announced the addition of two new factories. How did Hermès, which has long been known as ‘Hungry Marketing’, make this decision? Seow, a wealthy Southeast Asian businessman who has worked hard for decades in China, went there two months ago. Los Angeles, USA. In Beverly Hills, he found that there was a ‘Birkin’ and a ‘Kelly’ in the Hermès store.
Seow has been in the fashion industry for many years, and is also an old fan of Hermès. This scene shocked him. ‘I have never encountered two of these bags at the same time in a shop, and even one of them is lucky. Hermes appears in the shop. Such inventory is a signal of a bad economy. ‘
Hermes announced in July 2013 that it has added two factories, which has mixed fans. Industry analysis believes that the increase in production of Hermès will not shorten the waiting time for banner products such as ‘Platinum Bags’, but merely alleviate the large-scale shortage of Hermes store products.
As a listed company, in the face of the acquisition ambitions of LVMH chairman Arnold, Hermès strives to maintain the rhythm of growth while continuing its “hungry marketing”.
Made in France
Not long after Seow’s trip to Los Angeles, in mid-July, Hermes issued a message from the French headquarters: two new production plants are about to be created, all for the production of handmade leather products.
The new plant will be located in the Franche-Comté region of France. Hermès revealed that the functions of the new factory are the same as those of another leather factory built by the company in 1996, and the manufacturing process is the same. Workers in the new factory will first receive handicraft training in harness and leather goods.
Hermes did not respond to the ‘Lu Xi interview notes’ about production capacity and production time, only revealed that the company is about to set up a temporary factory in 2014 to welcome the first batch of horse and leather craft training students. Once completed, the new factory will attract 600 artisans, including 210 artisans who are already working in other leather factories.
斌 He Bin, director of China marketing for Kiton, an Italian luxury menswear brand, told reporters that for European factories, 600 people are a fairly large scale, and it is even more striking now that the unemployment rate is high.
Hermes wrote in the first half of the results report released in mid-July that demand for Hermes products is still very strong, but sales of handbags are still limited by production capacity.
In the recent financial reports of Hermès, it is not difficult to find that the company is committed to ‘increasing production capacity’. Out of stock for a long time is a prominent topic around Hermes. In response, the former Hermes CEO Patrick Thomas stated in 2012 that he is well aware of the current situation of insufficient supply of products, but always insists on ensuring product quality as a prerequisite before considering expanding production capacity.
Hermes and leather goods increased by 10% in the first half of 2013. Hermes said it will continue to invest in this category to increase production. In addition to the two recently announced plans to open new plants, the two Hermès plants opened in France in 2012 will also increase production.
‘Hermes has been growing, but not as crazy and fast as its competitors. It is precisely because Hermès knows how to control growth.’ Michel Gustaz, director of the MBA and EMBA courses at Marseille Business School, told Lu Xi’s interview notes. In 2012, Hermes’ total revenue reached 3.48 billion euros, an increase of 22.6% over 2011. Hermes’ decision to grow at this time is based on facts and must be carefully considered.
As famous as Hermes platinum bags and Kelly bags, it is Hermes’ ‘waiting list’.
The handbags displayed in Hermès stores are generally for reference only. Customers need to choose the material of the handbag: cowhide, reptile leather or ostrich leather, etc., and then choose the color and metal parts; and the details of the front line and so on. For months.
With too many fans and long teams, some people need to wait for several years. This has stimulated the desire of fans, and Hermès has also been regarded as a textbook of ‘hungry marketing’.
However, no matter how ‘hungry’ the fans are, Hermès still produces at its own pace and firmly controls its production system.
Most of Hermès production is completed in Europe, and only some raw materials are purchased overseas. It is well known in the industry that Hermès has set up a crocodile farm in Australia to obtain crocodile leather handbags. In order to prevent these crocodiles from killing each other and being damaged, Hermes also breeds them separately.
In 2007, fashion columnist Diane Thomas wrote in the book that Hermès has the largest leather goods production line in the Bond area north of Paris, with 300 artisans and 15 studios. The factory also produces some ready-made garments, as well as a leather-making school.
Hermès has extremely high requirements on craftsmanship. Only after graduating from the famous French academy of leather and craftsmanship and completing apprenticeship at the Hermès leather school for more than two years can they enter the Hermès factory. The apprentice needs to ‘learn from senior Hermes mechanics and cut leather, how to perfectly sew the brand’s signature saddle stitches’.
In addition, Hermès also produces silk products in Lyon.
A Chinese executive from an Italian luxury (special reading) brand revealed to reporters that Hermès once gave some knitwear products to a European high-tech clothing company to be foundry. This foundry has been recently acquired by the Italian brand.
A former Hermès executive from China revealed to Lu Xi’s interview notes that outside of France, Hermès only produces a small number of products in Vietnam and only some Hermès window displays in China.
‘The waiting list of customers has strengthened their desire, which is great for Hermès’ image.’ Michel Gutsatz believes that Hermès truly has the essence of the ‘exclusiveness’ of luxury goods.
Fans sometimes prefer to wait. Seow always remembers that he traveled to Tokyo many years ago, and encountered a surprise of a Hermès platinum bag in the store. He bought it decisively and gave it to his beloved daughter. He said that if he could buy it anytime, anywhere, he would not feel surprised, and at the same time, he would worry about the devaluation of her collection.
‘Even if there is a new factory, it will still be difficult to buy platinum bags in the future.’ Gu Teng, former CEO of Richemont Asia Pacific and founder of Gu Teng Consulting, believes that Hermès has adopted a very cautious strategy for a long time. Will not harm the brand for short-term profits.
Gu Teng believes that although not as well-known as the platinum bag, other Hermes products are in short supply, and out-of-stock stores are common. Hermes opened a new factory this time, which may increase the supply of other products, but the ‘Platinum Bags’ will always have a long waiting list.
Hermès profit does not depend on long-term scarcity of platinum bags, and financial reports over the years prove this.
‘In the fall, Hermes’ silk scarves have reached the peak season for sales.’ Seow said. In mid-July, Hermes released the first half of 2013 performance report. The company achieved sales of 1.767 billion yuan, an increase of 14.4% year-on-year at constant exchange rates. The United States and the Asian markets (excluding Japan) led by Greater China increased year-on-year. The fastest speed is 17%.
‘Some shareholders of Hermès said that we do not require you to make how outstanding Hermès products are. It is the work of the artist.’ Patrick Thomas said in an interview with Chinese media. He frankly stated that Hermès is a listed company and must consider profit. He believes that Hermès has done a good job in protecting brands so far, but Hermès regards profits as rewards for making high-quality products, and good quality naturally makes money.
Patrick Thomas has worked for Hermes twice, becoming the CEO when members of the Hermes family took over the vacant window, and realized the listing of Hermes.
The balance between art and profit has thus become a lingering topic for Hermès. He Bin, China Marketing Director of Kiton, believes that as a listed company, profits and stock prices are issues that cannot be ignored. The management team needs to ensure that the company’s performance grows every year and meets the shareholders’ requirements.
Hermes needs to care more about profits than ever. Chairman of LVMH, known as the ‘snake’ of the luxury goods industry, Bernard Arnold has quietly purchased Hermès stocks since 2001, using various rules to cover up the acquisition. Hermès has tried hard to block Arnold’s attack, but just recently, LVMH once again disclosed that it would increase its holding of 0.5% of Hermès, but as of now, Hermès’ equity held by LVMH has reached 23.1%.
Gu Teng believes that it is actually very difficult for LVMH to control Hermes, and Hermès’s biggest risk is the inconsistent opinions within the family. If Hermes does not perform well, some family members are more likely to be shaken by the temptation of Arnold.
In the first half of 2013 performance report, Hermes wrote that the company will follow the ‘innovation’ -based market strategy, take full control of the brand, expand distribution channels, increase production capacity, and ensure security of supply.