Hermès Reveals Pricing Strategy
If you follow your favorite luxury brands from a business perspective (ie, who’s doing well, who’s not, whose business strategy is expected to change in the near future, etcetera), then you may have seen the Hermès business report that came out earlier this year. The brand reported “outstanding” performance in 2021, with revenue amounting to €9 billion and increased by 42% at constant exchange rates.
However, if you don’t follow brands like Hermès that closely, you may not have realized how much reports like these can influence your shopping experience. So, for those new to the business side of fashion, here’s everything you need to know about Hermès’s recent report, the brand’s pricing strategy and what it means for you.
The Hermès 2021 Financial Report
According to executive chairman at Hermès, Axel Dumas, “I thank above all the passion and quality of our teams’ work, because together we have made 2021 an exceptional year. Abundant creativity, unique know-how and the quality of materials have driven the growth of our 16 métiers. Hermès is very dedicated to its role as a committed and responsible company and continues its commitments to job creation around the world and to regional regeneration in France, while reinforcing its ambitious environmental objectives.”
But what does all that mean? When you get down into the nitty-gritty of the report, here’s what we found.
Asia and America recorded the highest sales growths last year, with store sales increasing by 44%. Growth was particularly strong in Greater China, Australia and Singapore, which was partially due to new store openings or renovations. The report notes that America’s growth was possible even despite pandemic-related restrictions, helped along by two new openings, in Detroit and Miami.
All of the Hermès product lines saw growth, but the largest areas of growth were in ready-to-wear items and accessories, watches, jewelry and homeware. Demand for new bags remained strong, including demand for the Della Cavalleria and 24/24 bags.
The Hermès 2021 financial report also touched on what the brand is doing to give back to the world and employees as a result of its success. It says it plans to give all employees a €3,000 bonus and it hopes to increase its sustainability factor, reducing emissions in some areas by more than 50%.
The financial report likewise touched on the future of the brand, but remained vague, noting that pandemic-related challenges still exist, but that Hermès is confident in its long-term growth strategies.
However, not all of the report was positive. As The Fashion Law noted, sales slowed around the holiday season of 2021, with leather good sales dropping in comparison to 2020. This caused Hermès to miss its sales targets for Q4, which the brand blamed on capacity constraints. However, these capacity constraints could be viewed as self-imposed.
Everyone knows that it’s difficult to purchase an Hermès bag, especially Birkin and Kelly handbags. Getting your hands on one of these luxury leather items can require months of waiting, schmoozing store associates and knowing the right people. You can never expect to simply walk into an Hermès retail location and pick one off the shelf. This is on purpose, of course — the more Hermès limits who can buy a Birkin bag and how, the more exclusive and desirable the bag becomes. It’s not like the Louis Vuitton Speedy 30, which you can see in just about every luxury handbag collection.
According to Reuters, Hermès caps volume growth in its leather goods production at 6–7% annually. Rather than increase production, the brand would rather extend its waiting lists indefinitely — making it even more difficult for new Hermès shoppers to buy a bag.
Again, this is entirely on purpose. As Axel Dumas told Reuters, “It takes 15 hours for an Hermès bag. Even if there’s a lot of demand, I’m not going to start doing them in 13 hours to raise production.” He added, “Contrary to what people may think, we’re always very sad when we have to say to our customers, ‘No’, because we don’t have that.”
Each year, Hermès hires about 400 artisans to make the brand’s leather goods, but, like the brand doesn’t want to reduce the time needed to make an Hermès bag to increase production, it also doesn’t want to hire more artisans, as it wants to take all the time necessary to properly train each individual.
Axel Dumas also told reporters that he didn’t plan on increasing Hermès prices in order to make up for that lag in sales around the holidays in 2021. He also noted that the Hermès brand is a little more immune to changes in energy and materials costs — which can spell big trouble for other fashion brands — due to Hermès’s production style. When everything is handcrafted, costs don’t fluctuate nearly as much.
However, that doesn’t mean that Hermès didn’t raise its prices at all. Each year, Hermès typically raises its prices by 1.5% to account for increased production costs. However, last year, Hermès increased prices by 3.5%. Still, Axel Dumas claims that this jump in pricing was not to make up for that lost holiday revenue.
So, What Does it Mean for You Specifically?
But if you don’t care at all about the Hermès pricing strategy, you should at least know what all of the above means for your shopping experience — especially if you have your eye on a Birkin. Birkins are already exclusive. With price tags ranging from $40,000 to $500,000, and only about 200,000 of them in existence, Birkin bags are the most VIP of luxury handbags.
Snagging a Birkin can mean traveling to multiple Hermès storefronts in order to find a sales associate willing to sell you a bag. It can mean becoming best friends with an Hermès sales associate. It can even mean buying smaller items over the years until the sales associate gets the idea that you’re serious about buying a bag — and that’s all before you end up on the months-long wait list.
And that’s what leads us back to your best bet for buying a Birkin or any Hermès bag in the near future: purchasing pre-owned.
Purchasing a pre-owned Birkin bag means near-immediate access to a range of bags that could literally be in your closet in days, not months. Additionally, pre-owned Birkin bags hold their value extremely well, so there’s no need to worry about a loss in value.
Buying an Hermès Bag with Luxury in Reach
Luxury in Reach offers an array of Hermès bags, including Birkins starting at just over $10,000. Plus, the shopping process is way easier than what you’ll find in any Hermès boutique. There are no sales associates, no pressure, and you can trust that every bag has been authenticated by Luxury in Reach’s experienced staff.
So what are you waiting for? Check out our full line of Hermès bags today and start shopping — without any of those pesky price hikes or long wait lists.