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Hermes Middle Age Crisis

The anxiety of middle-aged people comes from the anxiety of rapid change, backwardness and even being eliminated. Luxury brands are no exception.

Chinese consumers have a nearly crazy obsession with Hermes. The Xiaohongshu in the domestic shopping and sharing community may gather the herd consumers with the highest density in the world. People not only share the most cost-effective way to buy, discuss the famous distribution system of Hermes, but also show off the Hermes handbag collection.


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On the surface, Chinese consumers are much more obsessed with Hermes than Chanel, Louis Vuitton, and other luxury brands. It is also a high demand for Chinese consumers.


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Within two years, Hermes has added 3 leather factories and plans to increase its leather product capacity by 8% in 2017. Hericourt, which opened in 2016, will specialize in the production of Kelly handbags. By the time, Hermes has a total of 15 production bases around the world, and the brand is expected to set up two new factories in France to meet the rising demand of consumers for leather goods by 2020.


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However, simply increasing production is not a good thing for a luxury brand. On the other hand, the pattern of luxury goods has changed dramatically.

Last year, the biggest news in the industry was that Hermes’s income was overtaken by Gucci, which took only two years. From the second quarter of last year, Gucci earned its first single quarter income over Hermes and officially released Hermes in 2017 with a 6 billion 200 million euro annual income. According to the 2017 earnings report, Hermes annual sales increased by 6.7% to 5 billion 500 million euros at a constant exchange rate. In 2016, the income of Hermes was 5 billion, and Gucci’s income was only 4 billion 378 million euros.


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From the group’s share price, Gucci’s parent company’s Open Cloud group has also overtaken the Hermes group for the first time last year, and since the capital market performance of Hermes, LVMH and open cloud group this year, open cloud shares have increased by 25% to 475 euros per share, with a market value of about 60 billion 800 million euros, over 553 of Hermes. Billion euros, and two and a half years ago, Hermes was 10 billion euros higher than the group.

The younger trend represented by Gucci sweeps the luxury industry, while Hermes is hesitant to balance the scarcity and youth of the brand. There is no doubt that the former is the moat of Hermes for many years, with luxury goods and scarcity, and Hermes has been able to occupy an important position in the luxury industry for a long time, but the latter is an almost irresistible trend in the industry today, whether it is Prada, Dior or Louis Vuitton.


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But since the second half of last year, Hermes has lost the Gucci and LVMH fashion goods department, and the fourth quarter of Hermes was 5% year-on-year sales at fixed exchange rates, slowing down from the previous three months, lower than market expectations. In the fiscal year 2017, sales of Hermes increased by 9% to 5 billion 500 million euros. There are indications that Hermes has begun to tilt towards digitalization and youth, but it can not help but question whether Hermes’s strategy is biased.

Between 2010 and 2012, driven by the rapid growth of the Chinese luxury market, Hermes also welcomed “explosive growth”. The annual sales growth rate was about 25%, and the operating profit also achieved rapid growth, and the growth rate of three years was over 20%. However, since 2013, the growth of Hermes has begun to slow down, due to the political and economic factors of global instability.


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Since last year, the attitude of Hermes to the electricity supplier has begun to loosen. Group CEO Axel Dumas earlier said that 2017 was the year of digital transformation of Hermes. In October of the same year, Hermes set up a limited online Store for the first time in the WeChat public, offering Apple Apple Watch Herm s Series 3. In December, four brands of men’s and women’s shoes were put on sale by WeChat. One of the Player ladies sneakers was sold in mainland China only.


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The test water WeChat sales chose the relatively low priced Apple Watch and sports shoes series, which, to a certain extent, reflects the constant caution of Hermes and the insistence on the pace of development in accordance with the established rhythm. But it also means that the conservative Hermes has taken an important step on the digital road. As the digital trend of luxury goods is becoming more and more obvious, Hermes has started to speed up the online market and is paying more attention to the most active Chinese market, and the Asia Pacific region, including China, has become the whole of Hermes. The biggest market in the ball.


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In mid-March, Hermes launched the game App H-pitch to attract young consumers. The concept of the game originated from the traditional “throwing horseshoe” game. In March 29th, Hermes opened fourth-time limited shops in WeChat, selling small games and selling products to 2018 men’s spring-summer series.

Then in April, Hermes sold the handbag for the first time on the official website. The new official website was officially launched in Europe after a year and a half of constant adjustment tests. In addition to the update of the interface design of the official network, the price of some handbag products was marked and the online purchase service was launched. This service was launched in the Chinese market in February this year.


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Some analysts point out that if luxury brands ignore digital and violate consumer needs, they may face the risk of being eliminated by the industry, which is no matter what the market value of Hermes, which is up to about 50,000,000,000 euros, is the key to Hermes reversal of e-commerce.

In addition, Hermes seems to have made more efforts in the promotion of creativity and brand image and provides a new sense of freshness to young people through exhibitions of artists’ cooperative windows. It is noteworthy that the creative team in Hermes is divided into the female world art director and the male world art director, which aims to oversee the design team to create a more rich and interesting creative image for the brand.


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In the autumn and winter of 2016, Hermes held the Iraqi vision in Beijing. In April, Hermes also held an exhibition called “wandering in Wonderland” at the Museum of contemporary art in Shanghai, and “packing” the exhibition space and products to young spectators is the most popular marketing technique. In April 2018, Hermes held a “Fast Forward Men” 2018 spring and summer male world show in Shanghai, integrating the device with the live performance into an exhibition of high art.

However, some analysts pointed out that the younger strategy of Hermes did not work, and its products began to be out of touch with marketing. On the one hand, Hermes lacks entry-level products, and on the other hand, its attempts to attract young people with low spending power in marketing activities.



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Handbags have always been the core of maintaining stable growth of Hermes. In a way, money can’t get handbags from Hermes, and platinum bags are the most difficult handbags that they can’t get. Consumers need to queue up on a waiting list, only a higher consumer record can buy scarce products, and the distribution system adds a threshold to buying handbags again.


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Hermes has deliberately increased scarcity, like most luxury goods, in order to raise prices and limit consumer groups to a small group. It means that a small number of people can have the ability to maintain the dream of luxury building in the long run because the lack of rarity leads to the reduction of people’s desires. Hermes’s pursuit of this is almost extreme. As Axel Dumas puts it, “when a product sells too well, we will stop producing it.”

Everything has two sides. The malpractice of Hermes’s hunger marketing is also emerging, followed by the prevalence of counterfeit goods and the confusion of the two-level market. The restriction of Hermes consumption level and special style brings huge space for subsistence, and some special handbags fall into the hands of higher consumption and better sales. In addition, it has used the psychological characteristics of Chinese consumers to show off their consumption.


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For luxury brands, fake and negative news is harmful to brand image. Last year, the “purchase action” of 150 police officers released by the Spanish police was recently revealed by the media. A Chinese buying gang was suspected of washing up at least 80 million euros by means of buying and buying. Some Chinese businessmen, purchasing and luxury stores were involved in different degrees of crime, and the luxury brands such as Hermes were also implicated.

In contrast to Chanel, Louis Vuitton, and other Gucci luxury groups, Hermes has a high level of dependence on handbags, earning more than 50%. Buy a Hermes handbag.

The fashion sector is also selling weak, but now Chanel is more and more focused on beauty and perfume, attracting more young consumers with low – threshold beauty cosmetics. According to data released at the end of Chanel, its total sales in the fiscal year 2017 rose 11% to 9 billion 620 million US dollars, or 8 billion 300 million euros, with a net profit of 1 billion 800 million US dollars.


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Chanel said in the report that the growth of its performance was mainly due to the popularity of the new perfume Gabrielle and the increase in sales of accessories such as watches and jewellery. In contrast, Hermes lack of this kind of entry sheet, apparently Hermes is also aware of this, is stepping up the introduction of perfume products, such as the new Twilly that was introduced in the autumn and winter last year. The 2017 earnings report showed that the sales volume of the perfume Department increased by 10.1% last year at a constant exchange rate, the most significant increase, but the scale of income remained small.


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Axel Dumas says the growth of women’s consumption of fashion and luxury goods is growing, while Chinese consumers are increasingly fond of the luxury of special craft, and the purchase of categories is gradually expanding, and Hermes can benefit from it.

In order to reverse the imbalance of internal product categories, Hermes still struggled. What is disturbing is that the leather material that handbag products rely on has become the sword of Damour and Chris on the head of Hermes.

As early as 2015, the killing of crocodiles by Hermes caused the brand image to be greatly reduced, resulting in a sluggish share price. PETA accused two Hermes crocodile suppliers, located in Texas and Zimbabwe, to kill a crocodile, and published video on a secretly recorded farm. In the video, a crocodile in the Hermes crocodile supplier’s farm was cutthroat in front of the same kind. Jane Birkin saw the video after the video. Hermes stopped calling her handbag with her name. PETA even took the purchase of Hermes shares to prevent the use of rare animal skins as raw materials.


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With the trend of sustainable fashion becoming the trend, the wind direction of the industry has changed.

Last October, Gucci CEO Marco Bizzarri announced its brand accession to the international zero fur alliance, promising to no longer use animal fur from the 2018 spring-summer series. There is no doubt that great pressure has been placed on Hermes, which has always used rare animal skins as raw materials to earn a high profit. It is understood that the price of Hermes platinum package is 10 thousand and 500 pounds (about 100 thousand yuan) to 150 thousand pounds (about RMB 1 million 450 thousand yuan), and the specific price is based on the animal skin used.


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Analysts believe that luxury brands are still a minority, although the luxury brands are still a minority, with Gucci, Versace and Furla brands, the luxury brand anti-leather camp will continue to expand, and this trend will be caused by Hermes, which is deep in the crocodile storm. Pressure.

Today in the Chinese market, the trend of flaunting consumption has not yet passed, but the emergence of the millennial generation has already had a completely different concept of consumption, and the loyalty of the brand is also greatly reduced. The price is not a problem for them, the luxury brand connects the consumer still depends on the product, because the block tiger always exists, the young consumers who pay attention to the sense of value will become more and more change.

Hermes, who is aware of market changes, is trying to accelerate. In order to better seize the gradual resuscitation of China’s luxury market, the conservative Hermes has been adopting the strategy of simultaneous expansion of online and offline industries. In addition to the northern Guangzhou and other tier cities, brands gradually penetrate China’s Hangzhou, Chengdu, Changsha, and other quasi tier cities.


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But the most important problem is that when the millennial generation takes over the consumption dominant power from the previous generation, luxury goods are also redefined.


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The global luxury industry’s revenue is expected to reach 250 billion euros in 2017, according to a report released by Deutsche Bank on the fashion luxury summit Fashion & Luxury Summit, sponsored by the Italy consulting firm Pambianco. Among them, millennials are the main customers of luxury consumption, accounting for 27% of the total number of luxury consumers, and this proportion will rise to 33% by 2020. In China, there are about 200 million of these groups. According to the Pambianco study, the current generation of luxury goods consumers account for 25%, and this proportion will rise to 40% in the next 5 to 7 years.

Although Hermes has made innovations, brand names still refuse to use the word “younger”. Unlike many luxury brands, Axel Dumas said earlier that Hermes did not deliberately cater to young people’s preferences.


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Earlier, Hermes predecessor, CEO Patrick Thomas, had strongly expressed that we were not interested in this part of the consumer, and those who liked boast, flaunting goods were not our target customers, and even Axel Dumas had hardly mentioned young consumer groups.

In 1837, when the French Thierry Hermes set up a harness manufacturing plant in Paris, they did not plan to follow the pro-democracy route. Equestrian as the core of Hermes has always been regarded as an aristocratic movement. Therefore, from early on, Hermes has positioned the brand as a class symbol.


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Although Hermes was once keen on brand image promotion by celebrity celebrities, whether it was a jacket designed by Hermes for Prince Welsh or a famous Kelly handbag by the name of the Princess Grace Kelly of Monaco, the celebrities selected had a certain status.

There is no doubt that Hermes attitude comes from the continuation of the brand positioning and the persistence in the scarcity of luxury goods. It does not want to lose the rich type of consumers, which are the most favorite, most vicious and loyal consumers of luxury brands, but these consumers are now more rational and can’t be used again. The card provides the increment. In 2016, Hermes announced the abandonment of its forecast sales figures due to the growing risk of Luxury Retailing.

Hermes is still a good company, but in the fast-changing fashion industry, how to achieve a balance between the new and old consumers and the maximum benefit is the biggest headache for Hermes. Hermes does not want to focus on the influence of young people like millennials and stars, but in the current upheaval, the luxury industry, once abandoned, will be marginalized in the competition.

Analysts say that before the crisis comes, Hermes is racing against time to bet on the “slot machine” that they find most likely to spit money. However, the luxury industry has changed its skin for three years. Hermes has no reason to be on guard.


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