Hermès: The Untouchable Giant of Luxury Fashion?

In a luxury market that seems to be slowing, Hermès remains an exception, reporting a stellar 11.3% rise in sales to €3.7 billion in the third quarter. With other luxury giants like Kering and LVMH experiencing more modest results—down 16% and 4.4% respectively—one has to wonder: what is Hermès doing differently? And more provocatively, can Hermès’ model truly be replicated?

Hermès has cultivated a luxury model that is, in many ways, as timeless as its iconic Birkin bags. Its philosophy is rooted in quality, exclusivity, and tradition, all of which are underscored by a business model that places the value of craftsmanship above all else. This model is especially apparent in Hermès’ local ordering strategy. Unlike competitors that might adopt a “produce and push” approach, Hermès relies on its stores worldwide to assess demand and adjust orders accordingly, keeping stock lean and exclusive.

Why Hermès Outshines in a Slowing Luxury Market

Firstly, Hermès’ loyal clientele is as resilient as the brand itself. Hermès continues to enjoy strong sales across Asia and the U.S., with its ultra-wealthy customer base supporting its sales even in regions where footfall has seen slight declines. In China, for example, despite fewer customers in stores, the average spend per customer has risen. This pattern suggests that Hermès clients are not only brand-loyal but are also willing to invest in their purchases. Hermès’ focus on enhancing the customer experience—such as with its newly revamped stores in Hong Kong and Tokyo—strengthens this relationship, giving customers an environment that resonates with the brand’s aura of exclusivity.

In Europe, Hermès also took advantage of summer tourist traffic, which bolstered sales across France and other regions. When Paris footfall declined due to the Olympics, Hermès maintained momentum by capturing tourist traffic in the South of France. A brand that adapts to both global and local trends, Hermès is as agile as it is steadfast in luxury.

Can the Hermès Model be Replicated?

Many brands have attempted to replicate Hermès‘ approach but with limited success. Here’s why Hermès is a tough act to follow:

• Meticulous Control Over Supply: Hermès limits production, creating exclusivity by making its products genuinely hard to obtain. The Birkin bag waiting list isn’t just a sales tactic; it’s a pillar of the brand’s identity. This scarcity principle is deeply embedded in Hermès’ model, whereas other brands may prioritize scaling up production to meet demand. Reproducing such exclusivity is challenging for brands aiming for broad-market appeal.
• Vertical Integration and Investment in Craftsmanship: Hermès operates 23 leather factories and recently added a silk production facility in Lyon, signaling its dedication to controlling quality and craftsmanship. Few luxury brands can match Hermès’ investment in traditional craftsmanship. Hermès artisans are trained in-house, often for years, a commitment that’s not only resource-intensive but also difficult to replicate without similar longstanding infrastructure.
• Client Relationships Over Seasonal Trends: Hermès doesn’t chase trends; it is a trend. While brands like LVMH and Kering frequently introduce new lines and collaborations to appeal to younger, fashion-forward consumers, Hermès invests in timeless products and focuses on cultivating client loyalty. This strategy pays off, especially during economic downturns, as clients view Hermès products as investments rather than fashion purchases.
• Careful Category Diversification: While leather goods remain a cornerstone, Hermès has also excelled in diversifying across categories like jewelry and ready-to-wear without diluting its brand identity. This diversification bolstered its performance even when watches, a smaller segment for Hermès, underperformed. By maintaining its brand equity across product lines, Hermès stays relevant to varied client preferences without overextending itself.

Is There Room for Replication?

Though difficult to replicate in totality, elements of the Hermès model offer valuable insights for other luxury brands. For example, emphasizing scarcity and local client relationships may benefit brands striving for long-term resilience rather than rapid expansion. However, achieving Hermès-like results would require a fundamental shift in how luxury brands operate, moving away from immediate growth toward a sustained, curated exclusivity that builds brand equity over decades.

Ultimately, Hermès’ recent financial success is not just a reflection of the brand’s popularity but a testament to its finely-tuned, unique business model. This model thrives not by chasing the latest trends or mass appeal but by offering a sense of timeless value, quality, and exclusivity that remains unrivaled. Whether other brands will succeed in mirroring even parts of this approach remains to be seen.