One day in 2010, Patrick Thomas, CEO of Hermes, received a call from Bernard Arnault, the president of LVMH, the world’s largest luxury group. Arnault informed Thomas that LVMH was planning to acquire Hermes, and they had already secured a 17% stake in the company. This news came as a shock to Hermes, as they valued tradition over change and considered themselves a family-centered business. They saw LVMH’s actions as a violation of ethical business practices, as the company had secretly collected Hermes stocks without proper disclosure. In response, Hermes took action to protect their legacy.
A Battle Won
Hermes established a holding company with a 50.2% stake owned by the Hermes family, effectively repelling LVMH’s takeover attempt. They also returned to owner management, appointing Axel Dumas, a sixth-generation member of the Hermes family, as the CEO. In 2017, LVMH sold its stake in Hermes, acknowledging the futility of their acquisition efforts. This victory against the industry giant marked the beginning of Hermes’ resurgence.
The Allure of Hermes
Hermes is a unique luxury brand that captures the attention of competitors like LVMH. It boasts the second-highest market capitalization among luxury companies worldwide, second only to LVMH. The brand offers a wide range of products, including handbags, clothing, scarves, and watches. Its most renowned products are the Birkin bag and the Kelly bag, coveted by royalty, heads of state, business magnates, and celebrities across the globe. Even pop star Victoria Beckham owns over 100 Hermes bags, and Jennifer Lopez carried a Kelly bag worth over 100 million KRW. Hermes’ popularity extends to male celebrities as well, with Pharrell Williams, Travis Scott, G-Dragon, and comedian Jo Se ho all proudly carrying Hermes bags. Rapper Drake has even started collecting Birkin bags for his future wife.
A Rich History
Hermes traces its origins back to 1837 when Thierry Hermes established a workshop in Paris, crafting exquisite harness items. As the world transitioned from carriages to automobiles, Hermes adapted its expertise to the travel products business, excelling in suitcase manufacturing. The brand’s trademark ‘Saddle Stitch’, a sewing technique using two needles, showcased their commitment to craftsmanship. Over the years, Hermes expanded its offerings to include clothing, jewelry, and watches. It achieved widespread fame with the launch of the iconic Hermes scarf, and in 1956, Princess Grace Kelly’s use of a Hermes bag to cover her pregnancy further solidified the brand’s reputation.
Weathering the Storm
In the 1970s, Hermes faced a crisis as casual clothing and affordable artificial fiber-based luxury brands gained popularity. However, Hermes remained committed to using the finest natural materials and maintaining in-house production. The brand’s growth rate declined, and it became associated with being expensive and old-fashioned. The arrival of Jean Louis Dumas as CEO marked a turning point for Hermes. Dumas recruited contemporary designers such as Martin Margiela and Jean Paul Gaultier, who injected fresh perspectives into the brand. Hermes’ advertisements featuring a young woman in a denim jacket and an Hermes scarf attracted a younger audience, rejuvenating the brand.
The Birth of a Legend
In 1984, Jean Louis Dumas introduced the Birkin bag, named after French singer Jane Birkin. This bag became an instant icon, and under Dumas’ leadership, Hermes experienced exponential sales growth. Even after Dumas left, the brand continued to thrive. In 2022, Hermes achieved record-breaking sales, increasing by 23% from the previous year. Over its 186-year history, Hermes has rewritten the rules of luxury goods and earned a place among the world’s top three luxury brands, alongside Chanel and Louis Vuitton.
Rarity as a Driving Force
Hermes’ ability to captivate people lies in its concept of rarity. The brand uses only the finest materials, ensuring that each Birkin bag is crafted with impeccable quality. The leather used for crocodile Birkin bags comes from scratch-free, never-fought crocodiles, while ostrich leather is sourced from the top ostrich farm in South Africa. Every Birkin bag is meticulously handmade by craftsmen with over a decade of experience, with each bag taking at least 18 hours to complete. Pierre Alexis Dumas, the creative director of Hermes, personally inspects each finished bag and discards any that fail to meet the brand’s high standards.
The True Meaning of Luxury
Hermes differentiates itself from other luxury brands by prioritizing authenticity and craftsmanship. While many luxury brands outsource production to countries with lower labor costs, Hermes remains committed to manufacturing its products in France. The brand’s refusal to compromise on quality has resulted in products that can be passed down through generations. The value of Birkin bags has consistently outpaced the rate of return on the S&P 500 and gold over the past 35 years, highlighting their rarity and enduring appeal. As a result, people around the world eagerly wait in front of Hermes stores, hoping to secure their own prized Birkin bag.
The Art of Evolution
Unlike other luxury brands that rely on creative directors to drive their evolution, Hermes takes a more gradual approach. The brand avoids drastic changes and instead focuses on a balanced blend of past and present. When Martin Margiela joined Hermes as a creative director, he respected the brand’s heritage while infusing his own contemporary sensibilities. This approach allowed Hermes to evolve without losing its essence. In recent years, Hermes has embraced collaborations that align with the times, such as partnering with Apple to create leather straps for the Apple Watch. These collaborations have attracted a younger audience, showcasing the brand’s ability to adapt and remain relevant.
Family Values
Hermes’ steadfast commitment to family management sets it apart from other luxury brands. The current CEO, Axel Dumas, is a sixth-generation member of the Hermes family, ensuring a seamless transition of leadership and the preservation of the brand’s craftsmanship. Family management allows Hermes to prioritize long-term goals and undertake projects that may take years to bear fruit. The brand treats its employees and suppliers as part of the extended Hermes family, fostering loyalty and ensuring the highest standards of quality. Even during challenging times like the COVID-19 pandemic, Hermes has upheld its family values by not laying off any employees.
Environmental Responsibility
Hermes’ deep appreciation for nature, stemming from its reliance on natural materials, has led the brand to prioritize environmental protection. The brand’s repair service, which fixes 120,000 Hermes products each year, promotes sustainability in an era of fast fashion. Additionally, the ‘Petit H’ project repurposes leftover materials from Hermes production to create unique products like shoelaces, key rings, and dolls. These products are sold at auctions and art exhibitions worldwide, reflecting the brand’s commitment to minimizing waste.
The Legacy of Hermes
Hermes’ success as a true luxury brand is rooted in its ability to leverage rarity, maintain a balance between tradition and evolution, and uphold family values. While not everyone can replicate Hermes’ achievements, following their methods and principles can help create a small yet enduring luxury brand. As the brand’s slogan aptly states, “The selling brand creates rarity.” Hermes has indeed mastered the art of driving customers crazy with its exceptional craftsmanship and unwavering commitment to luxury.
