Rising Interest in Luxury Goods
With the global economic growth, consumers’ purchasing power has notably increased. A rising number of individuals are now gravitating towards luxury goods. A recent survey conducted by YouGov across 18 international markets revealed that 31% of consumers are interested in luxury clothing and footwear, while 14% have a keen interest in luxury jewelry, handbags, and wallets.
Speaking of luxury brands, Hermès invariably stands out as a market leader, showcasing significant profitability. Established in 1837 in Paris by Thierry Hermès, the brand was initially renowned for its premium equestrian products. Over the years, it pivoted from crafting saddles to producing handbags.
Commitment to Quality and Exclusivity
The brand places an unwavering emphasis on leather quality, partnering with some of the world’s top leather suppliers. Each bag is meticulously handcrafted by artisans with over a decade of experience. Every finished product is assigned a unique ID that details the information of the responsible artisan, who also offers after-sales service to the consumer.
Strategic Production and Sales Bundling
The annual production volume of Hermès bags is remarkably limited. After placing a custom order, customers often wait several years before receiving their bags. Moreover, not all products can be customized in stores. Each boutique has store managers responsible for product procurement and the allocation of the coveted bags. Hermès employs a strategic sales bundling approach; consumers typically need to purchase a certain number of non-leather products before being offered an opportunity to buy a bag. This sunk cost encourages customers to continuously purchase other products to qualify for a bag purchase. This strategy not only increases profit margins for Hermès but also diversifies its product line. Such sales bundling has become an unspoken rule between customers and sales associates.
Service Beyond Sales
Hermès offers exclusivity to cater to the emotional needs of their high-end clientele, ensuring they feel a sense of superiority. Similarly, Hermès’ service attitude is notable. Regular customers are always met with a warmer smile and are served with utmost humility. For elite clients, a purchase represents more than just an item—it’s an expression of respect.
Target Demographics
Hermès primarily targets three consumer demographics:
- Individuals aged between 35-60, with notable financial prowess. They appreciate the cultural significance of the Hermès brand, valuing its uniqueness and craftsmanship to accentuate their societal standing.
- Individuals aged between 25-45, working in creative industries such as fashion and entertainment. As influencers in their social circles, they need to keep abreast of the latest trends and styles to maintain their image.
- Individuals aged between 20-40, with a median income range. They harbor aspirations for a luxurious lifestyle, viewing Hermès as a tool to elevate their social status.
A commonality among these consumers is their desire for others to gauge their economic status through Hermès. Since one cannot constantly showcase their entire wealth, luxury items they carry serve as symbols of their status. Luxury goods bestow confidence and validation upon their owners. By displaying these items, individuals satisfy their vanity and, at the same time, gain entry into wealthy social circles.
“With a gorgeous bag, I thought, I would not just have a sword and a shield. I would have something that they did not have, or something they wanted, or something they did have and didn’t want anyone else to have.”
Wednesday Martin -“Primates of Park Avenue”