Hermes has a problem. Weakening demand in favourite market China has largely led to a downturn in revenue growth. Greater China and the wider Asia-Pacific region account for 40-42% of Hermes’ total global revenue. This should make the French luxury brand revisit its marketing strategy. Luxury brands such as Hermes, Chanel, LVMH, Prada need to stick to their USP. What sets luxury brands apart is not just design and quality – ‘product’ – but the promise of an experience: brand equity riding on qualitative reputation.
Hermes’ Birkin bag is popular among 1%-ers. That’s the whole point. Europe®, itself now fire-ringed from the turmoil being witnessed, still commands aesthetic-commercial influence and heft for new developed economies like China. So, it makes adequate sense for Hermes to create a ‘China-only’ line – selling its ‘Europeanness’ to customers who can afford it.
China’s HENRYs – High Earners, Not Rich Yet – are no longer treating that $12,000 Birken bag as a monumental buy. They have been buying high-end local brands that can give the entry-level Birken a run for its money. But it now needs a nudge. European luxury brands are about offering experience to the (affording) world, signalling status that comes with ‘beautiful things’. Rather than the affluent mass-market, European luxury brands like Hermes need to focus on 1%-ers, laying out bespoke products that sets China’s very own 1%-ers apart by having a ‘China-only’ line. This doesn’t mean dilution. On the contrary, it means encouraging a traditionally strong market towards a ‘European’ product. What holds true for China, holds for other regions: high-end products/brands – whether a Hermes scarf or a bottle of Chardonnay – can be ‘tailor-sold’ in certain strategic markets.
