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Explore the iconic allure of Hermès as a luxury brand with unique strategies like limited supply, minimal branding, and no marketing department. Discover how the family-led company transformed itself dynamically over six generations and navigated a $200B market cap. Dive into the history of craftsmanship, strategic decisions, and the evolution of Hermès from equestrian roots to modern luxury icon.
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Quick takeaways
- Hermès focuses on scarcity and craftsmanship, creating exclusivity and high demand for its products.
- Hermès has successfully defended against a takeover bid, showcasing the family's commitment to preserving the brand's heritage.
- Hermès strategically partners with brands like Apple to combine craftsmanship with modern technology, catering to a wider customer base.
- Under Jean-Louis Dumas, Hermès saw significant growth by appealing to a younger audience and expanding internationally.
- Hermès embraces a unique business approach by emphasizing tradition, craftsmanship, and exclusivity over winning in the luxury market.
- Hermès reinvented itself multiple times in its history, evolving from a family enterprise into a European giant through radical strategies.
Deep dives
The Transition to the Automobile Era
In the early 1900s, the company adapted to the age of the automobile by introducing handbags and accessories for cars. This transition was led by Emil Hermes, who recognized the changing needs of wealthy clients who were increasingly traveling in cars and desired high-quality, handcrafted leather goods to accompany their journeys. This expansion into the automobile market proved successful, and Hermes became known for their exquisite craftsmanship and attention to detail in creating products that met the unique needs of their clients.
The Art and Whimsy of Hermes
Under the leadership of Robert Dumas in the early 20th century, Hermes embraced an artistic and whimsical approach to their products. Dumas introduced unique designs such as the Otakoura bag and the Shandonca bracelet, incorporating elements of artistry and storytelling in their creations. The company also gained recognition for their silk scarves, which became a timeless fashion accessory and were popularized by Queen Elizabeth. The combination of exquisite craftsmanship and imaginative flair defined Hermes as a brand that offered a luxurious and playful experience to its customers.
The Orange Box and Logo
During World War II, the shortage of packaging materials led Hermes to use orange boxes, which became an iconic part of their brand identity. The company's logo, a harness carriage inspired by 19th century paintings, was introduced by Robert Dumas as a representation of their heritage and craftsmanship. With a focus on artistry, storytelling, and attention to detail, Hermes products transcended mere luxury goods, offering customers a connection to history, elegance, and timeless style.
Repositioning the Brand: The Birkin Bag Revolution
Jean-Louis Dumas, the fifth-generation CEO of Hermes, successfully repositioned the brand by launching a new ad campaign featuring young Parisian women wearing the iconic Hermes scarves in playful and modern ways, such as with jeans. This shift appealed to a younger audience and breathed new life into the brand without compromising its tradition or craftsmanship. Additionally, Dumas introduced the Birkin bag, a larger and more casual version of the Kelly bag, inspired by his encounter with British actress Jane Birkin on a plane. Despite initial slow sales, the Birkin bag became a cultural sensation and a symbol of luxury and exclusivity.
Global Expansion and Tapping into New Markets
Jean-Louis Dumas recognized the potential of the expanding global wealthy class and pursued an internationalization strategy. Hermes strategically entered different markets, observing the rise of wealth in countries like Japan and China, and opening stores to cater to the increasing demand. This approach allowed Hermes to be a second mover, observing where the market exists and establishing a presence to meet the needs of the growing elite clientele. By offering its heritage and French nobility, Hermes has become universally revered and desired worldwide.
Impressive Growth and Financial Success
Under Jean-Louis Dumas, Hermes experienced significant growth, with annual revenue increasing from under $100 million to $2 billion during his tenure. He skillfully managed the brand's transformation and maintained the company's commitment to craftsmanship and tradition, while also adapting to changing consumer preferences. By staying true to its heritage and offering iconic products like the Birken bag, Hermes fostered a loyal and aspirational customer base. This dedication to quality and exclusivity allowed Hermes to thrive and solidify its status as a leading luxury brand.
The Craftsmanship and Scarcity of Hermes
Hermes thrives on the craftsmanship and scarcity of its products. Each item is meticulously handcrafted by a skilled artisan, and the limited production capacity creates a sense of exclusivity. This approach has allowed Hermes to maintain its reputation as a luxury brand and command high prices for its products.
The Successful Defense Against Bernard Arnault
Hermes successfully defended against a takeover bid by Bernard Arnault and LVMH. The Hermes family came together and formed a cooperative vehicle, H51, to maintain control of the company. This move prevented LVMH from gaining majority control of Hermes and ensured the family's long-term ownership. The defense was a testament to the family's unity and commitment to preserving the heritage and values of the brand.
The Strategic Partnerships and Global Expansion
Hermes has strategically partnered with brands like Apple to expand its reach and cater to a wider customer base. The collaboration with Apple resulted in a luxury version of the Apple Watch, combining Hermes's craftsmanship with Apple's technology. This partnership reflects Hermes's willingness to adapt to the modern world while maintaining its commitment to quality and elegance. Additionally, Hermes has expanded its presence in Asia, particularly in China, tapping into the growing luxury market in the region.
Hermes: The Craftsmanship, Fun, and Unique Business Model
Hermes is a luxury brand that has successfully scaled the old way, focusing on craftsmanship and creating a unique customer experience. The company emphasizes having fun and staying true to its identity rather than solely focusing on winning. The splinter in the mind is the ability to sell similar products as competitors but with an entirely different business approach. Hermes captures the value by offering a bundle of exclusivity, service, craftsmanship, shopping experience, and brand that cannot be easily replicated. They have a deeper commitment to the craft and control everything from design to production to retail. The company has made strides in animal welfare and responsibly sourcing exotic leathers. Overall, Hermes represents the pinnacle of luxury craftsmanship, combining tradition with a touch of whimsy and securing a devoted fan base.
The Anchor Prime Charger: Power and Portability
The Anchor Prime Charger is a high-quality, portable charger that offers a convenient charging solution for multiple devices. With two USB-C ports and one USB-A port, it provides fast charging capabilities while being compact and easy to transport. The charger's gallium nitride technology enables it to be smaller and more efficient than traditional chargers, making it a reliable and valuable accessory for travelers and tech enthusiasts alike.
Matter: A Comprehensive Reading and Listening App
Matter is a versatile app that allows users to save and listen to various forms of content, including articles, newsletters, and web pages. With its text-to-speech capabilities, it provides an immersive listening experience for those who prefer audio content. Matter is an all-in-one solution that combines the features of read-it-later services, podcast apps, and text-to-speech tools, making it a valuable tool for consuming and organizing a wide range of digital media.
Perplexity AI: The Ultimate Information Resource
Perplexity AI is a powerful tool that offers a comprehensive search experience that exceeds that of traditional search engines. It provides reliable information and sources, allowing users to fact-check and access a wide range of knowledge in a user-friendly format. By leveraging the capabilities of AI, Perplexity AI offers a unique and efficient way to research and discover information, making it a valuable resource for a wide range of users.
In luxury, there’s Hermès… and there’s everyone else. Stewarded by one French family over six generations, Hermès sells the absolute pinnacle of the French luxury dream. Loyal clients will wait years simply for the opportunity to buy one of the company’s flagship Birkin or Kelly bags. Unlike every other luxury brand, Hermès:
- Doesn’t increase supply to meet demand (hence the waitlists)
- Doesn’t loudly brand their products (IYKYK)
- Doesn’t do celebrity endorsements (stars buy their bags just like everyone else)
- Doesn’t even have a marketing department! (they barely advertise at all)
And yet everyone knows who they are and what they represent. But, despite all their iconoclasm, this is not a company that’s stood still for six generations. Unbeknownst to most, Hermès has completely reinvented itself at least three times in its 187-year history. Including most recently (and most dramatically) by the family’s current leaders, who responded to LVMH and Bernard Arnault’s 2010 takeover attempt by pursuing a radical strategy — scaling hand craftsmanship. And in the process they turned the company from a sleepy, ~$10B family enterprise into a $200B market cap European giant. Tune in for one incredible story!
Sponsors:
Many thanks to our fantastic Season 14 partners:
- J.P. Morgan Payments
- ServiceNow
- Vanta
- NVIDIA GTC (Code "ACQUIRED" for 20% off)
Links:
- Visuals for:
- Quartr's Hermès: Two Centuries of Craftsmanship and Excellence (with graphs)
- 00:23: Haut a Courroies, the “high-belted bag” to carry saddles and boots
- 00:45: Chaine d'ancre, “Chain of anchors”
- 00:49: Jeu des Omnibus et Dames blanches, “White ladies at play”
- 00:53: Screen printing each color on a scarf individually
- 00:57: The Hermès oranges
- 01:06: Sac à Dépêches (today: the Kelly Bag)
- 01:07: Grace Kelly photo in LIFE Magaine
- 01:26: Steps to sew a saddle stitch
- 01:48: The Birkin Bag
- 03:17: Petit h
- The saddle stitch (video)
- Inside the Saddlery at the Faubourg
- Hermès 2022 Annual Report
- Axel Dumas Interview
- All episode sources
Carve Outs:
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- Join the Slack
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- Check out the latest swag in the ACQ Merch Store!
Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
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