1.2.5 ACTIVITY BY SECTOR
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Leather, rattan and a neutral palette reflect Hermès’ understated approach to luxury.Hong Kong Store
A glass box covered in an exoskeleton of white steel rods, the striking façade of Hermès’s store.
HermÊs, as with most retailers, does not own the location of most storefront locations. Most stores are in rented locations which have undergone lease negotiations for a predetermined amount of time which is usually longer than one year. The process of leasing a space rather than owning mitigates the risk associated with commercial or mixed-use developments. In the event of an economic downturn, the brand would then not be responsible if the area became unsuitable- but instead could move to a suitable location. The majority of locations follow this guideline including both brand and flagship locations. Examples of this include the Miami Design District, Singapore’s Liat Tower, and the Shops at Buckhead.
Pricing Strategy Matrix
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Direct Competitors Gucci
Brand
Herm s
Louis Vuitton
Founded
1837
1854
1921
1847
Core Values
Craftsmanship, precision and timelessness.
Craftsmanship, outstanding quality and creativity.
Craftsmanship, outstanding quality, made in Italy.
Exceed the limits of excellence, create objects of the highest quality.
Key Product Offering
Luxury clothing and accessories for men and women. Specializing in scarves & Birkin Bag.
Unique Identity
Orange Box and iconic Birkin Bag
Target Audience
Distribution
Cartier
Indirect Competitors Tradesy Rent the Runway 2009
Bring trust and fairness Give everyone access to a to fashion, and make luxury experience and great style affordable revolutionize the retail and accessible. process.
Luxury fashion goods Luxury clothing and Luxury goods such as Pre-worn luxury items such as leather accessories for men, handbags and wallets. such as handbags, goods, ready to wear women, and children. Specializing in shoes, clothing, and and accessories. Specializing in timepieces and jewelry. accessories. Specializing in handbags. luggage and handbags. Recognizable logo and graphic symbol
Red & green stripes
Red box and iconic tank watch and love bracelet
Offers a rage of designers (Zara to LV) and prices.
Upper class men & Middle upper class Middle upper class Wealthy consumers Middle to upper class women who care about and upper class men and upper class men who spend heavily on women who are busy, quality and craftsmanship, and women who want and women who want authentic luxury brands style conscious, and and want exclusive unique, quality fashionable wear and to enhance their social value affordable products. products. accessories. image. designer fashion. Limited distribution that mainly happens through directly operated stores, with minimal online and department store presence.
Limited distribution and accessibility. Do not sell in department stores and minimal online presence.
Uses various channels and distributes to company owned stores, e-commerce sites, and wholesalers.
Limited distribution, mainly through Cartier boutiques.
2009
E-commerce retailer that ships internationally through their website.
Thousands of pre-worn designer dresses, handbags, accessories, tops and pants.
Able to rent items for a short period Middle to Upper class women who are price sensitive and care about designer fashion at an affordable price. E-commerce retailer with fast online distribution only accessible in the United States. They also have retail stores where customers can view pieces for rent.
Source:
(edited by Madison)
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SALES POTENTIAL Seasonality Peak tourism season for Tel Aviv begins in March and trails off through September. Location The location contains both direct and indirect competitors of the brand. This area is especially significant to international travelers.
AREA ATTRACTIONS Kikar Hamedina is a district within the city of Tel Aviv which is characterized by the unique architecture including the circular park near the fashion district. The luxury shopping area surrounds this park with boutiques and brand stores located on He Be'iyar Street. This northern area of the city is known for its elegance while being a mecca for international businesses as well as a cultural center with the museum and theatre complexes nearby. Other attractions that might bring people into Tel Aviv are the local beaches, Tel Aviv’s many historical museums, and tours of historical cities such as Jerusalem and Jaffa.
Port of Jaffa
AREA FACTORS Ease of Access Transportation methods include foot traffic, public transportation and private car access. Architecture The buildings where the majority of luxury shops and housing have experienced few renovations since their inception in the 1950’s. As recently as 2015, a new proposal for the park and surrounding area was approved. This improvement project is set to increase property values and rejuvenate the park. The plan is set to include three apartment buildings and a 10 acre park which will be maintained by both property owners and the city.
Kikar Hamedina
DIRECT COMPETITION Kikar Hamedina is an area of Tel Aviv where some of the world’s top luxury designers are located. The area is comparable to Rodeo Drive in Beverly Hills, CA.
Designers in Kikar Hamedina include: Ralph Lauren, Chanel, Versace, Prada, Gucci, Tom Ford, and Fendi.
Ramat Aviv Mall is a mall located in Tel Aviv that hosts luxury stores such as Louis Vuitton, Versace, Ralph Lauren, and Calvin Klein.
Ben Gurion Airport, located 11 miles from Tel Aviv, is the main international airport for the city. Stores in the airport include: Armani, Diesel, Swarovski, and Hugo Boss.
Ramat Aviv Mall
Ben Gurion Airport
INDIRECT COMPETITION Micheal Kors and Marc Jacobs also have stores in Tel Aviv. These brands do not compete on the same level as Hermès, but they do sell ready to wear, leather goods, scarves, and accessories at a lower price point. These stores would provide an alternative for locals and tourists who want a “luxury” brand but can’t afford the prices of Hermès.
Many local artisans can be found in Tel Aviv in open air markets selling handmade crafts such as leather goods, jewelry, and scarves.
One of the most popular open air markets in Tel Aviv is Nahalat Binyamin. Everything in the market is handmade, guaranteeing a unique piece. While these artisans may not craft luxury items like those found at Hermès, some tourists may opt for locally inspired items that can’t be found anywhere else.
Nahalat Binyamin
PRODUCT ASSORTMENT After analyzing the Hermes half-year financial report for 2017, the following assortment is the ratios considered for the first fiscal year of the Tel Aviv store. Since each store has the opportunity of customizations, the following may be adjusted after the first fiscal year. Leather Goods Ready to Wear & Accessories Silk & Textiles Home Jewelry & Watches Fragrance
50% 25% 12% 5% 5% 3%
PRODUCT ASSORTMENT
Leather Goods makeup fifty percent of the assortment plan. Leather goods consist of bags, diaries, and small leather goods. The proposed assortment should include the following style of items: Luggage ToolBox Bag 2002 Bag Mix Media Clutches Garden Party Bag Boldie Bag Luggage Tags Key Rings
PRODUCT ASSORTMENT
Ready to Wear & Accessories makeup twenty five percent of the assortment plan. This category consists of Mens and Womens ready to wear collections as well as shoewear. The proposed assortment should include the following style of items: Resort Pieces Swim Dresses in assorted lengths Tailored Bottoms Tailored Tops Variety of sneakers Variety of dress shoes
PRODUCT ASSORTMENT
Silk and textiles makeup twelve percent of the assortment plan. This category consists of Men’s and Women’s silk accessories. The proposed assortment should include the following style of items: Ties Pocket Squares Twilly Scarves Limited scarves Limited shawls
PRODUCT ASSORTMENT
Jewelry and watches makeup five percent of the assortment plan. This category consists of cufflinks, enamel jewelry, lacquered jewelry, watches, and partnership products. The proposed assortment should include the following style of items: Enamel bangles Gold and Silver metal pieces Gold cufflinks Silver cufflinks Enamel cufflinks Mixed media watches
PRODUCT ASSORTMENT
Home make up five percent of the assortment plan. This category consists of textiles, baby gifts, games and sport, tableware, furniture, lighting, wallpaper,and beach accessories. The proposed assortment should include the following style of items: Limited quantity beach towel Limted beach maxi bag Furniture used for display purposes and design consulting Tableware and lighting should only be used as vignettes for design
PRODUCT ASSORTMENT
Fragrances makeup three percent of the assortment plan. This category consists of scented products specified for men, women, home and bath. The proposed assortment should include the following range of items in a variety of scents including Terre DHermes, Twilly, 24 Faubourg, Elixir des Merveille and : Eau de toilette Parfum Cologne
PHYSICAL STRUCTURE There Hermès boutique in Tel Aviv will use an open see-through window with a slope that draws customer in. This allows customers to envision the whole store when standing outside. Customers will feel more comfortable and can anticipate what will happen.
The open window format will be the best structure for a new location, because new customers who aren’t familiar with the brand will be able to access it and feel welcome.
Hermès uses a free-form layout. The layout flows in an irregular pattern which allows customers a free choice of movement throughout the store. This layout gives customers a more relaxed environment.
INTERIORS A seating area is available for customers who would like to sit and relax and enjoy the personalized one-on-one service.
The hallmark for every Hermès boutique is the mosaic floor at the entrance, which incorporates Hermès’ emblem.
A glass door is typically used for the entrance with a ceiling light hanging above and cherrywood details throughout the boutique.
FLOOR PLAN
SPACE ALLOCATION & PRODUCTIVITY Hermès does not launch region specific collections, so the products sold in the new Tel Aviv location will be found in other stores across the globe.
Hermès has grown the amount of directly operated stores and has been reducing third party retailers. As a result, they can better control the in-store product mix.
Hermès uses the theme-oriented presentations. Products in the store are displayed in different sections according to themes.
For example, belts will be grouped together, scarves will be displayed together, and read to wear will be grouped according to collection.
Average space allocation based on space elasticity of demand for Hermès would be on the low end close to 0. Increasing sales space would have a negative impact on exclusivity and brand image, especially since Hermès purposefully limits distribution.
SPACE ALLOCATION & PRODUCTIVITY The boutique is divided into a range of smaller areas using wooden paneling enabling the light to flow. This lets the customers discover products in an atmosphere of privacy. The panels used are semi-transparent, so customers can see where products are located at a glance.
Hermès boutiques have a wide breadth of assortment. They carry apparel for men and women including ready to wear, belts, watches, scarves, handbags, shoes, jewelry, saddlery, and luggage.
Hermès has a narrow depth of assortment. While they have different items to choose from (shoes vs. belts) they don’t carry large amounts of the same item in stores (a black Birkin vs. a brown Birkin) in order to limit distribution and maintain exclusivity.
FIXTURES & MERCHANDISE PRESENTATION Hermès boutiques use cherrywood fixtures, fittings, and cabinetry accented with nickeled brass hardware.
Deep recessed cabinets with floating shelves and hang rods made of cherrywood line the interior walls of the boutique and often showcase leather goods and shoes.
Glass cases house accessories such as jewelry and watches.
FIXTURES & MERCHANDISE PRESENTATION Presentation for fragrances include a row of testers arranged by graduated color and hue.
Hermès’ famous scarves are often presented using a pin-up hook which allow a full view of the design.
Neckties are presented using hooks against a cherrywood background where the necktie is displayed in full.
Ready to wear is grouped together according to collection and season.
AMBIANCE Hermes stores are designed to provide a sense of luxury and exclusivity which conveys a feeling of tradition and values of the brand to the consumers.
Upon entering the store, shoppers will come across an open-plan retail space with cherrywood. The space is furnished with handmade pieces while wooden frames display Hermès’ famous silks.
Color psychology is frequently applied to stores. Hermès stores typically have a white interior which makes the store appear calm, cool, and clean.
Warm tones and dim light is also common throughout Hermès boutiques. Warm tones have been shown to be stimulating, and evoke sensations of warmth and action.
Hermès architect Denis Montel explains that creating an atmosphere of privacy for the customers is one of the main goals.
VISUAL MERCHANDISING & DISPLAYS Hermès is continually evolving their visual merchandising through their differentiation strategy of their window displays.
The visual merchandisers at Hermès often experiment with different artistic concepts in their store design.
Hermès typically uses red, orange, and white in their visual merchandising.
Sometimes Hermès includes temporary art installations in their displays in order to emphasize creativity and to keep the brand dynamic.
VISUAL MERCHANDISING & DISPLAYS Hermès has used a variety of themes in their windows displays. Some themes include surrealism, symbolism, and realism, and often incorporate a variety of objects in the displays.
Hermès’ official website describes their window displays as “the ambassador for our imagination.” The aim of the window display is to “fill the streets with wonder and ensures the passerby’s happiness.”
For seasonal shop windows, local artists are often commissioned.
Since Hermès began their business by making equestrian tack for the wealthy, horse figures may be incorporated throughout the store to emphasize heritage.
SAFETY & SECURITY Hermès works with security firms from around the world to implement a system that is comprehensive and integrated.
Hermès employees a variety of security measures in there stores such as intrusion alarms linked to monitoring stations, card readers that lead to restricted areas, and display cases.
In order to gain entry into a controlled area, employees hold a card up to a card reader mounted on the wall. Embedded in the card reader is an antenna that catalogs identifying information, date, time, and the duration of access.
A similar system is used on the display cases on the sells floor. Once the employee gains access, software records relevant information.
Intrusion security is important for after hours in case of break ins. At closing time, the system is armed and activates motion detectors and door sensors. When there is a breach, a burglar alarm system is activated which alerts a third-party central station.
Panic buttons are also placed in sensitive areas such as behind the register and in the restrooms.
PRELAUNCH Store Wraps Store wraps are a fantastic way for the local community to become excited about the future opening. This could include the iconic orange box and brown ribbon or the staple image from the current fall campaign. Events in Tel Aviv: Partnership with the cultural center and art museum Since the store location is within walking distance of the cultural center an Hermès exhibit can be organized to engage tourists and locals in the heritage of the brand while creating buzz for the brand. While there are several locations possible for this event, the prefered venue is the Tel Aviv Museum of Art. This museum houses both temporary and permanent exhibitions. Key artists within the museum include Cezanne, Chagall, Dali, Monet, Henri Moore, Auguste Rodin, Archipenko, Picasso, Klimt, and Kadinsky. Digital Promotion (Social Media & Targeted Advertisements) In keeping with the current dialogue on social media, Hermès could create a short film showing the integration of the Hermès brand into the fast paced Tel Aviv lifestyle. This video could then be shared across several channels including Facebook, Instagram and through the globally distributed Hermès app. In this regard the advertisement could be targeted toward existing consumers of the brand as well as customers within the mental space geographically located in the Middle East.
LAUNCH In Store Launch A black tie event will be held as an introduction to the store and opening in a newly designed neighborhood with a flair for the creative. An outdoor is possible event given the temperatures in Israel are moderate this time of year. Digital To integrate the existing heritage along with the technologically driven consumer, an in app event will be created mocking a Steeplechase horse race event. Through the application, consumers will be given a series of challenges to draw the consumer from the museum installation to the in-store launch event. This application will create engaging opportunities similar to the virtual reality games already introduced through the application. Instead of only playing horseshoes the consumers will also be on a scavenger hunt style trail which will lead to the store location.
PRELAUNCH Before the grand opening of the Hermès’ Tel Aviv location, the market will be analyzed and the launch will target a group of potential buyers for the products, and they will be put on a prelaunch email list. From there, various types of media will be sent out to promote the grand opening. During the pre launch stage, the company will build up interest in the products, art displays, and grand opening events. This can be done through the store wraps and and partnership with the Tel Aviv Museum of Art. Hermès likes to commission artists from other countries to bring fresh perspectives to their window displays. For example, a French artist in an American store, or a Latin artist in a Chinese store. As part of the brands tradition, Paris based artist Eva Jospin will be invited to decorate the windows into one of her signature cardboard landscapes inspired by Israel’s architecture and terrain for the launch of the new Tel Aviv store. CEO Axel Dumas and Hermès president Robert Chaves will hold a pre-dinner the night before the grand opening for select journalists and Israel’s elite.
Display by Eva Jospin
PRELAUNCH ACTIVITIES INCLUDE: 1. 2. 3. 4. 5.
Launch new expansion plan on website Announcement of expansion plan in the media Paid campaigns (print, social media, emails) Public relations and press kit activities Training and product demos for sales staff
LAUNCH: On the day of the launch, executives and VIP guests including the CEO of Hermès, Axel Dumas, will attend the ribbon cutting ceremony at the unveiling of the new Hermès store in Tel Aviv. On the day of the grand opening, a morning tour of the Hermès boutique will be given for journalists, to help with promotions and press. In the evening, guests will be invited to a black tie event and will have a first look at the merchandise offered and a full staff of trained associates will be available to assist customers. The event will also include champagne, sparkling water, and hors d’oeuvres. The visual display artist, Eva Jospin, will also be in attendance to meet with guests and do a live demonstration of her work.
POST LAUNCH: It will be important to assess the companies performance such as the purchasing of resources, selling the product, and customer satisfaction. It is also important to analyze whether the company performed in the new market according to expectations. After the launch, Hermès will need to keep its audience engaged. This can be done through interaction and monitoring social media, building relationships with customers, and creating newsletters.
The inventory managers and associates will be responsible for devising ways to optimize inventory control procedures, and inspecting the levels of business supplies and raw materials to identify shortages.
Hermès will not suffer from large amounts of inventory sitting in the store. Hermès purposefully limits distribution in order to maintain exclusivity, so only a small amount of each product will be kept in the store. Hermès is more likely to have a waiting list for products compared to an excess amount products sitting around.
POST LAUNCH ACTIVITIES INCLUDE: 1. 2. 3. 4. 5.
Review performance of social media promotion Review performance of PR efforts Review how well trained the staff felt Evaluate possible ways to improve Continue to engage customers
WRITTEN RATIONALE: The communication and marketing plan for the store expansion consists of a mix between traditional and nontraditional marketing which coincides with Hermès’ current marketing initiatives and innovative practices. In order for the store to have the proposed earnings in the millions both the primary and secondary customer market must be reached. Since the brand is evolving into the world of VR through the existing application the technology the secondary tourist consumer will be able to discover the store through the virtual scavenger hunt. While instead the primary customer will be engaged through the exhibition of past Hermès’ products and inspired artwork at the Tel Aviv Museum of Art. Top clients and business associates will then be invited to the store launch event extending the brand’s heritage of exclusivity to this location’s grand opening.
TIMELINE OF EVENTS
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