HERMÈS BRAND ANALYSIS
TABLE OF CONTENTS 1
About Hermès
6
Competitor Analysis
2
Brand Equity & Visual Identity
7
SWOT Analysis
3
Marketing Mix
8
PESTEL Analysis
4
AIDA Model
9
Financial Overview
5
Market Segmentation
10 Works Cited
BRAND ANALYSIS
│ISABEL LEONARD
ABOUT HERMÈS Hermès is a Parisian fashion house and luxury brand founded by Thierry Hermès. It was only several years before the brand was founded that Thierry moved to the outskirts of Paris, where he learned how to make leather and produce harnesses. In 1837, Thierry Hermès opened the doors to the house of Hermès, a harness shop along the Grands Boulevards in Paris, France. In his shop, Hermès created harnesses and bridles for private clients, priding his business on its most superior quality. This quality inevitably gave him the opportunity to win first prize at the 1867 World’s Fair in Paris.
However, in 1878, Thierry Hermès passed away, leaving the family business to his grandsons, Émile-Maurice and Adolphe Hermès. By the 1880’s, many things had changed for the brand, including their store locations. The original location that Thierry started in was transitioned to a more expansive location in the 8th Arrondissement, where it still stands today. This was a monumental step for the brand, as it marks the first time that Hermès sold their products to the public in a retail manner. By 1900, a new leaf turned, and Hermès started selling more than just saddlery. The brand introduced the Haute-á-Courroies bag, which we know today as a form of the Birkin bag. This piece opened a new door to retail for the brand, as they created something that tied in Hermès’ brand values of horseback riding, while making it fashionable to consumers. By the 1910’s, Hermès began designing various clothes and handbags, and by the 1920’s and 1930’s, they publicly launched their first handbag line to women. In these two decades, Hermès developed some of their most beloved items, including the Kelly bag and their iconic silk scarves. By the late 1930’s and 1940’s, the brand launched their own jewelry and perfume lines, as well as silk ties for men.
By 1949, their silk scarfs proved to be one of their most popular, selling items. In the 1950’s, Hermès focused heavily on visual merchandising and window selling to attract customers, something that we still see the brand execute today. By the 1960’s, Hermès began to expand their stores globally. Today, they currently have 311 locations worldwide. Over the years, Hermès has partnered with many successful designers, including Martin Margiela, however their leadership of their brand remains in the hands of the family. Hermès has been run by family for nearly six generations, showing just how closely they stick to the original values Thierry instilled from the beginning.
BRAND ANALYSIS
│ISABEL LEONARD
BRAND EQUITY & VISUAL IDENTITY
BRAND EQUITY & VISUAL IDENTITY BRAND ANALYSIS
│ISABEL LEONARD
BRAND ESSENCE
Values Hermès has six brand values consisting of: spirit of conquest, creativity, craftsmanship, quality, authenticity and independence.
Target Audience Hermès' target audience has always been one of wealthy, upper class individuals with a disposable income, heavy fashion influence and high awareness of style trends. This includes elite members of society, celebrities and influential people within the fashion industry.
Personality Understated, feminine, vibrant, timeless, classic, authentic, refined and individualistic.
Tone of Voice French, elegant, chic, sophisticated.
BRAND ANALYSIS
│ISABEL LEONARD
BRAND OVERVIEW Brand Identity Hermès has an iconic, established brand identity. From the highly coveted Birkin bag that comes in an array of colors and prints, to the unmistakable ‘H’ that appears on various belts and accessories, consumers instantly recognize the luxury designer. Superior quality, handmade craftsmanship and the development of timeless pieces bolster Hermès’ valuable brand identity.
Brand Equity
Brand Investment
Although Hermès demands a superior pricing point, they allow opportunistic customers to participate in the brand by offering entry-level items such as silk products, accessories and small leather goods. This invites a new type of customer into their customer base while still maintaining the overall exclusivity of the brand.
Hermès has invested into their brand by expanding their number of global locations and continuing to collaborate with individual craftsmen for specific pieces. The board members, predominantly family, invest into the brand by only taking a limited profit so that they can reinvest back into the company. With this, in response to the global pandemic, the board men collectively decided to forego their raises in 2020 and reduce the 2020 dividend to the same amount paid in 2019.
Execution Hermès communicates to their audience in numerous ways, whether it be through social media, print and mobile advertising, visual merchandising or brand sponsored events across the globe. Recently, they created a virtual pop-up store in promotion of their silk squares, shawls and more. Designed as a virtual house, the website had different rooms that allowed users to browse over 600 models of their unique, signature silks. On the mobile side, Hermès has two apps: Silk Knots, an instructional guide that teaches consumers all of the ways to tie an Hermès scarf, and Parcel Manager, an app that provides insight to customers on their shipments, with options to control how they receive their packages. Social media is used to promote campaigns with various artists and designers, as well as showcase new and existing products. BRAND ANALYSIS
│ISABEL LEONARD
Brand Positioning Hermès is still considered a superior luxury brand, with a wealthy customer base that looks for excellent craftsmanship, manufacturing, brand exclusivity and brand values. The luxury brand has a well-established history, known for producing superior quality products through elite craftsmanship and a combination of elegance, lightheartedness, creativity and eccentricity. A distinguishable trait about the brand is that they focus on slow fashion rather than quickly emerging trends. Elements to describe the brand would include elegance, inaccessibility, durability and premium quality.
Brand Responsibility While Hermès does not comment on the fact that they use animal skin for many of their products, they counteract these actions by stating how they only use materials offered by nature. Their website has a sustainability section that emphasizes their contribution to the environment, including the integration of renewable energy sources into their French manufacturing sites, monitoring their fragrance manufacturers environmental footprint, taking part in biodiversity and global sustainability programs and more. According to the Hermès website, the brand has had an 84% increase in their workforce over the last 10 years, with a total of 15,417 male and female employees. In the last five years, they have hired more than 1,800 craftsmen and women. Along with this, Hermès owns 43 out of its 55 French manufacturers, with 62%, or 9,522, of their employees based in France.
Brand Awareness Hermès has increased their brand awareness by expanding to 240 locations worldwide. Hermès sells one silk scarf every 20 seconds, which attests to their strong global demand as a luxury brand.
Brand Value In 2010, Hermès was valued at 4.8 billion dollars. In 2019, the brand valuation rose to 18 billion dollars.
Value Proposition In terms of value proposition, Hermès clients can expect superior craftsmanship, limited edition production and the exclusivity of owning such valuable items.
BRAND ANALYSIS
│ISABEL LEONARD
MARKETING MIX
MARKETING MIX
FOUR P'S
Product Strategy Hermès has a high-income consumer base that is willing to pay for high quality, luxurious products. In terms of product strategy, Hermès provides a diverse range of products divided into the following categories: leather goods and saddlery, men’s and women’s ready-to-wear and accessories (footwear, belts, gloves, hats, etc.), silks and textiles, fragrances, watches, and others (jewelry, home décor, tableware, sporting accessories). Almost all Hermès products are manufactured in France, with 4,300 craftsmen and women and 61.4% of its employees located in the region. One of Hermès key strategies is ensuring that almost all of their products are created in France, something that reaffirms the generational values instilled by the family when the brand was first created. Ultimately, Hermès and its product strategy are built on six values: spirit of conquest, creativity, craftsmanship, quality, authenticity and independence.
Place Strategy Hermès operates in international markets, including the United States, Japan, France, Europe, and Asia. This is an international strategy to increase customer base and sales. Hermès currently distributes its products to 311 locations globally and via e-commerce, with 78% of the turnover through in-person sales. However, due to the rarity and scarcity of items such as the Birkin and Kelly bag, many consumers turn to vintage or secondhand dealers for authentic bags. Another factor that makes Hermès unique is that they do not distribute their products in department stores like many of their competitors.
Promotion Strategy Hermès marketing campaigns are created to celebrate the “Hermès lifestyle”, rather than to directly sell products to consumers. The brand also incorporates strategic collaborations with various artists and designers to increase product visibility and strengthen the sense of exclusivity. This is often done by releasing limited edition products, which is only a further refined collection for the brand as they are already so exclusive. Also, Hermès rarely engages in mass marketing efforts in hopes of acquiring more sales. This tactic allows them to streamline their efforts to a more specific target audience. To further strengthen their heritage and close ties with the equestrian lifestyle, Hermès sponsors various horse racing events across the globe. For marketing and communication campaigns, Hermès uses various social media platforms, including Facebook, Instagram, Youtube and Twitter, to engage with consumers and promote content. The brand also heavily invests in television, print, mobile and online video and virtual advertising to promote varying seasonal collections throughout the year. Mobile advertising is specifically used to target readers of various publications in which their print ads are carried. Hermès also incorporates extensive visual merchandising practices as a strong selling point of their craftsmanship and creativity, as well as to pay homage to their craftsmen. Lastly, celebrity endorsement is beneficial for the brand as it increases brand value and awareness, along with an increase in brand position within the market.
Price Strategy Hermès falls under premium pricing for a number of reasons. Superior craftsmanship, exotic textiles and a detailed manufacturing process all go into creating their products. All of these factors raise the price point to a higher standard. Along with this, Hermès does not offer any promotional discounts to anyone. All of these components create a sense of exclusivity and luxury, allowing Hermès to stand out from its competitors.
BRAND ANALYSIS
│ISABEL LEONARD
AIDA MODEL Awareness Those interested in fashion and luxury brands, specifically Hermes, fall into the awareness category. Celebrities, influencers and bloggers that own Hermès products may be helpful in raising brand awareness, however this is not necessary to the brand due to their alreadyestablished success. Coincidentally, this could be a potential threat to their brand equity as they want to maintain a tight, high-profile customer base.
Interest The purpose of Hermès campaigns is to appreciate the Hermès lifestyle – one full of luxury, opulence and exclusivity. Their advertisements are not focused on making a sale, but rather instilling the sense that few can afford such a level of lavishness. To wear or own Hermès products sets one apart from others and increases consumers to buy their products that much more.
Desire High-profile celebrities and elitists donned in Hermès inspire consumers to purchase similar products from the brand. If consumers acquire the same pieces, it is almost like they fit in with the elite crowd.
Action Due to the pandemic, people have shifted from purchasing in-store to purchasing via ecommerce. With this, brands like Hermès are forced to follow as to remain intact with COVID-19 guidelines. However, with the shift to e-commerce, this means an expansion of their customer base. With more diverse customers purchasing their items, it almost takes away from the exclusivity and rarity that their primary customer base demands. Hermès is in a unique position where selling more of their product does not necessarily signify the longevity of success. In keeping their products almost unattainable, they find their greatest success. A suggestion might be to continue online opportunities for shoppers, while simultaneously making shoppers aware that this is a limited time experience. Following the pandemic, Hermès should revert back to solely in-person purchases or the rare occasion of ordering privately online.
BCG MATRIX
High Market Growth Percentage
Stars
Question Marks
Fragrance Ready-to-wear -menswear -womenswear
Beauty Skincare Other business lines -home decor, kitchenware, etc.
Cash Cows
Dogs
Saddlery Leather goods -handbags -wallets -luggage Accessories
Brand collaborations -Hermès x Apple Watch
Low Market Growth Percentage High Market Share Percentage
Low Market Share Percentage
Stars: Fragrance and ready-to-wear are the stars of Hermès as they have high market share in a high growth segment. Question Marks: Beauty, skincare and other brand extension lines, including home decor and kitchenware, are Hermès' question marks. Currently, the Hermès fragrance collection accounts for nearly 5% of their annual sales. By newly venturing into the luxury cosmetics industry, Hermès hopes to boost perfume sales through the addition of compatible products. Cash Cows: Saddlery, leather goods and accessories are Hermès' cash cows because these are products that have been well-established through decades of credibility, brand building and exclusivity. Their brand presence has created a dominant market share, therefore they do not have to invest in heavy brand initiatives and costs. This is solely a maintenance brand cost rather than a brand building cost. Dogs: Brand collaborations such as Hermès x Apple Watch fall into the dog sector. This partnership generated little interest to consumers and created a decline in sales within this business unit.
MARKET SEGMENTATION
CONSUMER SEGMENTATION Target Market Hermès' target market is comprised of mostly upper class consumers, with occasional middle class consumers purchasing lower priced items from the brand, including accessories and beauty products.
Pscyhographics People that purchase from Hermès embody fashionable, stylish qualities and seek out designer brands. These people are constantly aware of current fashion trends, dress well and have a high financial status, therefore also seeking out high-profile opportunities with people of similar status.
Demographics Hermès’ current consumers are highprofile, wealthy individuals that typically fall into a category of celebrities, elitists, royal families and more. These individuals are mature men and women 25 years or older, with a high income and financial certainty. However, the target market could potentially shift as the demand for Hermès products has increased over the years with middle class consumers purchasing their products.
Geographics Hermès has over 300 locations worldwide, with each store tactfully placed in areas where high income, wealthy individuals live and frequent on a regular basis. Recently, the global pandemic has presented Hermès with a unique opportunity to segment their markets through online sales. However, while sales may increase, the overall exclusivity of the brand diminishes as their products are more readily accessible to various consumers that do not typically fall into their target market.
COMPETITOR ANALYSIS
COMPETITOR ANALYSIS BRAND ANALYSIS
│ISABEL LEONARD
COMPETITIVE POSITIONING MAP Prestige Price
Mass Market
Exclusivity
Affordability
Hermès falls into the categories of high exclusivity and prestige pricing. The brand's top competitors include Louis Vuitton, Chanel and Dior. These brands are considered top competitors with Hermès as they offer a similar range of products, with consumer bases that seek high quality, high end products from more prestige brands. However, the superior craftsmanship, level of detail that go into each of their products and exclusivity as a brand places Hermès above its' competitors.
│ISABEL LEONARD
BRAND ANALYSIS
SWOT ANALYSIS
SWOT ANALYSIS BRAND ANALYSIS
│ISABEL LEONARD
Strengths High brand valuation High product value Inaccessibility Strong markets in middle-aged, upper class populations Over 170+ years of family history Long standing family business ties
Opportunities New market to expand customer base Store expansions Partner with likeminded luxury brands to introduce new products and tap into new target market
Weaknesses Extensive use of exotic leathers (high demand for leather goods only increases over time) Decrease of in-person sales and increase in online sales, diminishing brand exclusivity
Threats Limited in-person accessibility during pandemic, threatens brand equity by creating more diverse and less exclusive customer base Counterfeit products Uncertain economic environment
PESTEL ANALYSIS
BRAND ANALYSIS
│ISABEL LEONARD
Political Navigating through political factors is crucial to brands like Hermès as it operates at a global level. Therefore, not only must Hermès consider the political environment of the country in which it was founded, but the environment of the other countries it operates in. Currently, Hermès is operating within a stable market that allows opportunity for growth and foreseeable market trends. However, political tensions in these varying countries may affect the success of Hermès by restricting growth opportunities. Other factors to consider include differing government systems, trade restrictions, tax laws and more.
Economic While Hermès did experience a significant fall off of nearly 46% in the second quarter, it has been touted as one of the most resilient brands overall, along with Ferrari. Hermès is already experiencing growth despite how the pandemic is affecting shoppers’ habits across the globe. Their continued focus on excellence and exclusivity serves them well during periods of economic crisis. Additionally, the target audience of prospective purchasers is much less affected by economic difficulties due to their degree of wealth, therefore the volatility of the economy affects Hermès less.
Social The social aspect of luxury brands is, to a great degree, focused on exclusivity. While Hermès is already quite exclusive, they handcraft many of their products which gives a limited- edition perception, making the brand that much more exclusive and valuable to the people interested in the feeling that this exclusivity provides them. While Hermès took a serious hit due to the pandemic, they are recovering well at this point. In fact, having to shut down and transition to more online business has created new customers for Hermès that they were not reaching in person prior to this pandemic. Also, due to the pandemic, production was shut down for a period of time. This has created a waitlist for products that makes them even more exclusive right now. On the other hand, there is a large portion of society that is becoming more focused on experiences rather than material items. More people are spending their extra money on trips, which would mean less money for exclusive products. This is happening as we globally move through the pandemic and possibly is enhanced by people realizing the importance of getting to partake in these excursions after being restricted from it.
Technological Hermès has been almost exclusively in favor of in-person shopping at their 300 plus stores around the globe. However, the pandemic and limited travel opportunities for many caused them to open the option for more online access. Chief Financial Officer Eric du Halgouet told reporters on a call “There’s no cannibalization” between online and physical stores, and that 85% of online transactions are from new clients. Hermès’ strategy is to expand the online offer progressively, except for iconic products like the Birkin bag, Halgouet said. The upside of this is obviously the use of technology to invite more customer access. The downside is that more access equals less exclusivity. If transactions are made online, Hermès cannot guarantee the personal customer service that is part of their brand expectation.
Environmental Hermès and many other luxury brands are under almost constant scrutiny and attack by animal rights groups. Most recently, Hermès is being shamed on their plans to build a large crocodile breeding farm to make access to exotic skins more readily available.
Legal One of the most significant legal issues for Hermès is an ongoing litigation involving ten people, in which seven are former employees, who created a high-level counterfeiting operation utilizing knowledge from their former role as employees to access manufacturing secrets and even suppliers of materials. After eight years, the case went to court in June 2020 and Hermès won, with defendants being fined as their only penalty. While there are always counterfeits to be dealt with in court, this was a large and significantly organized venture.
FINANCIAL OVERVIEW
FINANCIAL OVER
BRAND ANALYSIS
│ISABEL LEONARD
FINANCIAL ANALYSIS
Revenue by Geographical Positioning
Revenue by Sector
The global pandemic negatively affected all geographical areas in 2020, with an even more significant decrease in the second quarter. Total revenues for the first quarter fell by 24% at current exchange rates and 25% at constant exchange rates, seeing a revenue of €2.488 million during these first six months. Total revenues for the second quarter fell by 41%. Silk and textiles saw a significant decrease of 38.5%, as a result of store closings during lockdown. Perfume sales decreased by 29%, despite the launch of Hermès' new beauty line that released in early 2020. Overall, each sector was largely impacted by the pandemic, however Hermès reported that their perfume site remained open to produce hand sanitizer samples and masks. Hermès did not experience any workforce layoffs, and actually increased their workforce total by nearly 300 employees. Most of these employees were placed in the production facilities. During the second quarter, Hermès saw a recurring operating profitability of €535 million, or 21.5% of sales, compared to 34.8% in June 2019. Along with this, Hermès reached a net income of €335 million, or 13.5% of sales.
Reccuring Operating Profitability
In terms of distribution, Hermès saw an increase in online sales growth in Hong Kong, Korea and Macao with the development of a new e-commerce platform. In June 2020, Hermès opened a new flagship store in Sydney, Australia and completed store expansions and renovations in Switzerland, China, Canada, and Taiwan. For Hermès, going public increased the company's financial stability while still enabling a strong family influence. In addition, it adheres to the principle of self-financing, resulting in a 15% profit reinvestment back into the company annually.
BRAND ANALYSIS
│ISABEL LEONARD
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