Nope, I don't agree that increase in sales of leather goods can necessarily be attributed to aspirational buyers. I think the only things we know is that they increased production and sold through more bags. Who is buying them is not broken out. How many members here reveal bag after bag after bag - and they are not clients new to Hermes.
Any information on 2015 price increase?
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Nope, I don't agree that increase in sales of leather goods can necessarily be attributed to aspirational buyers. I think the only things we know is that they increased production and sold through more bags. Who is buying them is not broken out. How many members here reveal bag after bag after bag - and they are not clients new to Hermes.
+1. MrsOwen3. You read my mind. I thought that the double digit growth in the past 5 years were fueled by a growing Asian market (esp. in China) as well as from an aspiring middle to upper middle segment of working ladies that have moved to the orange side due to H quality. We stomached the initial price shock of moving to Orange, enjoyed the products but increasingly feel discontent with the ridiculous price increase, a fall in their quality (thinner box leather and let alone the skunk issues last year) along with inconsistencies of customer service.
I know H will continue to pick up new customers along the way. I've seen that in my local store and feeling that the service that I'm getting is going down hill as my SA values new customers more than old ones. Although Chanel continues to see their sales growth with their recent price increase, their average price for their bags is nowhere near H. You can get a Chanel wallet for $1-1.5K but the cheapest H wallet for ladies is the Dogon that will probably surpass $2K after the price increase. If the aspiring customers stay with the brand, they will end up cutting their purchases to offset the price increase so in the end, it may just be a wash.
Enough said.
Isn't one of the reasons the U.S. is priced higher than europe bc of duties/tax the company must pay to import these goodies from France? I would find it hard to believe that H isn't paying tax to import merchandise, and naturally all taxes get passed on to consumers in some form/fashion.
Excellent post !! :true::true:
I recall back in the 80s and 90s that I only see print ads from the luxury brands. Now they are sponsoring red carpet events and slapping them on movie stars and celebrities to create an appetite for the aspiring shopper.
That is part of it but any company if you look around have done internal adjustments to avoid the large gaps between continents to close the arbitrage opportunity. And in the US, one has to consider the additional cost when sales tax is involved. It is a double whammy.
Oh agree, companies should be adjusting their pricing strategy to account for costs of doing business internationally, but if the company is doing well in a any given market, they probably won't.
H probably won't (sadly) since they are still successful in selling merchandise in the US. People will still buy - repeats and new clients. Until they see a decline in sales in US stores, I'm guessing they won't adjust the pricing gap.
I have nothing more to add (we don't have a blanket price increase in £ here due to already high prices compared to €
but I love the informed debate here! Very interesting read! Keep them coming ladies!
but I love the informed debate here! Very interesting read! Keep them coming ladies!
Adding to what I said yesterday. When I informed my DH that the price increase looked like it would be 10% this year he said "That's all?"
I guess my speculation about it seemed more frantic than it was worth. 10% to us is a good chunk of change, but buying a K or B is a luxury purchase, not a necessity, and once we are over a certain $ point...it's already a bit ridiculous (not in a bad way, but in a purely practical sense). As I said above, I suspect that there will be another increase (maybe less substantial?) in 2016, and it will take us that long to plan for this purchase responsibly, so we are going to need to allow for that. I am not sure how H views taking our money for a bag. Are we the aspirational buyers? We are new to buying at H, but have been having a great time doing so, we've been treated respectfully and view the items we have purchased as pieces of art, and in some ways investments and heirlooms. Do we plan to buy more than one B or K? Potentially. Will the price increase cause us to delay adding more than one bag? Potentially.
I don't see going to Paris with the intention of buying our first bag, if we are there and it happens, great! We have a truly delightful SA here and would prefer to buy through her and also to have the options that are not always available to a walk-in (with no purchase history in the EU) at FSH.
This is my 2 cents as someone who is not in the upper 1% of income in the US, but more of a lower-upper or upper-middle
. I can see how most of the view points above are valid. I don't like the price increase, but I can see how H is possibly trying to balance out the falling Euro by raising US prices. I think it comes down to do you want to sell 20 bags at a lower point or 10 bags at a higher point? H doesn't need to worry, they will still sell those 10 bags (10,000 bags, whatever). It will be interesting to see how this all plays out...
Chkpbeliever - I felt like you were talking about me in the bold statements above! To be completely honest, I've started looking at Delvaux and Valextra at my Barney's and starting to research other brands. I'm even retracing my steps with Chanel and Gucci too. I must say my latest repair experience with Gucci was top notch. Really made me want to buy more from the brand.
Mrs.Owen - Good on you for doing the research. I do agree that the brand growth is mainly driven by sales of bags. Now we just need to get to the bottom of who is buying these bags? I confess, I bought 4 in the last year or so. But I'm not sure how I would categorize myself?
Monceau - you and I are on the same page. I really enjoy reading your viewpoint and posts on this topic.
Yep and unfortunately this is now how most of the companies are operating. And I would go even further to say the whole financial market / credit market melt down in 2007 - 2008 were due to companies purely greedily chasing growth. I remember during the time, one of the major companies in my industry made a couple of billion £ in net profit. But they were not in the headlines because of it, they were in the headlines because their growth has decreased! And the whole article was basically saying the company was doing very poor! SMH!
I do believe one major reason that H increases their prices like this is simply because they can! And I bet people will still buy their products. Will this aversely impact their revenue? only time would tell.
I have to agree with MrsOwen3, again.
There may be some differences of opinion over the definition of the aspirational consumer, but there is no doubt that the "average" luxury accessory consumer has changed over the past two decades.
We are talking about growth. While not the only driver, a significant driver of growth for Hermes and others in the Luxury accessories and luxury auto categories has been the aspirational consumer.
The HNW consumer is clearly important, but the "average" consumer has changed. Twenty years ago, the only consumer in the luxury market, by and large, was the HNW consumer.
But today, the average buyer of a 10k Birkin is not also purchasing a 100k pair of 18th century side chairs...
What percent of H customers today will spend as much on a lamp as a birkin? I bet not many.
Not many will even spend that on a chair, or even a painting.
The average H consumer will spend more for a bag than a chair or a painting - this makes artists and antiques dealers very sad.
All one has to do is look at other sectors that are geared toward HNW individuals, like antiques, art,, etc.
while the investor grade art market has risen exponentially, the mid-level market has seen only modest growth. Same goes for Antique furniture, fine rugs, high end fabrics, lighting and finishes for the home, high end door hinges, etc. Who is purchasing these things, and why aren't these sectors growing at the rate of Luxury accessories and automobiles?
These sectors are still driven by the HNW consumer, with very little involvement from aspirational consumers, but these sectors are not keeping pace with the luxury accessories and luxury auto sectors. That extra growth in luxury accessories is coming from aspirational buyers.
Clearly, tastes have changed, and not all HNW consumers are focused on quality across the board, so there are plenty of HNW consumers with luxury cars and handbags, and relatively lower quality furniture, but changing tastes alone do not explain the growth in the luxury accessories and auto sectors over growth in other HNW focused sectors.
Many studies have been done on this. The future HNW consumer, by and large, is today's aspirational consumer. Everyone has to start somewhere, and luxury goods like handbags and cars are a great starting point. One does not have to have a masters degree in leather or an engineer's background to know that brands like Hermes and Mercedes produce quality products. However one DOES need a significant education to ascertain the merits of an American Impressionist painting, appreciate the nuances of a Cabriole leg, or reflect on the quality of abrash in a Serapi rug. One either needs considerable knowledge, or a consultant with knowledge, to be a consumer in these categories.
Usually, the latter: HNW consumers pay others to know which Chippendale chair to purchase.
And the consultant who helps the HNW individual find the right chair? Well, she's the girl with the Master's in Art History and a concentration in 18c furniture, who will save her funds for a Kelly.
And she is an aspirational buyer who just might become a HNW consumer in the future.
Bottom line, Hermes, Chanel, and the others, do not want to return to a time before the advent of the aspirational consumer. They have expanded stores and ramped up production beyond a level that could be supported by HNW consumers alone.
There may be some differences of opinion over the definition of the aspirational consumer, but there is no doubt that the "average" luxury accessory consumer has changed over the past two decades.
We are talking about growth. While not the only driver, a significant driver of growth for Hermes and others in the Luxury accessories and luxury auto categories has been the aspirational consumer.
The HNW consumer is clearly important, but the "average" consumer has changed. Twenty years ago, the only consumer in the luxury market, by and large, was the HNW consumer.
But today, the average buyer of a 10k Birkin is not also purchasing a 100k pair of 18th century side chairs...
What percent of H customers today will spend as much on a lamp as a birkin? I bet not many.
Not many will even spend that on a chair, or even a painting.
The average H consumer will spend more for a bag than a chair or a painting - this makes artists and antiques dealers very sad.
All one has to do is look at other sectors that are geared toward HNW individuals, like antiques, art,, etc.
while the investor grade art market has risen exponentially, the mid-level market has seen only modest growth. Same goes for Antique furniture, fine rugs, high end fabrics, lighting and finishes for the home, high end door hinges, etc. Who is purchasing these things, and why aren't these sectors growing at the rate of Luxury accessories and automobiles?
These sectors are still driven by the HNW consumer, with very little involvement from aspirational consumers, but these sectors are not keeping pace with the luxury accessories and luxury auto sectors. That extra growth in luxury accessories is coming from aspirational buyers.
Clearly, tastes have changed, and not all HNW consumers are focused on quality across the board, so there are plenty of HNW consumers with luxury cars and handbags, and relatively lower quality furniture, but changing tastes alone do not explain the growth in the luxury accessories and auto sectors over growth in other HNW focused sectors.
Many studies have been done on this. The future HNW consumer, by and large, is today's aspirational consumer. Everyone has to start somewhere, and luxury goods like handbags and cars are a great starting point. One does not have to have a masters degree in leather or an engineer's background to know that brands like Hermes and Mercedes produce quality products. However one DOES need a significant education to ascertain the merits of an American Impressionist painting, appreciate the nuances of a Cabriole leg, or reflect on the quality of abrash in a Serapi rug. One either needs considerable knowledge, or a consultant with knowledge, to be a consumer in these categories.
Usually, the latter: HNW consumers pay others to know which Chippendale chair to purchase.
And the consultant who helps the HNW individual find the right chair? Well, she's the girl with the Master's in Art History and a concentration in 18c furniture, who will save her funds for a Kelly.
And she is an aspirational buyer who just might become a HNW consumer in the future.
Bottom line, Hermes, Chanel, and the others, do not want to return to a time before the advent of the aspirational consumer. They have expanded stores and ramped up production beyond a level that could be supported by HNW consumers alone.
Brilliant.
This.
I am fully aware that all of the high end luxury brands have price increases every year. I think what bothers me so much with this year's increase is how much of a discrepancy in prices there is between different parts of the world. A difference in price due to a state or country's tax is one thing; this is different. I'm not angry about it. But I am disappointed and a little saddened.
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