Europe price increase next week? 1st of August

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#31
Monceau said:
Yes, but H raised their prices in the U.S. and other parts of the world at the start of 2015, so the price of a 35 Birkin Togo is $11,900 USD, which equates to €10,725.00 at current exchange rates.
This is the price before tax, which adds another 5-9%, making it the equivalent of over €11,000 euros to purchase a 35B in the U.S., so the U.S. Is paying far more for H leather goods than the eurozone.

The problem is that H and others expected US buyers to pick up the slack for declining sales in Europe, and a declining euro overall. They planned to do this by raising prices in the U.S., however, many people here are either not buying or catching a plane to France, so US boutiques are experiencing a decline in sales.


Another issue is the continuing decline of the Euro, which is forecast to reach parity with the USD this year. If that were to happen, the cost of a B35 in the U.S. would be close to double the price of purchasing in Europe. With international sales, they have to have a better balance in their pricing structure.

Depending on the amount of the increase in Europe, they may lower prices a bit in the U.S. at a later date. I would predict a 8-10% price increase in Europe, and perhaps a 5% decrease in the U.S. later, but this is just speculation on my part.
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perlerare said:
Thanks for this.

I agree they need a better balance in their price structure, but in my opinion they should LOWER their prices abroad, and NOT increase in Europe.
Especially because their pricing are based on European costs, so their margins are already secured and comfy.

They just need to be less greedy abroad, IMHO;)
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I guess I would ask our forum community members who have bought a bag at the higher USD price how they would feel if that bag was now worth 5-15% less than they just paid for it? I personally don't consider bags to be an investment but I know many people buy counting on the bags at least holding their cost as value.

I understand many member would understandably be excited to buy a bag at a decreased cost as exhibited by the silk frenzy that just took hold but how much of an impact would it have on the brand value? Just quoting you both as I think it's an interesting conversation.
 
#32
I don't think Hermes would lower prices in the US on leather....it'll be interesting to watch though. I'm surprised they did such an aggressive increase in the beginning of this year here.

Each of the major luxury houses has a target % of their revenue that they seek to come from Europe, Asia, N. America, in line with their expansion plans and also it's just good business not to be overly exposed to one geographical area. Look at what's going on with some of the watch companies now which were too heavily exposed to China.

There's a very relevant article in the WSJ today about the weak euro masking problems at LVMH and Kering...there's a mention on how Hermes had 21% sales growth, but after the effects of the low euro were taken into account, growth was actually only 9%. A company should be growing sales because of good product, marketing, broader customer base, strategic expansion...not due to forex fluctuations which are unpredictable and not within a company's control. If Hermes did increase prices in Europe again it'd be in an effort to combat that and bring sales growth figures more in line with their long term targets.

http://www.wsj.com/articles/low-euro-masks-lingering-woes-at-lvmh-kering-1437942805
 
#33
I think the increase of prices in Europe is inevitable. Many big houses such as LV, Chanel and even VCA do that. Pre-increase will create a lot of hype for people to buy up everything (even non-sought after bags) and customers will still continue to purchase after they "get used" to the higher sticker price, its a win-win situation for them! As much as we would like to think H is a craft, its a business organization afterall....
 
#35
perlerare said:
Actually they love to sell volumes in France and Europe as it costs much less in logistics, VAT management and other fees and duties etc... Its also easier to adjust products allocation, inventory turn over, and its also much valuable for the company to grow and control their customers data base locally.
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The problem is that Hermes has spent the last decade building brand palaces from Shanghai to Chicago, all of which need to shift a mountain of product to justify their massive overhead. If people skip their local stores in favor of buying abroad, H is stuck not only with a network of unprofitable boutiques but fewer visits visits per client, and thus fewer opportunities to sell more challenging categories like home and RTW.

Monceau said:
So true. They could have avoided all of this had they not increased prices in the U.S. In January.
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Exactly. Thanks to the weak euro, Hermes was already enjoying an effective 15-20% increase in revenue from dollar-denominated regions but still pushed ahead with a fat increase. Whether out of greed or pure habit, it wasn't the right call.
 
#36
perlerare said:
I am not sure why they should raise their prices in Europe instead of lower their prices elsewhere ???
I live in a country where a Birkin35 retails for the equivalent of 8275 euros including a one digit VAT rate, while the same bag retails for 7400 euros in Europe including at least 20% VAT.

So ?
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OOPS, I forgot to mention that H lowered all prices by 10% in my country, 1st of june 2015.

So yes, it is possible to lower prices without hurting brand value. And still they are selling at roughly at 20% more in this country than in Eu !
 
#37
ValleyO said:
The problem is that Hermes has spent the last decade building brand palaces from Shanghai to Chicago, all of which need to shift a mountain of product to justify their massive overhead. If people skip their local stores in favor of buying abroad, H is stuck not only with a network of unprofitable boutiques but fewer visits visits per client, and thus fewer opportunities to sell more challenging categories like home and RTW
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That's the big mistake they did. They finally realise that people WANT to buy the product in the original country... when possible. and since people who spend at Hermes price range are the same people who travel the world.... bingo...they buy H in Paris ! not in Shanghai.

Those are challenging because they don't put enough effort in design and product positioning inside the brand and outside the brand.

I might sound a bit acid, but I have been an Hermes loyal customer for more than 2 decades, and I've seen this fabulous maison falling into the luxury mass market just like all others. I am not happy with what they did, and I am watching how they will get out of this trap.

I understand its about business, but I have the feeling there must be a vision. Those days, its a lack of vision that we are watching.
 
#38
I've heard this rumour from a VIP in Europe however haven't had a confirmation from my SA and to be honest I'm afraid to ask her directly as I've been lucky with getting my HG bag from her just a few weeks ago... August is just around the corner so I guess we will know soon anyway. Strange though that no one here has heard this from their SA's in Europe.
 
#45
What they need to do is stop being so stingy with their B/Ks in the US. Stop expecting ppl to drop $10K on other things before offering them a B/K. It makes buying in the US that much less appealing. Prices in Europe are much lower and, although there's no guarantee that they will offer you a B/K, ppl are more than willing to try (it's Paris, after all!). If only it were at least easier to obtain a B/K in the US, that would at least offset the price disparity. More expensive, but easier to get, KWIM? Seriously, weren't there talks about plans to make B/Ks more readily available in the US to make up for the price difference, what happened?!!
 
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