Is there a future for Hermès in Asia?

Our visit to Hermès was one of the most excited and long-expected…company that represents luxury and excellence, care for details and transformation of noble materials has opened its doors to MSc in Business Development on 4th day of the trip to Singapore. Pierre Verdière, Managing Director of Hermès in South-East Asia and our presenter, has also been the president of the French Chamber of Commerce in Singapore for the last 6 years and has lived in Singapore for 15 years.Despite the fact that the meeting was short in time, the content and the amount of useful information went beyond all our expectations.

 In the past few years Hermès has registered a very strong growth: 13% in 2009, 11% in 2010, and 10% in 2011. Plus, they have had a cumulative annual growth rate (CAGR) of about 23% between 2007 and 2013, which is a real performance.

What is important to know about Hermès is that it is still a family owned business, despite many attempts from other companies to acquire the company (LVMH is among them). 73% of the shares are owned by the family, LVMH owns 22% of the company and 5% is on the Paris Stock Exchange.

Hermès is a luxury products company that used to sell saddlery in the past but has moved to selling every luxury product as such today (bags, shirts, perfumes, leather goods, etc.). The luxury products are sold within the stores of the brand, most of which are managed by the company itself. There are no franchises or concessionaires (except in China). Plus, the company usually tries to be extremely well located in the cities where it implements its stores. For stability reasons and for better control of costs on the long term, the company has purchased most of the buildings it holds its stores in. Hermès has been selling dreams for the last 177 years: it was created in 1837.

Anywhere you go in the world, you will always find the same product and the same quality. Also, one very peculiar particularity about Hermès is that they do “product Push”, not “product Pull”: that means that they are not doing any studies or market research to see what customers are looking for, what product would fit their need perfectly; Hermès just creates the product according to its feeling and push it to the market, or more the markets.

In Singapore, 70% of the customers are local; they are not just tourists that pass through Singapore. According to Pierre Verdière, Indonesia is expected to have the highest growth by 2020, among the ASEAN countries. Maybe is it the new place to be for Hermès then? Whatever the answer to this question, he said that it is a pleasure to operate in Singapore because the country is one with the lowest corruption rate in the world. Also, there are more millionaires in Asia than in Europe, which makes the place a high growth market with great potential.  Plus, more and more Chinese people are traveling and spending money on luxury goods (95 million trips made by Chinese people in 2013). The worldwide luxury market is worth €800 billion and the global market for personal luxury goods represents € 217 billion, which many luxury retailers are trying to get a share of.

Today Hermès is quite confident that it will be successful in the future by surfing on the Asian waves.

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