Hermes, the French company that manufacturers the legendary Berkin and Kelly handbags, actually showed a 3.2% profit in first quarter. The sales increase stands by itself in an economy where consultants project a 20% contraction of sales in luxury lines such as Gucci, Louis Viitton, Armani and others. What is their secret?
Hermes started as a saddle maker back in 1837. Now, they are primarily known for their exclusive leather handbags and wallets although their scarves have enjoyed great popularity. The company’s Chief Executive, Patrick Thomas was quoted in an article in the Wall Street Journal as saying, “We are not fashionable, and we avoid being fashionable.” The two most popular handbags are the Kelly and Berkin. The Kelly was a favorite of Princess Grace and thus got its name. The Berkin was named for French singer, Jane Berkin. It seems that she sat beside the Hermes president Jean-Louis Dumas on a plane trip carrying a Kelly bag. During the ensuing conversation Berkin remarked that she found the Kelly bag difficult to get into. Mr. Dumas asked her to draw her dream bag. Although the story has variations, ultimately Hermes produced the bag and presented it to her along with a $5000 bill! She only owned one of her namesake bags and in 2006, when she announced she was retiring the bag, she was quoted stating, “I love my Berkin bag, but I lug so much stuff around in it I believe it is part of the reason I have tendonitis.”
These handbags are among the most expensive on the market. A Berkin starts at $7000 and can go up to over $100,000, depending on materials and customization. One devoted client stated, “Every time I see another women carrying a Birkin in a color that I want, I get bag envy.” She added, “The more you can’t have something, the more you want it.” Therein may lay the key to the company’s success. Victoria Beckham’ husband, David, presented his wife with a Himalayan diamond studded Birkin for her last birthday, costing 80,000 British pounds. This purse joined her collection of 100+ other Hermes bags (over $2 million dollars worth according to Purseblog.com) of ostrich, crocodile and other exotic leathers.
Faithful customers place orders for bags in unique colors or leathers, creating a waiting list for sometimes years. Custom bags may require waiting for up to three years. Although the styles remain the same, these variations coupled with the quality of workmanship, scream exclusivity – something that Hermes carefully guards. Each bag is hand- stitched, using the same artisan from start to finish. The Paris workroom produces only five handbags a week, which helps, explain the waiting list. The company does not take a deposit and does not penalize the customer if the order is cancelled. They do not reveal what percentage of their present sales is attributed to the back orders from their waiting list.
There is definitely something special about carrying a Hermes bag. Three years ago while we were in Florence, Italy, I bought a Kelly look-a-like bag. To my untrained eye, it looked like an exact replica. Apparently, I was right. We were skiing and had dinner in a popular restaurant in Vail. The hostess, as she was seating us gushed, “I really like your bag.” I just smiled demurely and respond softly, “Thank you.”