Nourished by tradition, even today can one buy a piece of heritage Hermès flourished from, crafting saddles has been a timeless art, from its founding in 1837 to the very present. On the 11th of March, The LSE French Society hosted Mr Axel Dumas, the CEO of Hermès, the talk being chaired by Professor of Management, Prof. Ricardo Alonso.
Dedication & Determination
Mr Dumas emphasized how much strategy and dedication it has taken to preserve the brand, amidst post-war France in 1918, “there were no more horses, just cars instead”. This led to the loss of clients that used to once purchase saddles, however from Bugatti to silk scarves, Hermes made strides into diverse areas to stay afloat. “You can survive when you lose all your clients”, mentioned the CEO. This rigour has also been well-preserved in the family, after all, there were questions, “should Hermes go international? Should Hermes go Digital?”. Yes was the answer to both questions.
VUCA — Volatile, Uncertain, Complex, Ambiguous. This is how the CEO describes the contemporary world. Hermès is a family business with a profound history, it is ‘a great legacy, not a testimony’, it was vital to nurture creativity, ‘to keep value but adapt’ so upon assuming his role, he set himself the following targets:
- Building ‘Vertical Integration’ — Controlling about 70% of its supply chain attests how important quality is to the brand, in both aspects the craftsmanship as well as raw material such as silk, leather and cashmere.
- Developing Growth Drivers- Giving metiers their independence to grow and respond to consumer tastes naturally, sometimes silk represented a higher share of production, sometimes leather, the inertia was largely untouched. It crucial to not rely on one product, one pillar and to sustain a sense of resilience.
- Balance Between Regions — Valuing the faithfulness such as investing in Japanese stores as that was one of the countries that Hermés took to when it decided to open internationally.
- Seizing Digital Opportunities- 2001 was the year of being amongst the first ones in the world to establish an e-commerce store, the reach has expanded with the following on social media too, “Omnicanal” was the key idea Dumas advocated. This also yielded interesting observations, one could sell anything digitally, such as a 5-metres long couch and also new clientele in large countries like Australia and Canada were not from sparse areas, rather within a close distance of a Hermes store.
Now, the luxury market has undergone intense polarisation such that the distribution of market share is either small or large, not in-between as such. This implies that companies with the largest capital dominate in investment, after all, he said, “The bigger one gets the bigger answers.” Within 10 years Hermes tripled in its size, something that was unmatched to the 170 years prior. The leader embodies himself as a “guardian of freedom”, in the sense that he ensures the creators manifest their ideas into actual creations freely without any constraints from anyone. This was not always successful, there were failures too but it was vital to embrace them in order to progress.
The CEO narrated how once the Head of Jewellery, some of the finest, Mr Pierre was fascinated with the idea of space travel after finding business travel so cumbersome. Inspired by the Sputnik, he designed jewellery based on the project and that a grand failure, laughingly Dumas exclaimed, “didn’t sell single jewellery on Sputnik”
Values & Virtues
“Products are made better in the country which shares the heritage”, it is about the culture, France has designated itself leather and silk, Switzerland with watches and Vietnam with lacquer. ‘Traceability is important’, 80% of production is in France, it is a motivation to revitalise regions of France which often suffer from high unemployment.
A key priceless factor is a respect for the craftsman, after cutting the leather, it takes 16 hours for one artisan to produce one bag. In fact, there is a maximum of 200–300 people in any Hermes workshop to ensure the right atmosphere, after all, it is not a factory with an assembly line, this is a place where creativity is realised. A shared anecdote is during the collaboration with Apple Inc. in 2015, Apple initially rejected all the stock sent by Hermes by its Quality Control team because each looked different by their stitching, well, this is to be expected when a human stitches…The CEO believes collaborating with other brands, it is a sort of ‘dilution, a clutch of own failure’ because you have to associate with someone else.
This does hand-in-hand with financial independence that Hermés preserved, stemming from the time ‘when every unit sale counted’, the very first few years of the renowned ‘Birken Bag’ had flat sales, when demand picked up, it drastically exceeded supply and store managers used “Waiting lists” as a necessity. This “Waiting list” entailed in the widespread perception of exclusivity, not wishing to alter or segment the production process to remain true to the roots, the family was adamant on sustaining craftsmanship and leaving that untouched. The consequence was it mounted in excess demand, strategically this in itself cushions downturns and crises whereby demand may drop. Even finding talent has not been a strictly uniform process, two of their best designers were approached in a nightclub.
The uniqueness pervades down to each store of Hermes, each store is vastly different. How it works is that 800 people (managers) from 45 different nationalities are invited annually to France to buy whatever they wish to comprise their collection of Hermes with. The customers then go to those unique shoes and purchase of the collection that was composed by the managers.
There is Hermes Horizon, which presents the opportunity to design bespoke products: “Sometimes the client designs, sometimes it is too ugly and we have to say no, sometimes clients do better, no royalties later {In the latter case}” Simultaneously, it is not about market data and analysing the consumer, they look at designing a “Hermes” rather than a product, it is about diversity, after all, someone who designed a tie has also designed a watch. ‘Bespoke is not enough on itself, it requires strategy too’, after all the decline of Saville Row, London attests to the idea. During a downturn, despite gold prices hitting highs, the designs were unchanged and the same amount of gold was used in their bags, so that 8 years later, ‘there could be a great patina’. To close with the CEO: “The product must be better than the storytelling, not vice-versa, it is about things that last, keeping to a few but timeless.”
