Have You Heard of The Hermès Game?
Good ol’ lesson in supply and demand or masters of exclusivity strategy? Whatever your take, here’s how Hermès became French for ‘luxury’.
Jane Birkin in Cannes, 1974 with her iconic straw basket
Created in the 80s for French actress Jane Birkin who carried her things in a literal basket (still iconic), the Hermès Birkin Bag has endured as one of the most coveted accessories in the fashion world.
The bag is an easily recognisable timeless classic often displayed front and centre of any outfit.
Getting one is no easy feat. You can’t simply traipse into a Hermès store and pluck one off the shelf.
No no no. Don’t be ridiculous.
You need to play the game.
The “Hermès game” is a fascinating strategy and if you haven’t heard of it, strap in. This will make your eyes water.
The game revolves around the brand’s most prized pieces - the “quota bags”, specifically the Birkin, Kelly, and Constance. These bags are the height of luxury and exclusivity, thanks to to their relative scarcity and high price point.
The Kelly and Birkin bags, in particular, are so sought after that fans of the brand will spend months, sometimes even years, endearing themselves to a sales associate for the mere chance to purchase one. This process involves a lot of patience, relationship building, and of course, money.
One Reddit user laments in r/TheHermèsGame that despite their ‘pre-spend’ of $15k* on a variety of items (trays, scarves, shoes, dishware), they are yet to secure a quota bag. (Eyes watering yet?) He was informed that some items don’t even contribute towards pre-spend. Oh, and online purchases don’t count either. Ouch.
Another mentions that for the chance to buy a Kelly Sellier at their home store, pre-spend is a whopping $75k*.
This game isn’t for the cash strapped, with many echoing that spending a couple hundred here and there over a long period of time won’t score you a QB. You need to drop thousands, often.
(*Side note, I assume these are US prices but I can’t be sure. Making these numbers even scarier.)
The Kelly Sellier in question… (Image from SACLAB)
So, why does the game work and what makes people want to play?
This unique strategy of creating an artificial scarcity has allowed Hermès to not only keep their products' desirability high but also to weather economic downturns better than many other luxury brands. For instance, during the start of the COVID-19 pandemic, while other luxury companies saw a hit in sales in China due to restrictions that curtailed movement and spending, Hermès' sales remained steady. Similarly, in the aftermath of the global financial crisis in 2009, while sales at listed luxury companies declined by an average of 4%, Hermès revenues grew by the same amount.
Hermès are masters of three strategies that directly influence behaviour; luxury positioning, Veblen good pricing and tight supply and distribution control.
Strategy 1: Luxury Positioning
Hermès' luxury positioning strategy primarily revolves around its reputation as a bastion of ultra-luxury, craftsmanship, and quality, buoyed by its rich heritage and story. Over its 180-year + history, Hermès has consistently adhered to its firm brand values, which have fostered a strong emotional connection with its customers.
You can safely assume that if the Hermès logo was written in Comic Sans the brand wouldn’t attract the audience it does. Created in the 50s, their iconic horse and carriage logo, and bold orange boxes quickly became distinctive brand assets. The brands adherence to their visual and verbal identity play a significant role in maintaining their market position. An excellent demonstration of why logos and branding that are in line with your values are so important.
The brand has artfully maintained its equestrian essence through its designs and sponsorship of equestrian events, thereby furthering its connection with the affluent audience who are often associated with horse sports.
Interestingly, the brand refrains from leveraging celebrity endorsements as a brand-building tactic. Instead, the fact that only A-list celebrities and the ultra-wealthy can afford and gain access to their most premium and exclusive products acts as an authentic endorsement of the brand, enhancing its allure and exclusivity.
Strategy 2: Veblen Good Pricing
This powerful concept deserves a whole article on its own! Veblen goods are a fascinating marketing and economic phenomenon defying the laws of supply and demand. Essentially, Veblen goods see a raise in demand as their price increases.
In his 1899 work, "The Theory of the Leisure Class," economist Thorstein Veblen suggested that the affluent often engage in 'conspicuous consumption', displaying expensive items as a status symbol to show they can purchase what most people can't.
Elite schools, luxury cars, yachts, high end housing and of course, Hermès famed bags are just that- status symbols and markers of social identity that express a certain message about the consumer to the world.
Strategy 3: Supply Modulation
The brand’s meticulous control of their retail distribution allows them to manage product flows and pricing, with almost no distribution done through wholesalers. This means that they avoid the pitfall of having excess product dumped on the market at a discount during tougher times. Additionally, they maintain the aspirational nature of their bags, by only having them available to and seen on the ultra rich.
Former Hermès CEO Patrick Thomas, put it perfectly, “The luxury industry is built on a paradox: the more desirable the brand becomes, the more it sells but the more it sells, the less desirable it becomes”.
Abundance is the enemy of luxury. Exclusivity and scarcity are vital to Hermès’ perceived value and consequent success.
Tight regulation of supply chains is a time tested strategy, most notably leveraged by the Di Biers diamond company who used a combination of expert brand marketing and supply constriction to corale the market.
The Hermès Game and brand itself is a result of masterful strategy, exceptional branding, consistency and supply chain control. Even if your price point isn’t as high, the Hermès strategy offers invaluable lessons for small business owners.
Brand, brand, brand! Maintaining a strong brand identity, both visually and in terms of values, is crucial in establishing a loyal customer base and differentiating yourself from the competition. It isn’t just a logo and some colours. It’s about the world around your brand. To build this you need a defined strategy that factors in your visual and verbal identity. People don’t buy colour palettes and logos. They buy values, resonant stories, social capital. Investing in a brand strategy to correctly position your brand will see more return on investment that giving your money to Zuckerberg each month for paid advertising with varied results.
The importance of exclusivity and scarcity in enhancing a brand's perceived value cannot be understated. Whilst you don’t need to make people spend $20k, you can emulate this through building hype across your platforms for product launches, emphasising one-time discounts, highlighting limited spots left for your service or even having a simple ‘one size left’ note on your product listing.
The concept of 'Veblen Good Pricing' teaches us that sometimes, raising prices can elevate your brand's status and attract a higher-end market. Its easier said than done. Much of the time when I have pricing discussions with my clients, they are reticent to increase them. As a start, I suggest applying the 13% rule (thanks to James Martin). Whatever your price is, chances are that people will still purchase your good or service for 13% more. $100 product becomes $113. It adds up.
