Dynamic Marketing Communiqué

From A Harness Workshop to A Global Fashion Brand: What’s this company’s secret to a worldwide expansion? [Monday Marketing Marvels]

January 11, 2021

A harness workshop.

This was all that this company was known for in 1837.

Its primary intention?

To serve the needs of European noblemen by providing them with saddles, bridles, and other leather riding gears.

Keyword: Leather.

As time passed, the company expanded through generations.

Now, it’s one of the biggest empires in the fashion industry…

Hermès International S.C.A., also known as Hermès of Paris or Hermès, is a French luxury goods manufacturer. It specializes in leather goods, lifestyle accessories, home furnishings, perfumery, jewelries, watches, and ready-to-wear garments.

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As a fashion brand, Hermès lives by a high status symbol, with a combination of rich heritage, exquisite craftsmanship, eye for detail, and high levels of quality and professionalism.

Have you seen a Hermès handbag?

Just by looking at it, you know it exudes luxury and elegance.

Even its silk ties and scarves have an average cost of USD 180!

Have you ever been curious about how Hermès maintains its social status?

Here are some of its marketing strategies that enable it to stay as one of the top brands in the fashion industry:

  1. A revolutionary guide for men’s styling needs.

    Fashion is not only for women, it’s for men too!

    In 2015, Hermès created a website that assisted men with their fashion needs.

    The website was called…

    Le Manifeste d’Hermès!

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    Through it, male consumers enjoyed interactive games, pictures of runways, and browsing through the brand’s products.

    For example, to view products that mix and match, website visitors were directed to a simple game of matching pairs of tiles.

    Once they’re done playing the game, they could finally view the featured products!

  2. Showcasing its iconic products through “mystical” exhibitions.

    Get ready to immerse yourself in an alternate universe!

    During its All About Women event in 2014, Hermès turned its J.P. Morgan office into a carnival.

    Imagine how fancy that was, with guests photographed riding on carousels and playing horse racing games!

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    Martha Stewart. Photo taken on May 20, 2014 at the J.P. Morgan Headquarters for Hermès’ “All About Women” event.

    Aside from that, the event featured a choreographed dance presentation to showcase Hermès’ bags, as well as a “swimming” performance to feature the brand’s scarves and bathing suits.

    Can you imagine what swimming looks like without water?

    Here’s how Hermès did it:

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    While wearing Hermès’ bathing suits, models performed several arm and body gestures that look like they are actually swimming. Coupled with flowing water in the background, they really looked like they’re in a pool.

    There was more in store for those who attended!

    Guests also enjoyed champagne and other drinks at the event’s “Bangle Bar”―a bar shaped like two giant enamel Hermès bangles.

    Even bartenders served drinks while their arms were filled with the colorful bangles!

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  3. Thematic advertising campaigns.

    Spring⟶Summer⟶Autumn⟶Winter

    Just like the seasons, Hermès follows a single theme throughout the year.

    For instance, the brand’s theme in 2016 was, “Nature at Full Gallop.” As the name suggested, the products launched under that theme were inspired by nature.

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    The campaign was accompanied by visually rich images that featured fashion icons like Laetitia Catzeflis and Tim Schaap wearing Hermès products.

    One advantage of these thematic advertising campaigns?

    They allow Hermès to establish a consistent creative direction every year.

  4. Apps that provide information on product collections.

    Hermès also knows how to maximize its resources in the digital world.

    In 2014, it launched its Silk Knots app that contained guides on how to tie Hermès scarves in 24 unique ways.

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    Yes, there’s a lot you can do with the scarves!

    Aside from that, Hermès created another app called Tie Break for its male consumers. The app contained GIFs, comics, trivia, and interactive games that are related to the brand’s neckties.

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    By developing apps to promote its products, Hermès increased brand awareness and boosted consumer interest towards its branding.

  5. Pop-up stores for women’s silk collections.

    On one autumn day in Manhattan’s Meatpacking District in 2018, pedestrians walking down 14th Street got curious by a glowing red light from a gallery space.

    As they walked inside the gallery, they were welcomed by a smiling concierge.

    Where were they?

    In a Hermès Carré Club!

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    ―a makeshift pop-up store dedicated to one of the brand’s high-volume products: Silk scarves

    Inside the Carré Club, visitors went to different stations where some of Hermès’ artists were sketching out new designs on the spot.

    In another station, one artist painted portraits rendered in the signature Hermès orange. There were also two other artists who swirled their designs onto their hand-made, wrought-iron “drawing machine.”

    There was also a “Carré-ok” Booth (karaoke booth) where people can sing songs of their choice.

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    There was also a café that served free coffee and staged jazzy concerts for every night the pop-up store was open!

    Should you want to buy something from the club, there was a capsule collection of scarves that you could choose and buy from.

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    The goal of this open-to-the-public, four-day pop-up store was to help position Hermès not as a stiff, snobby, or exclusive brand, but rather a playful, engaging, and inclusive one.

    Here’s what Hermès said about the purpose of its pop-up store:

    “Conjuring a halo of perceived exclusivity over a wide range of products, while balancing an image rooted in both high luxury status symbols and a young-at-heart whimsy.”

All these efforts lead to two of Hermès’ top business goals: To engage with its customers and appeal to its target market as well as showcase the efforts of the artisans responsible for the design of its products.

In the past five years, Hermès International S.C.A. has recorded revenues of:

  • EUR 4.8 billion in 2015
  • EUR 5.2 billion in 2016
  • EUR 5.5 billion in 2017
  • EUR 6.0 billion in 2018
  • EUR 6.9 billion in 2019

Clearly, Hermès’ unique and fashionable marketing strategies enabled it to maintain its good reputation in the fashion industry, while also showing its humanist values to consumers.

Hermès International S.C.A.’s Earning Power: Valens Research vs. As-reported numbers

Hermès International S.C.A. (RMS:FRA) makes for a great case study that we come back to regularly. One great reason?

The company has proven itself to be a better earning power generator than investors might think.

So, how well has Hermès been growing its business in the past years?

The research doesn’t lie—nor do the results. Earning power (the blue bars) continues to show results higher on average than what traditional databases show.

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The blue bars in the chart above represent Hermès’ earning power (Uniform Return On Assets). Hermès has seen generally improving profitability. Its Uniform ROA ranged from 22% to 55% in the past sixteen years, or an average of 39%. Uniform ROA is at 28% in 2019.

The global ROA is just 6%.

The orange bars are the company’s as-reported financial information. If you relied on these numbers, you will see a company with understated profitability. As-reported ROA (return on assets, a measure of earning power) only ranged from 12% to 21% in the past sixteen years. Its ROA in 2019 was only at 16%, lower than its Uniform ROA in 2019.

That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.

The company’s stock price also performed better than the rest of the stock market over the decade, which we can see in the blue line in the chart below. Its returns have been well above the market.

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The numbers show that Hermès has been doing well and making a profit.

Quality and refinement are two principles that fuel the brand’s business operations.

It is for these principles that Hermès decided that every product it produces should reflect an artisan’s hard work.

Even until today, the brand’s Creative Director, Pierre-Alexis Dumas, makes it a point to always sign off on every Hermès product, showing the company’s unwavering commitment to the highest quality.

Though the brand enjoys an iconic status in the world of luxury, its professionalism and quality enables customers to reconnect with Hermès’ “humanity,” or the presence of the people who crafted the product.

Throughout its 184-year history, Hermès assures consumers of one thing: That it will remain faithful to its “artisanal model and humanist values,” while developing its international distribution network of 311 stores in 45 countries.

About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”

Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy.

…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.

The true ROI in marketing can’t be separated from the business as a whole.

What good is a marketing case study if one can’t prove that the company’s efforts actually paid off?

At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success.

Every Monday, we publish a case study that highlights the world’s greatest marketing strategies.

However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place (compliments of Valens Research’s finance group).

By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.

We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.

Hope you found this week’s marketing marvel interesting and helpful.

Stay tuned for next week’s Monday Marketing Marvels!

Cheers,

Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
Powered by Valens Research
www.valens-research.com