Before we get into the Battle Royale between LVMH and Hermes International, I’d like to begin with some background on the legendary company, starting with its origins and going into its operational strategy, looking at how such operational discipline has shaped the company into a direct competitor with LVMH Group as a singular brand.

The Art and Strategy of Hermès Craftsmanship: Standing Tall in the Luxury Market

Founded by Thierry Hermès in 1837 as a harness workshop, Hermès started its journey in Paris catering to European noblemen with high-quality saddles, bridles, and other leather riding gear. The company reached a significant milestone in 1880 when Thierry’s son, Charles-Émile Hermès, relocated the shop to its now-iconic address at 24 Rue Du Faubourg Saint-Honore in Paris, which continues to serve as the company’s global headquarters.

Over the generations, Hermès has continuously evolved and expanded its product range. Between 1880 and 1900, the brand forayed into the retail sector with saddlery and later introduced the “Haut à Courroies” bag in 1900, designed for riders to carry saddles. The 20th century marked significant diversification for Hermès with the introduction of its first leather golf jacket with a zipper for the Prince of Wales in 1918, beginning its entry into accessories and clothing. The 1920s launched the brand’s first leather handbags, and the 1930s brought iconic products like the Sac à dépêches (later known as the “Kelly bag”) and the Hermès carrés (scarves). The first Hermès silk tie and perfume, Eau d’ Hermès, were introduced in 1949.

Hermès’ entry into the US market began in the 1930s, initially through a partnership with Neiman Marcus the introduced Hermès craftsmanship to New York. The 1950s saw the introduction of the brand’s signature duc-carriage-with-horse logo and its distinctive orange boxes. The watch subsidiary, La Montre Hermès, was established in Switzerland in the 1970s. In the 80s, Hermès acquired tableware manufacturers Puiforcat, Saint Louis, and Perigord. The “Birkin bag,” a pinnacle of ultra-premium luxury, was introduced in 1984.

In 1993, Hermès went public on the Paris Bourse, a strategic move shifting its retail strategy. The late 90s saw Hermès reducing franchise stores, either buying them outright or transforming them into company-operated boutiques.

KEY MODERN MILESTONES

Hermès Craftsmanship in the 1970s: Embracing New Materials

During the 1970s, Hermès adapted to the changing fashion landscape by incorporating modern materials like polyester and plastic into its product range. This era marked a significant pivot for the brand, traditionally known for its leather goods, without a decline its commitment to Hermès craftsmanship.

Hermès in the Early Aughts: Landmark Moments, Challenges, and Iconic Moments

In the 2000s, Hermès achieved a historic milestone as annual sales exceeded €1 billion, even as the brand struggled to meet the surging demand for its iconic Birkin bags. This amplified the Birkin’s desirability, creating the notorious 5+ years waiting list. A 2001 episode of “Sex and the City” further elevated Hermès’ cult status.

In 2006, Jean-Louis Dumas stepped down as CEO, marking the first time a non-family executive, Patrick Thomas, led the company. Despite production challenges, Hermès achieved stable growth, even during the global financial crisis of 2008-2009, when it opened its 10th French leather goods workshop. In 2010, the brand faced the aforementioned attempted takeover by Bernard Arnault. I’ll cover this in length in an upcoming article.

2014: A Year of Diverse Innovations in Hermès Craftsmanship

2014 represents Hermès’ adaptability and willingness to explore new horizons. Hermès introduced the Oxer bag, followed by the Nautilus pen to demonstrate the brand’s commitment to expanding its luxury range. A collaboration with Apple for the Apple Watch Hermès collection merged the realms of Apple technology and Hermès craftsmanship luxury.

2015: Expanding Horizons and Digital Innovation

Hermès continued its  innovation trajectory in 2015 with a digital expansion. The launch of the men’s style guide website, Le MANifeste d’Hermès, indicated a strategic move towards e-commerce. This year also saw Hermès focusing on themes of exploration and wanderlust, exemplified by the Wanderland exhibition at London’s Saatchi Gallery.

2016: Sustainability and Technological Advancements

Hermès Innovation Lab, established in Leeds, England in 2016, followed by another in New York, showcased the brand’s focus on sustainable practices and emerging technologies. The “Petit H” initiative marked a foray into luxurious recycling, repurposing leftover materials into unique products.

2021: Exploring Veganism with Sylvania

In a partnership with MycoWorks, Hermès’ craftsmanship pioneered an eco-friendly alternative to traditional leather, known as Sylvania. Crafted from mycelium, it offers strength and durability akin to conventional leather while championing sustainability.

WHAT FUNDAMENTALLY MAKES HERMÈS TRULY LUXURY

Only One for a One and Only

Hermès stands apart as the sole major luxury brand that rejects assembly-line production, insisting on one artisan per bag to oversees the creation of the artisan’s respective bag from inception to completion, excluding the leather cutting stage. While modern tools and machinery assist in bag construction, many of Hermès’ renowned saddle stitches are meticulously handcrafted, employing the same techniques originally used for equestrian work in the 19th century. Each Kelly bag, for instance, demands the dedicated labor of a solitary craftsperson at 15 to 20 hours per bag.

Exquisite Materials, Uncompromising Quality

Hermès owns several French tanneries and has strong partnerships with others. This grants the company complete control over its materials, developing exclusive textures, colors, and finishes, while having access to pristine, hand-picked leathers to ensure there is never any compromise in Hermès’ craftsmanship.

Even within its own tanneries, Hermès craftsmanship demand only the finest skins, selling the remaining lower-quality pieces to other brands. The company uses only full-grain leather, preserving the natural grain without sanding or concealing. In contrast, many brands rely on stamped and coated leathers for mass production, applying wax or plastic finishes to mask imperfections in lower-quality hides. Some even use thinly sliced leathers that are prone to fragility over time.

Recognizing the quality of leather hinges on the quality of the meat consumed by livestock, Hermès’ pays cattle farmers for specific vaccinations against skin diseases and promotes practices fostering healthier animals. Alligator and crocodile skins are sourced from the company’s own farms, a strategic response to concerns about animal welfare at external suppliers.

This rigorous approach to sourcing extends beyond leather.  Even the hardware used in Hermès products is meticulously crafted in French metallurgy shops. The brand’s unwavering commitment to maintaining a high level of quality and supervision throughout its supply chain reinforces its reputation as a paragon of luxury craftsmanship.

Pricing, Once Again, Is A Consequence of Quality

Hermès’ pricing calculations are grounded in input costs and targeted profit margins, relying on longstanding formulas with no adjustments made for tactical or marketing considerations—unlike other brands that gauge customer demand through surveys and benchmark prices against competitors.

For instance, the Hermès Birkin 25, starting at approximately $8,700 in Epsom calfskin, offers a multitude of customization options allowing prices to soar further, with ostrich or lizard skins roughly doubling the cost. A mini Kelly in crocodile currently commands about $29,000, with Hermès once fashioning a limited-edition high-jewelry diamond embedded Kelly bag sculpted from rose gold reportedly sold for a staggering $1.7 million. Hermès entertains no price ceiling for haute-couture style orders, be it custom bags or upholstery for automobiles, aircraft, and even canoes, produced at a dedicated workshop near Paris.

Nevertheless, this deliberate positioning of its bags as a cut above the rest has unintentionally bolstered the brand’s desirability for decades. For luxury consumers accustomed to other brands seeking to elevate their conspicuous consumption, there’s often only one clear choice: Hermès. Although recent price hikes across the luxury sector have somewhat narrowed the gap between Chanel and Hermès, the brand’s flagship styles remain substantially pricier than those of any other megabrand.

Within Hermès’ own pricing framework, the premium positioning of its leather goods is complemented by sales of lower-priced silk scarves and neckties. The pricing discrepancy between the two categories preserves the brand’s core allure. This strategy shields Hermès’ exclusive aura from dilution and maintains its identity.  While many can indulge in a $250 Hermès necktie or a $100 perfume, bags remain a realm reserved for the fortunate few. In this, we reinforce the enduring link between pricing and quality at the heart of Hermès’ unique branding strategy.

KEY TAKEAWAYS ON HERMÈS CRAFTSMANSHIP

1. Historical Evolution: Founded in 1837, Hermès craftsmanship has evolved from a high-quality harness workshop catering to European noblemen to a global luxury icon, continuously diversifying its product range while maintaining its commitment to exceptional quality.
2. Innovative Expansion: Hermès has successfully expanded its product line beyond leather goods to include accessories, clothing, perfumes, and digital innovations while maintaining its core values of Hermès craftsmanship and exclusivity.
3. Artisanal Hermès Craftsmanship: Hermès distinguishes itself through its dedication to artisanal craftsmanship, with each product, especially its bags, being handcrafted from start to finish by a single artisan, ensuring unmatched quality and attention to detail.
4. Material Excellence in Hermès Craftsmanship: The brand’s strict control over its supply chain, including ownership of tanneries and exclusive partnerships, allows it to select only the finest materials, ensuring the superior quality of its products and the legendary Hermès craftsmanship.
5. Sustainable Practices: Hermès’s commitment to sustainability is evident in its product sourcing, including promoting healthier livestock practices and owning farms for exotic skins, to ensure ethical and high-quality material sourcing.
6. Pricing Strategy Behind Hermès Craftsmanship: Hermès’s pricing is a direct reflection of its input costs and the craftsmanship involved, rather than market demand or competition-based pricing, reinforcing the brand’s luxury status.
7. Selective Distribution: By reducing franchise stores and focusing on company-operated stores, Hermès has maintained control over its brand experience, further distinguishing its distribution strategy from competitors like LVMH.
8. Digital and Sustainable Innovation: The brand’s foray into digital platforms and sustainable innovations, such as the partnership with MycoWorks for Sylvania, a vegan leather alternative, highlights Hermès’ craftsmanship, adaptability and forward-thinking approach while staying true to its luxury heritage.