In recent years, the French luxury brand Hermes has shown no signs of slowing down, continuously expanding its product range and capturing consumers' attention with innovative offeringsFrom venturing into cosmetics to ramping up its watch production capabilities, Hermes stands as a testament to how a luxury brand can evolve while maintaining its core identityAs we observe these strategic moves, the question arises: Can Hermes's brand expansion succeed? And what lessons can be learned by other brands from its approach?

Founded nearly 200 years ago, Hermes has become synonymous with luxury, and its remarkable ability to navigate economic fluctuations has earned it a reputation as a “money-printing machine.” But what is the story behind its success?

The origins of Hermes can be traced back to Emile Hermes, who, bereaved by the loss of his parents during the Napoleonic Wars, began working at a harness shop at a young age

By the age of 37, Emile had honed his craftsmanship and opened his first harness store, quickly establishing himself as one of the premier suppliers of horse equipment in ParisHis ability to handle large orders, including contracts for the Napoleonic army, laid the groundwork for the iconic horse-and-carriage motif found in the Hermes logo.

In its early years, Hermes primarily catered to wealthy, equestrian male aristocratsThe meticulous craftsmanship demanded for saddle-making was far superior to later demands for handbagsHowever, as the 19th century progressed and the Industrial Revolution reshaped society, the market for horse-drawn carriages wanedThe rise of the railway system created an increased demand for travel luggage and accessoriesRecognizing this shift, the third generation of the family, Emile-Maurice Hermes, seized the opportunity and began producing wallets and travel leather goods – the early prototypes of what we now recognize as Hermes handbags.

The technical skills acquired through years of saddle-making provided a solid foundation for this transformation

Furthermore, Hermes capitalized on the burgeoning popularity of zipper technologyZippers, invented by an American and improved by a Swede, found widespread acceptance in France after military applications during World War IHermes's early investment in acquiring exclusive rights for zippers in France allowed the brand to not only cement its position as a military supplier but also secure significant contracts for military uniforms during the war.

As automobiles became more prevalent, the demand for high-end equestrian gear declinedIn response, Emile-Maurice displayed notable commercial foresight by entering the luxury women's market in 1922. The war had led many women to join the workforce, resulting in economic independence and increased purchasing powerEmile-Maurice launched a line of small handbags catering to the needs of these women, effectively opening a new market.

In 1937, to celebrate the brand's 100th anniversary, Emile-Maurice introduced another iconic product: the silk scarf

The enduring popularity of the Hermes silk scarf can be attributed to its unique creative processThe brand employs numerous artists from various cultural backgrounds, funding their global travels for inspirationEach year, Hermes sets a thematic concept, and designers create artwork reflecting this theme, which often focuses on folklore, tradition, and nature.

To ensure accuracy in color representation, Hermes has meticulously developed over 75,000 shades, and the process of creating a scarf is incredibly intricate, taking a minimum of two years from design to finished productThis intensive approach exemplifies the perfect synergy of content and craftsmanship, further fortifying Hermes’s place in luxury history.

The brand cemented its status in the luxury goods market with the introduction of the Kelly bag and the Birkin bagFollowing the passing of Emile-Maurice, his son-in-law, Robert Dumas, became the head of Hermes

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Dumas had previously worked on scarf designs and was responsible for reimagining the Kelly bag.

Initially, the Kelly bag didn’t gain immense popularity until a 1956 issue of Life magazine featured Princess Grace of Monaco, effectively elevating the bag to iconic statusIt was during this moment that the world began to recognize Hermes as a leader in luxury fashionTrue to form, Hermes has steadfastly refused to employ celebrity endorsers, relying solely on the allure of its productsThis strategy has resulted in a remarkable 30% net profit margin, significantly higher than the 17% margin of its competitor, LVMH, largely due to lower marketing expenses.

Hermes promotes its products as hand-crafted art rather than simply luxury goods, emphasizing their artisanal qualities while avoiding the modern urban milieu in its advertisements, focusing instead on nature, outdoor elements, and fantasy.

In 1981, Jean-Louis Dumas, the fifth-generation head of Hermes, designed the prototype of the Birkin bag inspired by a conversation with the actress Jane Birkin during a flight

Initially, the Birkin bag did not achieve instant fame; however, its appearance in the popular television series "Sex and the City" propelled its value in the secondary marketIn 2020, a Hermes Birkin Himalaya handbag was sold at auction in Hong Kong for an astonishing 3 million HKD.

To maintain the brand's exclusivity and elevated value, Hermes has developed a unique allocation system where customers wishing to purchase popular bags like the Birkin and Kelly often have to buy other products firstThe ratio required can be as much as 1:2.5, meaning buyers may need to acquire multiple pieces, from thousands of yuan items to luxury items costing hundreds of thousands, before qualifying for their desired bag.

While many luxury items lack investment value, Hermes's Birkin and Kelly bags retain their worthHowever, differences in leather quality and bag styles can lead to significant valuation discrepancies

Hermes is acutely aware of this and collaborates with auction houses to enhance the status of its items as collectables, fortifying its image in consumers’ minds.

When venturing into new product categories, Hermes exercises extreme caution, typically introducing only one or two substantial categories per generational shiftThis strategy ensures that each new line aligns with the brand's ethos and heritage.

The longevity of Hermes throughout six generations can be largely attributed to its family succession modelFrom the ages of 6 to 14, potential successors undertake an evaluation and nurturing process designed to spark their interest in design and artistry while also providing a firsthand look at the company’s operations through visits to subsidiaries and suppliersThis upbringing fosters a sense of responsibility for the family business, as members are educated on the collective nature of Hermes.

The sixth-generation heir, Axel Dumas, began working on the shop floor at 14 and entered the public relations department at 18. After graduating from university, he spent eight years working at BNP Paribas, including two years in Beijing, gaining valuable insight into the Chinese market