Hermés, a world-famous French luxury brand, has generated really good profits in the marketplace, despite a minor downturn in the global luxury goods market. The brand is known for its exclusivity, which is always a good strategy for luxury brands because luxury buyers like to buy creations, which are rare.
When a luxury brand is wanted, this generates a dilemma with business leaders; they want to sell more but there is a danger that the brand might become too popular. Dedicated luxury buyers rarely want to buy products, which are too popular.
When a brand and its creations are rare, buyers will feel special when they own such creations. It is actually very easy to boost sales of a luxury brand when there is a huge desire in the marketplace. But this can damage the brand image by becoming too popular - its creations will face inflation in the aftermarket.
However, it has been speculated that Hermés might drift away from its core strategy, hence, to protect its scarcity, and it might move closer to Louis Vuitton's strategy, which seeks to gain larger popularity and noise amongst buyers. Louis Vuitton is very active in seeking new markets, and it uses celebrities as its endorses. In contrast, it is hard to get Hermés' creations and it does not use celebrities as endorsers.
Still, Louis Vuitton has not lost its appeal as a luxury brand but most dedicated luxury buyers see Hermés as a more valuable label because it is rare. However, it is quite easy for Hermés to boost sales because the brand is rare. There are actually two dangers; the label might become too popular and sales growth might be a quick fix in order to drive short-term growth.
A luxury brand must think in long-term. However, we have seen that Louis Vuitton has succeeded with this strategy but scarcity has been one of the cornerstones of Hermés', and loosing this might disappoint its current customers. If the French brand decides to move away from its current position. My recommendation is, only small steps, just to see how it goes.
Published in Luxury Sales Academy.