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A FAMILY COMPANY History and timeline of diversification and Brand spirit building
Founded in 1837, Herms, was a company of harness and saddler, today his principal activity is in piece of luggage and leather goods.
Context
1878 1902
Diversification
first bag (model precursor of the Kelly) Haut Courroies High international clients: Kings of Romania, of Spain, Emperors of Japan, Russia, Presidents of France, Perou, Philippines, names in finance, in Industry, in politic. pieces of luggage and leather goods because anticipate the development of car industry development in USA and Canada
Location
24 rue du Fbg-Saint-Honor conquer international markets: Germany, Belgium, Poland, Russia (Nicolas II) purshasse of the leither in USA and CAnada Take over the big English saddlers installed in Paris Metamorphose of the familial firm in a store with a wide corner window Close new York store Some years leater new stores: Cannes, Deauville and Biarritz.
1837 After 5 generations Thierry Herms comes to Paris to offer his family expertise of saddlery makers.
Charles-mile Herms Hermes frre 70 80 ouvriers cosmopolite prestige First war Emile Maurice went to USA beginning of the automobile industry
1880 24 faubourg St Honor: Opening the first famous POS. Ssupplier of the European Royal Families
191418
1918 The start of the spirit: Emile Hermes, Mr Vif Argent opens new horizon : the world in mouvment
191926 192938
Economy slump
193945
For new way of life: inedited accessories for travel, sport, car Exclusivity on design innovation=>first patent and first introduction in France the sliding faster: Hermes exclusivity Diversification an rebound on crisis: cult pieces until now, the Kelly and others : sac de dpches economies of means : the cult leather agenda make with scrap. Way of life luggage design for : Elegance on liner travel ; Trend of yachting ; Car comfort Renew of use of precious and historical material: The cult Carr Herms made of the silk used for the jockeys blouse A humour spirit within difficult period: inspire square name Le Retour la terre, la gloire de la cuisine franaise. Ingenuity face to shortage of colouring and rarity of silk: rediscover linen, wool, raffia the leather stay orange, color adopted on boxes associate with the bolduc. + logo duc attel . Follows the evolution of the way of life : women close for bicycle : divided skirt, shoulder strap bag. Diversification: The Herms Tie An attractive place for celebrity : Grace Kelly, le Duc et la Duchesse de Windsor, Ingrid Bergman, Jacky Kennedy
beginning of link with art private collection, inspirate designers Cult pieces
1950 Diversification of products: Robert Dumas and Jean-Ren Gurand (genders of Emile)
195060
Shops window attract the celebrity were meting with Set in scene
1978 a world-wide distribution network conducted by Jean-Louis Dumas (5th and 6th generation of Herms Family) 1993 Introduction on the Stock Market: but still 73% ownership by Herms Family.
2003
Crisis
Plan investments: distribution and production capacity of the leather+ Innovation logistic
2006 Patrick Thomas New CEO continuity of the strategy with a re introduction of design and creativity
The structure of the company allows the family to keep the perfect control of the brand, in privileging its positioning on the long-term, even they have to forecast a slow down in the short-term Clmence Bounaix,
Richelieu Finance.
The advantage is the long-term vision support by the 6 members working at a decision level on 40 family shareholder members.
Competitors?
The competitors? Its not a topic. Hermes is not positioned regarding the others because we broach the product creation, in each know-how, with our own meaning and with our history. Pascale Mussard
(art director in 2006)
Groups: LVMH: Vuitton, Givenchy, Kenzo, Lacroix, Celine ou Gucci Gucci Group: Gucci, Yves Saint Laurent, Stella Mac Cartney, Alexander Groupe Prada : Prada, Helmut Lang, Jil Sander, Miu Miu Mono-brand company: Hermes Chanel, Versace, Armani
Extension in Asia
In Tokyo, 94% of women in there twenties own Louis Vuitton bags. Hong Kong hosts more Gucci and Herms stores than New York or Paris. Chinas luxury market is set to become the worlds largest within just six years.
Market positioning
Turn over 2006
The leader, LVMH
Domestic market
International market
Domestic market
LVMH a high distance leader Change risk gets higher Activity fall down
as markets mature, they will become more discriminating and people will want more true luxury rather than pseudo luxury Michael Burke, chief executive of
Fendi
To continue to thrive in maturing new markets, luxury brands will need to offer deeper luxury, with social and environmental excellence built in. A new tend of the definition of success is becoming. Successful people want to show that they care about environmental and social issues. Asian luxury gurus Radha Chadha and Paul Husband
describe how tastes are maturing towards interest in luxury lifestyles.
faster is not a luxury, Being able to go a lot slower is the luxury. futurist Charles
Leadbeater.
only the brands that show deeper meanings and foster simplicity in creativity will thrive need a concrete and morally right background story to endorse a brand industry consultant Uche Okonkwo. In a period of financial crisis, revive for all things an instinctive desire of authenticity whom bring back at its just value an amusing showy stuff Paul
Iribe in Dfense du luxe 1932.
We used this quotation to show how the value survive with time and so how what the sustainable trend ask for deep and authentic value is a normal variation of time write in the genetic of Hermes
2007
31/12/2007
2007
30/06/2007
2006
31/12/2006
2006
30/06/2006
2005
31/12/2005
6 Months Revenue -Total Revenue Cost of Gross Profit Operating 318.6 585.4 237.9 243.4 79.3 Net Income 164.1 (2.9) Equity In (1.3)
6 Months 721.1 -721.1 252.0 469.1 185.8 192.6 64.5 128.1 (2.9) 2.9
6 Months 814.4
6 Months 700.5 --
6 Months 778.3 -778.3 271.9 506.4 212.3 210.1 73.2 136.9 (2.3) 3.3
814.4
700.5 244.4
Net Income
2007 Silk & Textile Leather goods & saddlery Clothes & accessories Others Distribution: Hermes Shops Perfumes Watches Tableware Distribution: specialized shops Others
TOTAL
2008
Growth
Growth on constant
192,7 675,0 315,2 85,6 113,9 104,7 50,7 274,3 82,3 1.625,1
173,5 663,7 293,7 77,1 100,7 110,1 44,5 255,3 51,6 1.514,9
16,1 % 7,7 % 13,1 % 16,2 % 10,8 % 19,8 % 0,7 % 17,0 % 11,1 % 61,5 % 12,5 %
Box for focus comments
(4,9 %)
13,9 % 7,5 % 59,5 % 7,3 %
Market Growth
Q S
Growth
eOthers a s r D C T
a
Our strategy will be a strategy of value, not a strategy of volume, we are not in the mass luxury. We want to avoid the banality, in maintaining the financial growth. We preferred extend the territories of the brand, in table wear, in watches for a most of possible diversified offer and make the client surprised with.
Patrick Thomas, CEO Herms International juin 1988
o a
s h Market Share
40.000 new ref. by year (most in leather goods) ; Kelly bag: 1.800 ref.
Others is hiring a galaxy of stars born with the product innovation, diversification and customization
This dynamic is boosted by the strategy who have reintroduce the marriage of creation and design with the tradition. And its support by a constant production investment allow high variety, constant product innovation and diversification until customization like special punctual order is star in the portfolio.
THE 4 Ps PRICE
- Vertical integration from conception, manufacturing and distribution - Production cost: cost is not the reference point : Mastering the cost of raw material (acquisition of suppliers) - Selling price: uniformity of price in the various geographical zones - Price = Value - Operating margin: 25 %
PRODUCT
- Core business: based on saddlery makers extended to the theme of Transportation & Travel (leather: 42% of the turn-over, cloth & accessories: 19 %, silk: 12 %...) - Expert of noble material = possibility to create and enlarge the product portfolio = less dependant on 1 category of product demand. - SBA: silk, leather, art of living. - long life product cycle
PROMOTION
- Low volume of product advertising communication - Higher effort of Corporate Communication through rich content events and Herms Foundation. - Launch of Corporate e-commerce web-site in 2007
PLACE
- Distribution network: 78 % of turnover generated through Hermes fully owned shops (79% for non private circuit for competitors). - 267 exclusive shops: - 41% in Euro-zone, 24% in Japan and 15 % in the U.S for main markets
COMMUNICATION AND PRODUCT Communication: singularity and focus on product and renew without touching the fundamentals
We are not in fashion, but in a house, where we cultivate the respect for the client, the sharing and the sensibility Philippe Chanet 2007 Focus on product, singularity in being worldly understandable, same message of making the people discover a singular universe and never imitate any one, same creative axe to tell simple stories, poetical, to give the desire of entering in the Hermes universe, always use the brand codes, play with them. Philippe Chanet 2007
Communication budget doubled in 4 years to 105 millions Euros, will rich 6 % of the turnover in 2009 with an objective to 7 % (Starbucks who focus on the product and services quality have a 1% budget)
Marketing specificity
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The marketing didnt really exist in Hermes: Be born art craft man, its know to stay to the service of his client Emile Hermes Opposite to LVMH or to PPR, who stake a lot on the marketing, Herms aim at only the excellence of the product. Their production cost doesnt matter Bernard Malek, du cabinet de conseil en stratgie Roland Berger.
Operation design
For the 60 years of the 2CV in the world salon of cars 2008:, the mythical car of the common people, the symbol of the democratisation was made by Herms a custom interior design on one unique model of 1969.
En chine sur le territoire des muses d'art avec ses foulards Une
exposition d'art permet de montrer les valeurs de notre marque mieux qu'une
10
11
- a supplementatry service in the processus of the client purshases ; a stong care to the usability of the site and to the logistic, a special attention to the packaging and delivery (3 h in Paris), a custom offer (initials on leather agenda). - complementarity offline /online - local product line
Innovation :
Develop the activities under represented in the portfolio of the group
As part of its strategy of welcome in the group Masters of know-how of exception to consolidate its expertise or secure supplying, perpetuation subcontractor, control the quality on vertical: Acquisition of emblematic brands, artistic know how, innovative technique or small long-term suppliers, raw material suppliers
Invest mainly in the reinforcement of its distribution network and its production capacity 2008 : Investment 150 millions en 2008, 70 millions in network of direct distribution (focus is in China) and the other main part for capacity of leather goods production
- Optimize the preparation of the ordered: multiply by 3 the storage capacity, reorganize flux - Manage the quality: reorganizing the logistic process 2003 Accelerate investments: +57,5 % and + 11 % of supplementary production capacity 2003 New logistic and quality control platform Infolog in Paris area to serve the entire world and prepare his international development 2003 extension of leather workplace 2003 building 2 leather workplaces (300 hiring in total) 2003 hiring/formation in leather within 2/3 years: 200 people 2003 acquisition of tanner 2003 interests reinforced in leather companies
This acquisition will enable to meet robust demand for leathers goods products, particularly in crocodile skin. And will rich 73 millions d'euros turnover on this erea 2007 Acquisition of Soficuir International in witch Tanneries des Cuirs dIndochine et de Madagascar , already held a 49.6% supply and tanning precious leathers, primarily crocodile skin. 2007 fusion tanning of exotic leathers Soficuir and Gordon-Choisy (alwrady subsidiary) 2008 owner 45% of fashion designer Jean-Paul Gaultier (35% since 2003)
2007 Discharge of gas effect divided by 20 favour by the Soficuir know-how Our ambition is never more transport the raw skin of alligator Francis Chauveau, directeur gnral in charge of the industrial issues Herms. Tan in original place (USA) they weigh 10 times less , are less bulky and dont need to be cool, then they transportation are less polluting.
Threat of substitution low propensity to substitute Know-how --- core competencies Distinctive image of Hermes brand
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how luxury market face to the decrease in Japan : combination monetary crisis, economic crisis
Until 2006 Hermes had a growth of 15 % with the strong decrease of the Yen in 2006 the turnover as growth only of 2% and at that time 27% of the turnover of Hermes has done in Japan. Hermes model allows them to resist with a growth of 5 %, during that the most other brands are decreasing. In Japan the specificity is to have middle clients compare to USA where they are wealthier. And the population will decrease. All the luxury try a strategy of delocalizing investment to China and reinforce the direct retrail (Hermes to Ginza, Gucci to Tokyo and Vuitton to Nagoya) Again with a differentiating strategy Hermes is trying a series of actions and thing that this could be made them consider this market like a laboratory.
Opportunities of improving social and environmental performance as part of deepening their luxury offering
over consumption is no longer a signal of success and that it is being replaced by conspicuous abstention. WWF-UKs Sustainable Business and Markets team
1. Operational efficiency gains. 2. Enhanced employee relations, making for easier recruitment, more motivated and loyal staff, better customer service, enhanced learning and innovation, and higher productivity. 3. More welcoming and accommodating local communities. 4. Enhanced brand reputation and trust. 5. Connections with voluntary associations and networks that generate new market intelligence and enable access to new markets. 6. A more secure and sustained supply of raw materials, provided by more motivated suppliers. 7. Improved relations with the financial sector, including responsible investors and lenders.
Emphasis by consumers on ethics is an enduring trendMore sustainable luxury to be pursued by luxury brands as part of their core commercial strategy R. Michman and E. Mazze.
This eco-awareness sweeping the urban middle classes across Asia, Africa, Latin America and eastern with significant implications for business. Even they are concerned by immediate preoccupations such as the need to escape from poverty and ill health. The luxury industry is calling to bring to life a new definition of luxury, with deeper values expressed through social and environmental excellence. Their performance and progress on environmental, social and governance issues should be comprehensively measured and reported.
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Environmental responsibility confers social status on individuals, celebrity endorsements of green, long tradition of ecological awareness from its religious beliefs such as Taoism and Buddhism, fortune building on the success of his solar power company In China: 76% of the more ostentatious nouveau riche segment said they would pay more to buy natural healthy foods
operation: to enhance the status of its conceptual, artistically and art craft know-how. A fuse style technology in landmark design. Partnership 5 millions
was bought by an Emirats Arabes Unis company: Falcon Aviation Services With the crisis the car industry is not in good wealth but Hermes can follow: -a strategy of niche with the very high level (ex: Bugatti) -a strategy of deployment (slow: like Hermes know to do) of entering in the Middele Est ( helocoptere) - a strategy of sustainability in working on the new trend of sustainable small electric car for the city (a sustainable smart could be perfect)
The luxury brands could rich multi-billion dollars in turnover on the mobile market and his accessories (clutch) in the logic of the consumption luxury as social distinction. (in 2008 Vuitton has launch a range of clutch and screen for iphone, Ralph Lauren launch software for it, Tag Heuer create completely a mobile Karl Lagerfeld conceived an iPod case once for Fendi, and an handcrafted custom trunk from Louis Vuitton (contained 20 iPods, one charger (what just one?), JBL iPod speakers and a subwoofer), to make from four to six months and run upwards of $10,000.
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Even we can find leither clutch hermes for iphone, Hermes is not involved in this erea. A strong reason could be the lake of perfectly high quality (even Iphone are not), but for a certain part it enter perfectly in the tradition of voyage or mobility could be the word. But behind this there is the future development of the Internet of object, where there is more place for the quality control because its not an wearing of a technology but the technology inside the object.
STRENGHTS
-Strong name value -Very strong internal cultural company -Large portfolio of products (less vulnerable to the demand of a certain type of products) -Products are not seasonable -Well balanced distribution on a worldwide basis -Control and quality of the distribution circuit (156 owned shops out of 300) -Suppliers: Long-term relationship and protection of some critical know how. Some include some participation of Herms Group to secure this (ex: Vaucher Manufacture Fleurie, watches -Supply Chain: Iso 9001 and new implementation of processes in 2007.
WEAKNESSES
Replenishment of raw material High exposure to Japanese and American Market Change rate sensivity
OPPORTUNITIES
Distribution network Promotion possibilities New market: helicopter and design. Not fully present on Asian market Internet
THREATS
Luxury market tougher and tougher Holding of luxury group
SWOT Analysis
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A long-term strategy, based on the mastery of the knowhow and the control of the distributors network (applied despite the recession) Annual
report
Boost the creativity in keeping the positioning of a prestige luxury Strategy based on value and not on volume CEO Patrick
Thomas
IV - Communication
Extend visibility of the brand and know-how (only 3 % of the budget in 2004)
V Sustainable market
Use transversality of Hermes core business to enter RESEARCH and PRODUCTION in new key environment business area (housing, textile,) extend Hermes Design Laureate on an intl basis and especially on emerging markets.
SOURCES :
http://www.strategies.fr/blogs-opinions/idees-tribunes/r49204W/5-l-orange-d-hermes.html http://archives.lesechos.fr/archives/2003/LesEchos/18919-44-ECH.htm http://www.lavf.com/conseil-bourse/Hermes_International_Une_double_strategie_pour_une_valeur_a_surveiller-RMS-0000040373.html Stratgie Herms http://www.att-fr.info/tracenews/Strategie-Hermes.html?var_recherche=conqu%Eate HERMES INTERNATIONAL http://www.ernstrade.com/srd/HERMES.html Herms intgre les partenaires de la Fondation de la Haute Horlogerie - Actualits - News - Fondation de la Haute Horlogerie http://journal.hautehorlogerie.org/fr/medias/actualites/hermes-integre-partenaires-fondation-haute-horlogerie.html Boutiques Worldwide: Herms Ginza (Japon) http://209.85.229.132/search?q=cache:5e2HnaNLBzMJ:luxecie.typepad.fr/photos/boutiques_worldwide/100_0849.html+hermes+japon&hl=fr&ct=clnk&cd =4&gl=fr&client=firefox-a Herms confiant pour 2008 malgr le Japon http://209.85.229.132/search?q=cache:pG1v0s1Jj1UJ:www.aujourdhuilejapon.com/actualites-japon-hermes-confiant-pour--malgre-le-japon3037.asp%3F1%3D1+hermes+japon+2009&hl=fr&ct=clnk&cd=1&gl=fr&client=firefox-a Herms poursuit ses investissements dans son ple industriel textile Archives http://archives.lesechos.fr/archives/2005/LesEchos/19322-103-ECH.htm Proverbio : du carr Herms aux implants chirurgicaux http://www.apce.com/cid67900/proverbioducarrehermesauximplantschirurgicaux.html Textiles : le tissu file vers l'avenir (Montredon - Hermes) http://www.ladepeche.fr/article/2008/06/28/461818-Textiles-le-tissu-file-vers-l-avenir.html Herms lance la H Box, cinma "nomade", bientt au Japon http://209.85.229.132/search?q=cache:HQglJmfMbEUJ:www.aujourdhuilejapon.com/actualites-japon-hermes-lance-la-h-box-cinema-nomade-bientot-aujapon-2384.asp%3F1%3D1+hermes+japon+2009&hl=fr&ct=clnk&cd=2&gl=fr&client=firefox-a WORLDTEMPUS.COM: La Manufacture Vaucher: Un partenariat favorable aux deux parties http://www.worldtempus.com/marques/marques-partenaires/hermes/la-manufacture-vaucher-un-partenariat-favorable-aux-deux-parties/ Les soyeux Perrin se portent bien Archives http://209.85.229.132/search?q=cache:dCwmeDqe8f0J:archives.lesechos.fr/archives/2007/SerieLimitee/52-9SLI.htm+soyeux+perrin+hermes&hl=fr&ct=clnk&cd=1&gl=fr&client=firefox-a Perrin & Fils: la plus belle soie du monde Perrin & Fils: la plus belle soie du monde http://209.85.229.132/search?q=cache:YqwjJxrx-NsJ:espacedocumentaire.cg38.fr/uploads/Document/09/WEB_CHEMIN_34357_1201615212.pdf+soyeux+perrin+hermes&hl=fr&ct=clnk&cd=2&gl=fr&client=firefox-a Luxe : Herms pourrait racheter Jean-Paul Gaultier http://www.actualite-francaise.com/depeches/hermes-rachat-jean-paul-gaultier,1501.html Herms International : un rachat de la maison Jean-Paul Gaultier n'est pas l'ordre du jour http://fr.biz.yahoo.com/07112008/17/hermes-international-un-rachat-de-la-maison-jean-paul-gaultier.html Hermes International : Une double stratgie pour une valeur surveiller (Finance Actualits) http://fr.newspeg.com/Hermes-International--Une-double-strat%C3%A9gie-pour-une-valeur-%C3%A0-surveiller-9656784.html Nouvelles rumeurs de vente d'Herms http://www.challenges.fr/20071004.CHA1512/nouvelles_rumeurs_de_vente_dhermes.html Herms sur l'olympe malgr les turbulences http://www.fashionunited.fr/News/Columns/Herm%E8s_sur_l%27olympe_malgr%E9_les_turbulences_200902106276/ Herms voit une baisse des marges en 2009 - Luxe - E24.fr
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