Thursday, November 12, 2015

Hermès Sales Lifted by Japan, Western Europe

Hermès Sales Lifted by Japan, Western Europe

Updated Nov. 12, 2015 5:31 a.m. ET

Article Reviewed by Alanna Murray

The following WSJ article initially sparked my interest with the mention of the highly popular French brand, Hermes. The Luxury manufacturer has lasted nearly 2 centuries and specializes in leather, luxury goods, lifestyle accessories and ready-wear. The article featuring the brand depicts several international marketing concepts and foreign environmental factors, and their influence on the Asian and European consumer market.

The French luxury firm revealed that their sales have continued to rise, due mainly to the increase of Chinese tourist shoppers and their high demand for its pricey leather bags. “ Hermes has been long regarded as the pinnacle of the luxury sector for both its stratospheric prices for its coveted hand bags and its strong revenue growth that defied economic slowdowns and changing consumer tastes,” Jason Chow. Fortunately, Hermes has been able to take advantage of favorable exchange rates and a weak euro. Unlike many others in the luxury industry, such as Gucci or Prada, that continue to struggle with Chinese consumers that opt to shop in Europe and Japan, Hermes was able to benefit with the lack of high import duties. “ Similar to other French luxury groups, Hermes was also boosted by a weak euro, which means overseas sales translated to even more when converted back to its home currency,” Jason Chow. This reflects lessons learned in Chapter 2, with the monetary barriers. According to our text book, differential exchange rates encourage the importation of goods the government deems desirable and discourages importation of goods the government does not want by adjusting the exchange rate. The exchange rate for the importations of the desired luxury goods becomes favorable, and helps the Hermes brand tremendously.

However, China is experiencing an ongoing crackdown on corruption and gift-giving which hindered the demand in the market. This primarily affected Hermes’ watch division, which forced innovation and a new marketing perspective for those products.  Therefore the luxury brand launched a new watch in collaboration with Apple. “It’s an opportunity to bring a new clientele into our markets,” said Chief Financial Officer Eric du Halgouët.

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