Eastern Promises
By Trends • Jun 1st, 2010Luxury markets in America and Europe are showing signs of recovery now, but the long-term trend could be down. In the Middle East and Asia, they’re thriving.
Some years ago, as I drifted into unconsciousness on an operating table, my doctor leaned in close, breathing heavily through his green surgical mask. He wanted to know: Where had I bought my red crocodile Birkin Bag? In a weakened state, I whispered the name of my Hermes salesman – a secret I normally guard as carefully as my birth date.
Awakening in the recovery room, I thought I’d imagined the fuzzy exchange. Surely such snooping violated the Hippocratic oath, or possibly the Geneva Convention? Imagine my surprise a few weeks later when my salesman bounded across the floor to hug me for introducing an enthusiastic new client!
Such was the ardor with which the well heeled during the boom years pursued treasures from the fabled House of Hermes – and still do. The third largest global luxury goods producer reported a revenue gain of 8.5 percent in 2009 in spite of an almost unprecedented slide in industry sales. That makes Hermes nearly unique amongst high-end vendors, most of which got clobbered by the worldwide recession.
Sales of luxury apparel, accessories and jewelry are only now beginning to recover from the worst falls ever experienced by the sector. In America, which in 2008 consumed about one-third of highend goods, sales plummeted an unprecedented 16 percent. Europe, accounting for 38 percent of sales, saw a drop of 8 percent, and Japan (12 percent of sales) saw demand slide 10 percent. Overall, according to consultants Bain & Company, the $200 billion-plus industry fell an estimated 8 percent worldwide in 2009.
As designer vendors and retailers plot their way forward, many must wonder: What makes Hermes so special? One answer is that the French firm has long purposefully limited the release of its most popular products, choosing “exclusivity over volume,” in the words of their chief executive. By doing so, they create “pentup demand.” Also, fashion-crazed socialites can reasonably argue to their incredulous husbands that spending $5,000 or even $20,000 on a Hermes handbag is an “investment.” The so-called Kelly bag, made famous by Hollywood’s true-life princess, is still as chic as the day Prince Ranier said “I do.” In other words, it’s rare and extremely valuable.
