Hermès Thrives in China, Banks on Exclusivity

on September 12 2012 | in Retail | by | with No Comments

French luxury house Hermès saw its sales in Mainland China rise 28 percent during the first six months of this year, according to brand CEO Patrick Thomas, and it seems like the brand will continue to enjoy a steady ascent.

“China is doing very well. The share of men’s and women’s products is gradually balancing out, and we would be recording stronger sales there if we were able to deliver more products, in particular leather goods,” Thomas said.

However, the luxury label is taking caution as it tries to balance its supply and demand – while Hermès would like to sell more, it also wants to maintain its exclusivity. “We must avoid the risk of trivializing the brand. Some brands are much too present in certain countries. If we have stores on every street corner, it’s not very good for our image,” he added.

The brand plans to expand globally rather than to inundate the Chinese market with new boutiques, though additional storefronts will gradually arrive in China – perhaps one or two a year. Hermès opened one store in Taiwan this year and plans to open another in Wuhan, China, during the fourth quarter.

Some new government policies, however, are also keeping Hermès from being as profitable as it would like to be, particularly, the new corporate tax policies as put in place by France’s President François Hollande. “We think the combination of these new taxes will cost us one percentage point in terms of profitability by the end of the year,” Thomas said.

However, the label remains sure of its ability to attract customers. Changes to its manufacturing locations will allow the capacity of its leather goods factories to increase 10 percent a year to help meet demands for handbags that often have long waiting lists. Within the next two years, the company plans to increase its silk-printing capabilities by 40 percent.

photo credit: hermès

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