Hermes Sales Rose 16% In The First Quarter And Strong Performance In Chinese Consumers.

The luxury goods giant Hermes has recently released its first quarter results: the group's revenue is 1 billion 609 million 700 thousand euros, up 15.5% from 1 billion 393 million 800 thousand euros a year earlier.

Sales surged 16% to 1 billion 610 million euros (11.6% by fixed exchange rate).

This quarter became the strongest quarter of Hermes growth in four years.

In his earnings report, AxelDumas, chief executive of the Hermes group, highlighted the strong performance of the Chinese market. He said: "all other markets in the Asia Pacific region including Hong Kong, Macao and Taiwan also have double-digit growth."

According to the fixed exchange rate, Asia Pacific income rose 16.9% to 655 million 900 thousand euros.

Sales in Asia, excluding Japan, surged 21.5% to 860 million euros.

This is mainly due to Chinese buyers' crazy pursuit of platinum bags and Kelly packages, and the brand's revenue growth in Greater China is more than 10%.

The strong purchasing power of the Chinese people has attracted the enthusiasm of Hermes, and Hermes is also giving back to Chinese consumers.

In 2018, Hermes not only renovated the IFC stores in Shanghai, but also opened new stores in Hongkong, Changsha and Xi'an.

In October of the same year, the official website of the Hermes Chinese version was launched.

One quarter of the data may not be able to explain the problem.

In February this year, Hermes released the 2018 performance report, there are many bright figures: (fixed exchange rate) revenue rose 10% to 5 billion 966 million euros, of which fourth quarter income rose 10% over the same period.

It is particularly important to note that Hermes has increased its sales in Asia from Japan to 13.7% euros in the year to 2 billion 142 million euros, thanks to Chinese buyers.

AxelDumas expressed satisfaction with the pcript: "I am glad that the income of Hermes is approaching 6 billion euros in the face of global environmental instability. This performance reflects the attractiveness of our products."

When he interviewed Bloomberg in the same month, he also mentioned the Chinese market: "our growth in Asia is still strong, and the sales momentum of Chinese stores has not seen any (unfavorable) changes."

Despite the rapid growth of luxury goods in China, the voice of decline has always been there.

In January this year, the Wall Street journal's China issue of the luxury goods industry pointed out that when the economy is down, the luxury industry has long relied heavily on Chinese consumers, but the industry has no solution.

The article cites the view of LVMH, a luxury group, that Chinese people spend more of their income on luxury goods than Americans and Europeans, which may lead to more volatile growth.

Because once the economic situation slows down and the disposable income of consumers decreases, luxury brands will become the first choice to reduce their burden.

In October of last year, the news of Chinese customs cracking down on purchasing agents made the market value of the three luxury goods giants LVMH, Hermes and Kai Yun group evaporate by 2 billion dollars in a day.

Many investors believe that the purchasing power of Chinese consumers is declining under the influence of policy and environment.

But the face is not only Hermes, but also other luxury magnates have not felt the chill.

LVMH's 2018 results released in January showed that the group's annual revenue rose 10% to 46 billion 820 million euros, operating profit grew 21% to 10 billion 3 million euros, and net profit increased 18% to 6 billion 354 million euros.

Here again, the performance of Asian markets is presented again: sales account for 36% of annual revenue, and sales account for 29% of total sales excluding Japan.

Jean-JacquesGuiony, chief financial officer of LVMH, said that luxury consumers tend to be influenced by sudden shocks, and that the long-term changes like economic slowdown have little impact.

"The market thinks the cup is half empty, but in my opinion, the cup is half full."

After Hermes's first quarter performance has stabilized market sentiment, industry analysts believe that the brand's rise in Asia has further eased investors' worries about the luxury sector in China.

Although changes in the global and domestic environment have caused investors' concerns about China's luxury consumer market, all data can prove that such worries are purely "worrying".

According to Bain's global luxury market monitoring report, in 2017, China's luxury goods sales reached RMB 142 billion yuan (US $22 billion 70 million), up 20% from 2016.

In 2018, the figure increased by 20% to 23 billion euros.

More importantly, Chinese consumers have contributed 1/3 of the total global sales of luxury goods - China's luxury goods market accounts for 32% of global consumption, over 22% in the United States and 18% in Europe, and is the world's largest luxury consumer market.

By 2025, China will account for about 45% of the world's share of the luxury market.

For now, economic trends and policy changes do not affect the purchasing power of Chinese consumers.

But even so, Hermes has not been able to sit back and relax. The old luxury goods are undergoing double tests both inside and outside.

Internally, Hermes is reinventing itself and abandoning the image and positioning of a century old shop.

For example, increase production capacity.

Hermes has planned to increase the production capacity of leather products by 8% in 2017.

In April last year, Hermes opened a leather workshop, Manufacturedel 'Allan.

In addition, two other new workshops are already on the way, and the new workshop in Guyenne and Montereau is expected to be completed in 2020.

Up to now, Hermes has 15 production bases worldwide.

In addition, Hermes has expanded its product category - the first make-up series will be launched in 2020.

Another change has revealed Hermes's anxiety: the brand's changing attitude towards digitalization.

The luxury brand represented by Hermes has always been cautious about digitalization.

In 2012, the chief executive of Hermes global said in an interview: "80% of the Hermes sold online is fake, which is a disgrace."

How many "Hermes" are sold on the Internet, and how many of them are fakes, these statistics are simply impossible to count.

This is interpreted by the outside world: consumers should go to the physical store to buy Hermes.

It was not until 2017 that Hermes began to do something about digitalization.

"For us, 2017 will be a year of digital change," AxelDumas said.

In October of this year, Hermes set up a time shop in WeChat public for the first time, and launched AppleWatchHerm sSeries3, which cooperated with apple. In December, the brand also sold four men's and women's shoes and shoes by WeChat; in October 2018, the official website of the Hermes Chinese version was launched.

Today's luxury consumption is inseparable from the electricity supplier.

Some analysts pointed out that if luxury brands ignore digitalization, contrary to the needs of consumers, they may face the risk of being eliminated by the industry. This is the Hermes group, which has a market value of up to about 50000000000 euros, which can not be ignored at all.

Increasing production capacity, expanding categories and testing water suppliers will also illustrate that even the centenary stores such as Hermes should cater for the trend and embrace the market.

VincentBastien, who served as executive director / general manager of several luxury groups such as LV, has summed up the definition of luxury as a very thick book, the luxury strategy, which contains detailed rules and regulations for restricting luxury behavior, such as:

Luxury goods should be kept scarce, and productivity can not be increased because of rising consumer demand, and sales growth should not be the criteria for evaluating luxury goods marketing.

For luxury brands, the expansion of brand audiences is equivalent to diluting its value.

The Internet can be used as an auxiliary way to serve existing customers, or introduce brand stories or product profiles to potential or selected new customers.

It can not be used as a tool for sale.

The 182 year old Hermes has always been the pursuer of uniqueness and scarcity.

AxelDumas once said, "when a product sells too well, we should stop producing it."

But the fact that Hermes is close to Chinese consumers is no evidence that the traditional rules are being overthrown and the industry is being reshaped. As a member of the veteran luxury goods echelon, Hermes has come to the crossroads of choice: should it remain scarce or embrace the market? Should it continue to maintain its original position or reshape its image?

The internal changes reveal the anxiety of Hermes, and the competition outside is far more intense than that: the luxury brands led by Gucci are threatening the position of Hermes with a new look.

For the first time in the second quarter of 2017, Hermes was first overtaken by Gucci (Gucci's first quarter earnings surpassed Hermes for the first time), while the growth of Gucci's parent company's group's share price also surpassed Hermes group for the first time last year.

China is a relatively special market. Although the potential is unlimited, from another angle, the word "brand loyalty" is almost meaningless. "Follow suit consumption" can basically describe the current situation of luxury consumption in China.

You know, in addition to Hermes, Chinese consumers also contributed to the fierce growth of Gucci and LV.

For example, in 2018, 62% of Gucci consumers were "millennial generation", up to 35% of purchases were from China; Gucci's turnover in 2017 was 6 billion 200 million euros, and Chinese consumers contributed 27% of sales to Kai Yun group.

In addition to the change of form (consumption habits), the content of traditional luxury industry is being overturned by the trend culture. A cruel reality is that whoever can take the lead in embracing the mainstream consumer groups will win a temporary victory.

This is especially applicable to Chinese consumer groups, and LV and Gucci, which have abandoned the "dogmatism", have long been able to see everything and act. Whether Hermes wants to maintain the rapid growth in the Chinese market depends on how well the centenary store takes consumers.