Earlier this week, luxury French house Hermès announced in a press release that it has officially opened its newest leather goods production site (its 19th, in fact) in Gironde, located in the Southwest of France. As per the official statement issued, the workshop will create 260 jobs locally and allow for Hermès to keep up with the continued demand for its bags globally.
It is this demand, however, that has evolved into a controversial topic concerning the house- specifically in Asia. Earlier this year, it was reported that throughout the pandemic, the Asian economic subsector was the driving force for growth in demand in the luxury market. In fact, the Chinese market specifically now accounts for the majority of this demand.
Between traditional demographics and the new (and ever thriving) GenZ consumer segment, the Chinese market has become more attractive than ever- with competition growing between luxury houses to meet the snowballing desire for luxury goods by shoppers. However, these very shoppers are starting to cry foul of some of the practises they perceive to be “smoke and mirrors” when trying to gain access to some of the most coveted luxury goods. Hermès has particularly been the target of these accusations. So what exactly is going on?
The Peihuo Problem
You’ll recall we recently reported that Chinese shoppers are engaging in physical protests outside Hermès boutiques in cities across the country. They are protesting a practise known domestically as “peihuo”- whereby one is required to purchase several smaller, less desirable items, in order to be given access to those they truly wish to buy. In fact, an image has made the rounds all over the internet of a disgruntled shopper outside an Hermès boutique with a sign that reads “rubbish Hermès- peihuo but no bag.” The movement has gained momentum in the country, with many claiming that Hermès is taking advantage of the skyrocketing demand for their items, and intentionally withholding sought after supply of handbags so as to market and sell its less popular products.
So what does Hermès have to say about this? Is it true what it said about the process of acquiring a Birkin or Kelly? Oddly enough, this notion has been rewrapped and regifted within the luxury community before. Back in the early 2000s, shows like Sex and the City fortified the concept of the Hermès waitlist- one that often stretched into the months and years. More recently, however, the age of social media has seemingly decided to key into this ‘peihuo’ system and the internet is now bursting at the seams with videos and blogs instructing eager clients on which items are better to purchase than others, and which will more likely lead to an offer of a quota bag.
The World According to Hermès
This is not a company-endorsed policy…what is true is that most markets have to manage scarcity. That means managing waiting lists, and sometimes managing disappointment and long wait times.
He also added that
It is very frustrating for us not to be able to satisfy everybody. At the same time, we’re not doing it to create an artificial market. We’re doing it because we’re not going to lower our quality standards, which are based on an artisanal production model that is growing as fast as it can.
Your Story, My Story and the Real Story...
It should be noted that despite the inauguration of this newest leather workshop, Hermès does not plan on increasing production anytime soon. In fact, the new location will not technically be fully function until 18 months from now- this is the length of time it takes to train new artisans in an already labour deprived industry.
A quote that comes to mind is this, concerning the nature of truths, and how there are always three sides to every story (not two, as is commonly believed): your story, my story and the real story. So who, if anyone, is right here? Or is the truth somewhere in the middle? Is the existence of a ‘peihuo’ system simply outlandish, or are slivers of it actually present in some of the ways Hermès does business? In knowing that its handbags are simply the most coveted bags ever- period, is Hermès working the game of supply and demand to its favour?
What do you think about de Seynes’ statement? Are you encouraged at the prospect of more leather production sites popping up across France? Do you think that an increase in supply to meet practically out-of-control global demand is something Hermès wants to do? Or will shoppers, like those in China, have to continue to endure excruciatingly long periods of time until the Birkin or Kelly of their dreams finally makes its way to them?
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