Feature
5 reasons behind Hermès’ steady rise
Feature
5 reasons behind Hermès’ steady rise
The French luxury powerhouse continued to gain coveted market share for the third consecutive year, boasting a 610 bps outperformance in sales vs the wider Swiss watch industry.
For a luxury brand more typically associated with leather goods and silk scarves, Hermès’ entrance into the top 20 Swiss watch brands back in 2021 might have been surprising to some. Since then, the maison has posted impressive watch sales growth of +72.5%, +43.1%, and +13.8% in 2021, 2022 and 2023 respectively, consistently outperforming the wider luxury goods market.
Notably, Hermès’ 2023 annual financial report revealed that their watch division was among the fast growing sectors of the business, though still remains one of the smallest revenue generators at CHF 593m within a wider context of the breadth and diversity product offering.
In fact, Hermès is still the only brand in the top 20 ranking where you could simultaneously purchase a DLC-coated titanium haute complication in the Arceau Lift Tourbillon Répétition Minutes, an extravagant diamond-encrusted Birkin bag in Himalaya Crocodile and a fabulously tailored two piece suit. While you’re there, throw in a tailor-made saddle for your purebred pony or custom upholstery on your private yacht (the brand does not advertise this service, but is offered to private clients through its bespoke workshop).
That’s a level of brand immersion not commonly seen in any industry. Here, we look five reasons for the maison’s seemingly unstoppable rise through the ranks of Swiss horology:
#1 Premiumization of Hermès watches
While Hermès watches have long been a hit with its relatively accessible quartz Cape Cod line, the maison has steadily been moving upmarket with wider mechanical offerings across its families. In 2006, Hermès took a 25% stake in Swiss movement manufacturer Vaucher Manufacture Fleurier, who also supplied movements to the stalwarts of high horology Parmigiani Fleurier and Richard Mille.
Cape Cod Crepuscule
Since then, automatic movements have steadily been rolled out across the majority of their watch families and entry-level quartz pieces discontinued as part of the strategy.
However, where other Hermès categories sit firmly at the top of their price segments — the famed Birkin bag starts at US $11,300 — their watch offerings provide a far more palatable price to value ratio. The H08 line of sports oriented watches start at US $5,650, for which you get a handsomely finished, satin-brushed titanium case housing a Vaucher manufacture caliber H1837.
The ultra-sporty graphene composite version costs a mere extra US $3,000 — a surprisingly authentic price that would fetch a much heftier markup at watchmakers of a similar caliber, making the H08 an undoubtedly attractive proposition for cross-shopping clients.
As with all things Hermès, the maison has shown time and time again their knack for resisting shorter term trends to continually refine their product. One might assume a similar view of their watch offering and expect these prices to become more commensurate with its proposition in time to come.
#2 Successful launch of H08
The introduction of the H08 in 2021 signaled the brand’s proverbial hat toss in the sports watch ring. At once elegant, angular and sporty, the new family offered a compelling proposition for the style and horology set.
Hermes H08 © Joel Von Allmen
While the handsomely decorated in-house caliber powering the piece — first used in 2012 on the Dressage line — might not be the most novel, the H08’s sheer aesthetic versatility was a winning formula for the brand to iterate on. By no coincidence, the launch of this family coincided with the arrival of Hermès to the top 20 rankings of Swiss watch brands.
Hermes H08 Monopusher Chronograph
Last year’s Watches & Wonders saw the first time complications were introduced to H08 in the form of a monopusher chronograph, perhaps the most natural fit for a sports watch. Watch Revolution’s Wei Koh introduce the piece here, but suffice to say this novelty was a unanimously agreed highlight for the brand.
Available in an agreeable 39mm case, the material options offered are brushed titanium on a rubber strap or bracelet, matte-black DLC-coated titanium, an ultra-lightweight graphene composite and a two-tone rose gold. As explored above, value proposition might not typically be congruent with haute luxury, but Hermès certainly makes a case with the H08.
#3 High horology halo products
Do not mistake the height of French luxury with stoicism — the heart of Hermès lies in whimsy, playfulness and fun. A peek over the most collectable bags the house recently released and you’ll find an ability to poke fun at even the most cherished products others might deign to venture to.
Hermès Pre-Owned 2020 mini Quelle Idole handbag
Image from Farfetch
This playfulness similarly flows through their watchmaking division with ventures into haute horology. The Arceau Le Temps Voyageur, released at Watches & Wonders 2022, showcased the technical prowess of La Montre Hermès with a world time complication that brought a fantastical sense of literality to the phrase “traveling time”.
Arceau Le Temps Voyageur
It’s worth exploring the quirky mechanism of this GPHG-winning piece here but as Laurent Dordet, CEO of La Montre Hermès, explains best, “We target to create reliable and technical watches, but our watches must evoke fantasy, humor and nearness.”
While the Arceau line has so far been the main beneficiary of such endeavors with the Arceau L’heure de la lune and the Temps Suspendu, the Slim D’Hermès has received a perpetual calendar option, and it’s not hard to imagine the same approach brought to other families. This foundation of high watchmaking is distilled down to even the simplest three handers, creating the famed ‘halo effect’ that brings about the sense of desirability essential for commercial success.
#4 True universal appeal
Where desirability creates the sparks, merchandising fans the flames. The Cape Cod has long been a hit with the style set for its recognisable double tour strap, the H08 is steadily carving out its corner of the sports watch arena, its métiers d’art offerings go toe to toe with the best watchmaking houses and its high complications satisfy GPHG jury-levels of watch nerdery.
Slim d'Hermès Le Sacre Des Saisons
Call it what you want, but the maison truly has something to offer every customer crossing the bounds of their boutique.
The cohesive strength and continued desirability of the Hermès universe presents rare opportunities for merchandising — a parent shopping for ready-to-wear might pick up a 25mm Heure H for their daughter; a savvy client might throw in an Oran sandal and gem-set Arceau to count toward a Birkin allocation. Possibilities under the orange ceiling are seemingly endless.
#5 Revamped distribution strategy
Since 2019, Hermès has been reaping the rewards of its updated distribution strategy, shifting away from the wholesale model to 90% directly operated retail stores. The brand’s New York flagship store on Madison Avenue, a 20,250-square-foot boutique unveiled in 2022, features expansive rooms dedicated to watches and jewelry, while the top floor houses an atelier with artisans-in-residence working on leather, jewelry, and timepieces.
These focused spaces affords Hermès the kind of deeper understanding and relationship building that could otherwise be lost to authorized dealers. As sales associates build out client profiles of their own, the direct feedback on watch products translates into invaluable data that undoubtedly finds its way back to product teams at the manufacture; the higher margins, controlled client experience and first-hand data create a win-win-win scenario.
