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article imageThe slow and the steady win the digital race

By Bill K. Anderson     Mar 19, 2014 in Business
Today's 28-percent global smartphone and tablet market penetration induces the luxury sector to explore the most effective ways to create new ties with consumers. Axel Dumas, new sole executive chief of Hermès, also faces this challenge head on.
The year 2013 marked a big change for the French luxury brand Hermès. After eight years of serving this family business, Patrick Thomas, the first non-family member to become co-chief executive of this brand, announced that Axel Dumas was to become the sole chief executive. Axel Dumas, who joined Hermès in 2003, has served as its finance director, managing director of operations, chief operating officer and head of operations & sales. In the past year, he also served as the co-chief executive alongside Patrick Thomas.
Dumas’ appointment to sole chief executive came at a challenging period in which Hermes’ unprecedented success — an 82 percent increase in revenue to 3.5 billion euros between 2009 and 2012 — was met with external threats from rival companies; most notably was the ongoing conflict between Hermès and LVMH.
Dumas is under the pressure to maintain and improve Hermes’ current growth rate. However, in 2013, while competitors such as LVMH have experienced deceleration in luxury-goods sales in China, Hermes’ 19 percent rise in sales were better than expected and have shown that Dumas is holding up under the pressure. In addition to expecting an operating margin that will exceed last year’s record-breaking 32.1 percent, Dumas is also targeting “sales growth of at least 10 percent, excluding currency effects.”
To realize these goals, Hermès has proposed a few action plans, some more tentative than others. In mature countries, Dumas plans to increase the size of 12 stores and open no more than three stores. In emerging countries such as South America, Asia and the Middle East, Dumas plans to open several more stores. Hermès has also considered the possibility of increasing its e-commerce sector (currently 10 percent) to improve the company’s growth rate. Axel Dumas revealed that in Lyon, Hermès has tested this idea by allowing customers to shop online and pick up their purchases in stores.
The greatest difference between Hermès and its competitors seems to lie in its online presence. Currently on Facebook, brands with the most likes include Burberry (nearly 17 million), Louis Vuitton (16.5 million), Dior (13 million), and Gucci (12.5 million) while Hermès has only 1.6 million. Similarly, on Twitter, brands with the most followers include Dior (4.58 million), Chanel (4.37 million) and Louis Vuitton (2.8 million) while Hermès does not have a Twitter page. On Instagram, brands with the most followers include Michael Kors (1.9 million), Louis Vuitton (1.5 million), Burberry (1.3 million) and Gucci (1.25 million) while Hermes has only around 188,000.
Some brands have even begun to test out the m-commerce market due to the development of smartphones and tablets that allow customers to download applications. Several luxury brands have helped consumers to feel more connected to the brand by creating apps that allow them to receive news related to the brand, discover fashion trends and find store locations. There are, however, very few apps that allow consumers to directly purchase goods via tablets and phones. Louis Vuitton’s LV Pass is one such app that allows consumers to browse and purchase goods “on the go.” As a result, purchasing luxury brand products is more accessible but does this strip a luxury brand of its luxury status? Some say that the appeal of luxury brands lies in personal service and special care (such as personal sales associates and personal shoppers) that one receives in the boutiques. Therefore, one may find oneself asking, “Does someone who chooses convenience by making a mobile purchase get the same experience as someone who makes an in-store purchase?”
Perhaps this is why Hermès chose to create the Hermès Silk Knots app, which shows its customers various ways to wear their famous silk scarves. Rather than focusing on promoting sales, this app focuses on enhancing a customer’s experience with a purchase without changing the experience of making the purchase.
The luxury sector is still in its early stages of exploring the most effective ways to leverage new mobile technologies to truly distinguish its products. So far, Hermès seems to be a little behind in this digital race but as the saying goes, slow and steady wins the race.
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