Abstract

The purpose of this case is to study the particular strategy of Hermès in its entry to the Chinese market, in the light of its external and internal environments. Despite some similarities with competitors, the house of Hermès has the specificity to be unconsolidated and independent, still family-run, with 95% of its revenue coming from its namesake brand only. Hermès has always showed a strong desire to do things its own way, which is especially noticeable on the Chinese market. For more than a decade, foreign luxury companies have proliferated in China, answering to a strong desire for status recognition from the Chinese elite. The main motive for purchasing luxury items was to show-off, wealth being a synonym of success. Louis Vuitton and Gucci, with their iconic monogrammed bags and accessories, became a worldwide reference in luxury, and a “must have” in the eyes of China’s upscale consumers. However, with the growing middle-class, the greater number of millionaires, and the increased use of digital media and ecommerce, China is revealing a new face, with new tastes, seeking for more sophistication, quality and uniqueness. Since 2007, Hermès accelerated its expansion, and has today 21 stores in Mainland China. While still lower-ranked than its competitors Louis Vuitton and Gucci in terms of fame and visibility in the Chinese market, Hermès is however experiencing a much more rapid growth than them. In 2010, Hermès launched its own Chinese brand Shang Xia, in order to cater the Chinese market with a new value proposition: offer Chinese lifestyle luxury items, designed by a Chinese team, with Chinese material, and produced in China. This radical move set off many reactions from analysts: Why creating a Chinese brand, especially when Chinese consumers are looking for western luxury items?

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