The power of exclusivity: would you spend $300,000 on this purse?

When quality loses its ability to justify price, the power of brand exclusivity takes its place. Sure, the quality of a $30 T-shirt is probably much better than the quality of a $3 T-shirt. And how about a 300-dollar one? It can’t be that much better, right?

At this point, you are no longer buying a product, you are buying a brand. When it comes to buying exclusive items or brands, you will be surprised (or not) to find out how much money people are willing to spend to obtain them. And what does a smart company do when there are customers ready to pay an obscene amount of money on something exclusive? That’s right – they create exclusive products just for them! 

Image result for shops hermes

Today, I will tell you about a unique collection of purses created by the French brand Hermès, and we will analyze the concept of value perception successfully used by many companies.

Hermès Paris: a company founded in 1837

Hermès is a French high-fashion luxury goods company established in 1837. True to its traditional business model that rejects mass production, the brand is famous for its high-quality manufacturing performed by hand in specialized French workshops.

The company produces a variety of luxury goods categorized in 14 product divisions that include watches, fragrances, jewellery and ties. But today, we will focus on their famous purses, and no, not the ordinary ones (which, by the way, rarely drop below $5000) – the exclusive ones that drive celebrities absolutely insane.

The Hermès Birkin bag – a symbol of wealth

Image result for jane birkin

The story of the famous Birkin bag can be tracked down to an iconic encounter back in 1983, when reportedly the chief executive of the company, Jean-Louis Dumas, was seated next to the actress Jane Birkin on a flight from Paris to London.

As she was trying to fit her travelling bag in the overhead department of the plane, it fell down, spilling its whole content around the seats. Later on, Jane Birkin complained to Dumas that she was unable to find a comfortable leather bag she liked, and it served him as an inspiration to design one especially for her. 

Nowadays, the Birkin bag is a symbol of wealth, and is highly appreciated by many celebrities.

What makes this bag so desired?

  • Price

As we already mentioned, the most obvious reason for representing a wealth status is the price (but definitely not the only one). While a regular Hermès purse can cost you around $6,000, the simplest Birkin bag starts from $11,900! These costs depend on the type of leather and whether there were any exotic skins used in the process.

The most expensive Birkin ever sold was a rare Himalaya crocodile diamond bag, handmade from the skin of an albino crocodile with more than 240 diamonds on it. It was sold on an auction for $379, 261!

Image result for hermes himalayan birkin price

  • Exclusivity

Even if you have the money, you can’t just go to the shop and buy a Birkin bag. You need to have a history with the brand before that, so if you have never purchased any bag or another luxury item from Hermès, don’t even bother asking them for a Birkin. In many cases, you will have to wait to be offered the honour of buying this purse by the company itself.

Hermes Atelier Sacs

In fact, for a long time, the bag was rumored to have a waiting list of up to 6 years! Would you wait 6 years for a bag? I would have personally forgotten that I even purchased it in the first place!

Additionally, the bags are distributed to the boutiques of the brand in limited quantities and on unpredictable schedules, making them even rarer to the public.

  • Hand-crafted

The bags are handmade in France and each one of them has the company’s signature saddled stitching as a symbol for exclusivity. According to the, all brand’s purses and handbags, including the Birkin, are handmade by one artisan in a process that takes 48 hours. Despite the pressure for mass production and automatization, Hermès is still using its traditional production processes, which gives additional value to customers.

Okay, so far, so good! But from a Marketing and Business perspective, what conclusions can we draw from Hermès and the Birkin bag?

The power of exclusivity: a lesson given by Hermès

Let’s be honest – regarding design, the Birkins are not the most jaw-dropping bags that you can find out there. Of course, it depends on the style of each person, but generally speaking, they have a pretty simple and even boring design. So what exactly makes them so special?

In order to make the right conclusions, let’s sum up the reasons for the popularity of the Birkin between celebrities and other rich people:

  • Brand reputation and history: the company was established 180 years ago, and it has managed to build up a solid and authentic reputation for itself;
  • Craftmanship – handmade bags produced by artesans;
  • Exclusivity – rare and unique bags that not everyone with money can afford;
  • Price – that makes the Birkin a status of wealth for people.

Image result for birkin bag price

Fun fact: Hermès Birkin bag is considered a solid investment tool, having increased in value by 500% over the 35 past years. According to Baghunter, an annual return on one of these goods is 14.2%, exceeding even gold on the scale.

So how would you apply all this information to your own business? Of course, if your strategy is based on low prices instead of differentiation, the following approaches might not work for you. But if you are in the high-end business, here are 2 lessons that the Hermès’ strategy teaches you from a Marketing and Business perspective:

  • The illusion of scarcity

It is a concept that creates additional perceived value for customers. When a product has the reputation of being unique, people are willing to spend more money in order to be only one of the few who have it. Obviously, possessing a mass-produced item doesn’t give the same experience as a luxury good that only the ”chosen ones” have. So if you are selling high-quality products and want to differentiate yourself, you might consider designing an exclusive collection or a single product for your loyal customers. Or you could use the scarcity principle on your existing products by adding unique elements that make them rare and exclusive.

  • Price

Remember, you can set any price on a product or a service as long as it is justified. Producing a regular bag or a pair of jeans and adding a 1000$ tag to it without the right branding will not make people flock to you. Brand reputation is not something that you earn overnight, and unless you are using extremely rare quality materials that no one else does, you will need to establish your company as an authority brand to justify prices. Hermès justified their prices with a combination of factors such as history, reputation, exclusivity, exotic and rare materials; so you will need to work on building your brand the right way in order to justify your prices. Not all companies that put high prices on their products are successful.

If you are interested in more Marketing lessons, make sure to check my latest post on Starbucks!

Thanks for reading!


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