The autumn drizzle obscures it, the most spectacular installation celebrating the launch of Hermes’ four-storey flagship store in Shanghai. The party spans two levels of a building on the Bund, the city’s most prestigious strip of real estate, and amid an entertainment showcase that offers digital games, interactive cinema booths and jazzy dance numbers from long-limbed teenagers, horses representing the house are roaming the other side of the Huangpu River in Pudong, projected as a film on the facades of two buildings.
And if you, wandering onto the terrace with your glass of wine, put on the headphones by the benches, you will hear tinkling piano music that syncs perfectly with the story of world-touring horses turned Pegasus. The show is whimsical and meticulously arranged, extravagant in execution, yet subtle in brand display. It’s the Hermes way, and a sophisticated way of appreciating luxury with which high-end Chinese consumers are increasingly in tune.
“There used to be a time when you can say the Chinese customer is logo-conscious, but that is no longer the case,” says Florian Craen, Hermes’ executive vice-president of sales and distribution, who oversaw the Chinese market from 2009 to last year. “We now have very sophisticated customers who know the brand inside out, who are drawn to discretion, subtlety and style.” And this, even before ostentation-curbing practices were adopted in response to president Xi Jinping’s crackdown on corruption two years ago, according to Hermes’ China CEO, Cao Weiming, in a Financial Times report.
Still, even if Chinese luxury spending has tapered off from 20 per cent pre-campaign three years ago to 2 per cent this year, Hermes has seen steady growth. People buy less but choose better-quality, nicer objects, according to Craen. This year for Asia-Pacific, excluding Japan, the earnings up to Sept 30 is 999.2 million euros, a 14.8 per cent growth from last year. In 2012, total revenue for this region was 1.1 billion euros.
There are no independent figures for China, but here’s an indication of the brand’s expansion. Seventeen years after its first store was set up in the country, the Chinese market now ranks fourth for the brand in terms of revenue, after the historic big three of France, the US and Japan. Of the 22 stores now, some 18 were added in the past six years, with a branch in Chongqing planned in two years’ time. In terms of customers, the Chinese is ranked top. Says Craen: “Chinese customers are buying all over the world, not only in China. It’s natural that, in a market that represents our biggest customers, they have a place to go to strengthen their relationship with the brand.”
The flagship is the brand’s fifth in the world after Paris, New York, Tokyo and Seoul. In addition to Hermes’ collection of products, the 1,174 sq m maison includes a cafe, a gallery for art exhibitions and craftsmen to repair items. The project took six years to complete, as parts of the structure had to be reinforced to preserve its historic appearance. When renovation began in 2008, the site on Huaihai Middle Road was considered a dead space on one of the city’s most prominent streets.
Since then, other high-end stores such as Gucci, Cartier, Tiffany & Co and Ermenegildo Zegna have set up shop in the area. Craen sees in the additions potential to create a unique street experience that transcends the ubiquity of malls to become a bona fide destination. “I don’t have anything against malls,” he says. “But, at a time when everything is uniform with the same development, same brand, having a different experience in your country in a city like Shanghai is good.”
The historic brick building shares a southern courtyard with Shang Xia, an Hermes-backed brand that showcases Chinese materials, craftsmanship and products. Launched in Shanghai in 2010 and with a branch in Beijing, it debuted in Paris last year on Rue de Sevres, in the heart of Paris. The brand showcases the Chinese craft of bamboo weaving, eggshell lacquering that produces smooth crackled veneers on vases and one-piece cashmere felt coats inspired by the techniques of Mongolian nomads.
The designs do not carry over to Hermes products, insists Axel Dumas, Hermes’ CEO, at the launch of the Shanghai Maison. The two brands share the same values of craftsmanship but have distinct styles.
There are other ways that the exclusivity of a brand can be affected. Asked if Hermes’ success in a country as big as China would dilute its value, Craen admits that in principle, there is a contradiction between desirability and selectivity and commercial success, but the brand’s answer is to expand its range of products.
There are over 50,000 items spread among 16 product categories that cover bags and luggage, diaries and small leather goods, saddles, silk, women’s ready-to-wear, men’s ready-to-wear, jewellery, watches, belts, gloves, shoes, hats, enamel and fashion jewellery, perfume and tableware. In 2011, the house launched its line of furnishing fabrics and wallpaper. Last year saw the introduction of a leisure bicycle and occasional furniture and, in July this year, a pen collection. The sleek Nautilus is a collaboration with industrial designer Marc Newson and Japan’s Pilot pens. Says Craen: “We don’t sell just bags and scarves. We sell a bit of everything. If you buy an Hermes scarf, you will still find an object that you won’t find around every neck.”
The ace in Hermes’ exclusivity game, of course, is the prized Birkin. Craen insists its rarity is not a marketing trick and that despite the overall workforce at Hermes increasing by 40 per cent in five years since 2009 to over 11,300, to devote craftsmen to making more of the bags is inefficient. “We have a lot of product families to grow. It doesn’t make any sense, neither in terms of image nor economics, to focus everyone on one bag.”
The house may offer over 50,000 items, all elegant and meticulously crafted, but one suspects that for the upper crust, it will boil down to this one. Showing it off may be a different story.