It has been said that the first generation creates wealth, the second consolidates it and the third squanders it.

Hermes, the favourite bastion of Parisian good taste, not only bucks the trend, but is also a notable exception to the maxim. Founded in 1837 as a saddlery by Thierry Hermes, the family-owned French luxury house, with its old-world elegance, holds an enviable and unchallenged position at the pinnacle of the luxury sector.

With an annual revenue of €4.8 billion (S$7.4 billion) last year, up 18 per cent from the year before, sales in every geographical region have posted growth, according to its 2015 annual report: Japan (18 per cent); Asia, excluding Japan (5 per cent); America (7 per cent); Europe, excluding France (9 per cent) and France (6 per cent).

Sales in most categories – or metiers as the French house calls them – have also seen an increase: leather goods and saddlery (13 per cent), ready-to-wear and accessories (8 per cent), perfumes (3 per cent) and other metiers which include jewellery and homeware (9 per cent).

Set against the current economic climate, in which growth is almost non-existent or snail-slow for many luxury companies such as Prada and Burberry, its overall performance is impressive. Nevertheless, Mr Axel Dumas, chief executive of Hermes since 2014 and a sixth-generation member of the founding family, is not resting on his laurels.

Hermes’ deep commitment to craftsmanship – its raison d’etre – is what sees the company through, says the 44-year-old, who is married to a United States-trained journalist and has two children. “Our products are prized for their craftsmanship and authenticity. The artisans put their heart and soul into them and when a client buys them, they buy a bit of Hermes,” says Mr Dumas. “In the long term, the client knows there has been no compromise and, because of that, we have built a loyal pool of clients who have stood by us all these years.”

He was in town last week to inaugurate the newly renovated Hermes flagship boutique at Liat Towers, the same address it has been at for the past three decades.

Before joining Hermes in 2003, he worked at French bank BNP Paribas in Beijing. Since then, he has been Hermes’ finance director, headed the jewellery and leather divisions and served as commercial director of France before landing the CEO position. At the helm with him is his cousin, Mr Pierre-Alexis Dumas, who has been the artistic director since 2009 and whose role is to steer the creative direction for a team that includes Nadege Vanhee-Cybulski (womenswear), Veronique Nichanian (menswear) and shoe meister Pierre Hardy (shoes and jewellery).

Craftsmanship is important to Hermes. It employs more than 2,500 leather artisans – Mr Dumas calls them “the backbone” – in 14 ateliers across France. At the Parisian suburb of Pantin where the leather atelier is located, more than 340 artisans continue to handcraft leather goods the same way it has been done for more than a century. For example, it still takes one artisan about 15 hours to make a bag employing a classic saddle stitch that has been in use since the 19th century.
After the leather is cut, each worker is responsible for his bag, seeing it to finish.

Upon completion, the inside strap is stamped with the number of the workshop, the year it is finished and the craftsman’s serial number. If the bag is damaged in use, a customer can send it to the same craftsman for repair. “We train about 250 new craftsmen a year. It takes about two years to train a craftsman with each one supervised by an existing craftsman. This puts a limit on production capacity,” says Mr Dumas.

With demand far outstripping supply, it would be logical to assume that this results in the brand’s exorbitant prices and its legendary waiting list, a phenomenon that was created by Mr Dumas.

Years ago, at a dinner attended by him, his late uncle and former CEO Jean-Louis Dumas and his mother, who was then managing director, he initiated a discussion on how to meet the demand for the brand’s Birkin bags. They decided not to increase production as that would compromise quality. Instead, the trio let the store managers handle the demand on their own and, thus, the list was born.

The waiting list is shrouded in mystery and Hermes Singapore declined to confirm if it still relies on it. If it does not exist, getting a Kelly or a Birkin boils down to being at the right store at the right time.

“An Hermes product is costly because we invest in quality materials, which are hand-sewn for up to 15 or 16 hours in France. We do pricing based on these factors,” Mr Dumas explains. A Kelly and Birkin start from about $13,000 in a non-exotic leather.

“We know our prices could be higher as we’ve seen auction houses selling them at two to three times our prices. But we keep to the true costs to maintain integrity.”

Hermes, he adds, will also not increase its production or alter parts that may impact the integrity of the product. He recalls, in 2007, when gold prices were high, the brand considered reducing the amount of gold used in handbag closures. It has been reported that the company put more of that metal than any other in the industry.

“A senior craftsman said in five to eight years’ time, the clasps will not have the same patina as the older ones. That was important enough for us to keep things the same. We care about how things look years later, even if no one sees it at the time.”

Hermes, Mr Dumas says, does not simply peddle expensive wares ranging from leather skirts ($4,900) to leather bookmarks ($165). A big part of the house is about merchandising dreams through storytelling.

The house, he says, is about mystery. No other luxury brand has backed up its mystique with such quality and emotional buy-in as Hermes. The Kelly bag stands at the apex of the Hermes myth. A modified saddle bag, the Kelly made its appearance in the 1930s. However, it was in 1956, after the late American actress and Princess of Monaco Grace Kelly used it to hide her pregnant tummy from an intruding Life magazine photographer, that the bag got its name.

Through the brand’s crafted products, its pedigreed past and its stores – no two are alike and each one carries merchandise unique to it – and the events it holds, such as a recent one in Chelsea, New York, which was art-directed by avant-garde theatre director Robert Wilson, the house has successfully managed to capture the imagination and loyalty of shoppers.

(Related: Hermes opens flagship in Shanghai.)

All the more exceptional, considering it does not have a marketing department. “We don’t do commercial studies. We don’t ask people what they want or reference what others do. You don’t need marketing. You need to be true to your style,” says Mr Dumas. “At Hermes, we create desires for our clients.”

Which is why, while the company embraces the digital platform – it launched eCommerce in 2001 – Mr Dumas is aware that the Internet has made everything more immediate. “We are in a world where everything is over-marketed. To us, it is important to keep a part of the mystery, a part of the magic which may sometimes not be so immediate,” explains Mr Dumas. “It’s about romancing our clients. Hermes is a human experience.”

The house’s enviable positioning is certainly not lost on Louis Vuitton Moet Hennessy (LVMH), its closest rival. In 2010, the luxury conglomerate announced that it had quietly acquired 17 per cent of Hermes stock without the company’s knowledge, raising its stake to more than 20 per cent in 2011. By 2014, the two had reached an entente cordiale, in which LVMH agreed to part with €7.2 billion or 23 per cent of its Hermes shares.

As a second-tier measure and a guard against future hostile takeovers, 50 descendants of Thierry Hermes pooled their shares in a holding company, H51. A ringfence, it owns 50.2 out of about 70 per cent of the family shares in Hermes and no one is allowed to sell his shares for 20 years. Forbes estimated the collective family worth to be US$25 billion (S$34.5 billion) in 2014.

If the LVMH episode is proof of anything, it is that family is writ large at Hermes. Mr Dumas says to stay relevant in these challenging times, the single most important element is to “remain faithful to ourselves, to our ethics, our values and our clients”.

“It is important to keep the integrity of Hermes, so that when the seventh generation takes over, it will be proud of it.”
Hermes does not groom family members for succession. Instead, the company believes in an organic evolution.

“We encourage each member of the company to have an experience outside of Hermes, to bring something to the table,” Mr Dumas says.

In the words of a certain Swiss luxury watch marque, it would seem, too, that you never really own Hermes. You merely look after it for the next generation.

Adapted from The Straits Times.