Hello readers!
It has been two weeks since the COVID-19 outbreak hit Italy and only recently was proclaimed as “global pandemic”, now seriously affecting European and the US markets. The launch of luxurious makeup line couldn't be more timely.
“Lipstick effect” - the theory that when facing an economic crisis or the economy is in a recession, consumers will be more willing to buy less costly luxury goods. For example, instead of buying expensive fur coats, women will instead purchase expensive lipstick or luxury cologne.
Hermès: Orange Turns Red
French luxury brand, Hermès, like many other luxury brands sells exquisitely made products, comprising women’s and men’s fashion, leather goods, fragrance, and jewelry. Hermès has been consistently ranked as one of the world’s most valuable luxury brands. Yet, it sets itself apart from the likes of LVMH, Kering, and Richemont, nor it owns a portfolio of brands, nor it is a conglomerate.
Hermès key facts
Brand value (2019): 18 bln $ according to Interbrand
Turnover (2019): 6,8 bln €
Breakdown of revenue by métier:
Leather goods and Saddlery — 50%
Ready-to-wear and Accessories. — 23%
Silk and Textiles — 9%
Other Hermès sectors — 7%
(jewellery, Art of Living and Hermès Table Arts)
Perfumes — 5%
Watches — 3%
Other products — 3%
Breakdown of revenue by geographical area:
France — 13%
Europe (excl.France) — 17%
Japan — 13%
Asia-Pacific (excl.Japan) — 38%
Americas — 18%
Other — 1%
Ultimately, Hermès positions itself as ultra-luxury thanks to its pricing power:
Hermès’ pricing power – its ability to set its own prices irrespective of competition – stems from the desirability of its merchandise. That desirability has its origins in the firm’s long history, the quality of its products and, crucially, their scarcity.
Related reading: Louis Vuitton Or Hermès: Which Is The More Authentic Luxury Brand?
While the company boasts to “not have a marketing department”, yet, Hermès is successful at creating a halo of exclusivity around each product it sells: the same logic was applied to the recently launched Hermès Beauty in early March.
Rouge Hermès, as the lipsticks line is called, is the result of five years’ worth of design, research and development. […] The Rouge Hermès collection will be available at selected Hermès stores and retail outlets in 35 countries.
The lipsticks come in 24 shades, inspired by Hermès’ 75,000 shades of silk and 900 shades of leather. […] Hermès will introduce twice-yearly limited editions of three colors to its Rouge Hermès collection.
[…] In addition to the lipsticks, Hermès will support with other beauty products such as a lip care balm, Poppy lip shine, universal lip pencil, and a lip brush in lacquered wood. A collection of leather accessories such as cases and a moon mirror will complement.
The lipstick line represents an entry-level price point (priced for 62€ each lipstick; 68€ limited edition) attracting both young aspirational consumers, without diluting the Hermès luxury status. The product also is great for creating digital engagement, with already over thousands posts for hashtags #HermesBeauty, #HermesLipstick and #RougeHermes on Instagram and product reviews on YouTube.
Experts see Hermès Beauty as a promising venture: global beauty industry is worth about €450 billion and is expected to grow further in the next years:
Lipsticks are a great starting point for the make-up line because it gives consumers a feel for what is next to come - the texture and shades will set precedence for further releases. What’s more, unlike some beauty products such as foundations, lipsticks are less tricky when matching to particular skin types and pigments, meaning that the brand’s launch will appeal to a wider variety of consumers with a “one fit for all” approach.
Recommended reading: Are Chinese Netizens Ready for Hermès Beauty?
What was unique about this product launch is how Hermès combined luxury with sustainability: environmentally friendly refillable lipstick cases made of the same metal used for the leather goods’ hardware.
It’s also interesting to note how Hermès leveraged its iconic orange box packaging to drive the attention to the product in its campaign, titled “Orange turns red”:
When it comes to distribution strategy, the company puts a great focus on the in-store experience. Thus, only a selection of Rouge Hermès shades was made available on Hermès e-commerce, meanwhile, a whole collection was presented in some Hermès stores around the world and few selected retailers, like Galeries Lafayette in France, La Rinascente in Italy and Neiman Marcus in the US.
Recommended reading: Hermès, Gucci and the Luxury Lipstick Wars
As the world prepares now for the global recession amid the coronavirus pandemic, we will see whether the “lipstick effect” is still true and whether the Hermès’s lipstick sales will cover for lost revenues due to temporary store closures.
Thanks for reading,
Asia Assanbayeva
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