While achieving the best results in 185 years, Hermès' new predicament has emerged. According to fashion business news, Hermes recently released the 2021 fiscal year performance report. In 2021, its revenue rose by 42% year-on-year to 8.982 billion euros, a record high. Surprisingly, under such a positive performance, the sales of the leather goods and saddlery department where the platinum bag is located in the fourth quarter unexpectedly fell by 5.4% to 1.015 billion euros, which was larger than the 2.3% decline expected by analysts, causing widespread concern. The financial report also shows that the leather goods and harness business accounted for 46% of Hermes’ total revenue in fiscal 2021, a decrease from 50% in 2020, followed by ready-to-wear and accessories, which accounted for 25% of total revenue. , compared with 22% in the previous year, and other departments covering jewelry and home furnishing are the third largest business of Hermès, accounting for 11%, which is also higher than 10% last year. At the same time, the revenue of perfumes, watches, silk fabrics and other products accounted for 4%, 4%, 7% and 3%, respectively, with no significant changes compared to 2020. The perfume department includes the new lipsticks launched by Hermès. and other beauty business. However, boosted by the strong growth in the first three quarters of last year, the revenue of the Hermès leather and harness division in fiscal year 2021 still rose by 28.9% year-on-year to 4.091 billion euros. Some people in the industry pointed out that, stimulated by the two major festivals of Christmas and New Year's Day, consumers' shopping and gift-giving demand surged. The fourth quarter is often the best quarter for luxury brands to sell each year. Sources, a bucking decline in the segment's fourth-quarter revenue could worry investors. Hermès CEO Axel Dumas also admitted in the conference call after the earnings report that the brand's fourth-quarter performance was disappointing, mainly due to the failure of the supply of handbag products to meet demand, but he believes that a single quarter decline does not mean that there will be more changes in the future. Broad decline, "It's hard to make an accurate forecast right now, but the trend remains unchanged in my opinion." Axel Dumas said that although Hermès has been setting up new workshops to increase production capacity in recent years, in order to protect the scarcity of luxury brands and ensure the craftsmanship value of products, Hermès will strictly control the output of core products and limit the growth of leather goods production. between 6% and 7%. There have also been previous reports that Hermes has not destroyed a single inventory since 2014, and sold 39,000 upgraded products in 2020. Last year, the brand also opened a "idea laboratory" Petit H in Paris, which is mainly responsible for the development and production of new clothing, accessories and other products by selling leftover materials or leftovers from other Hermès departments. Axel Dumas especially emphasized that it is precisely because of its insistence on manual production that Hermes faces relatively little inflationary pressure caused by factors such as increased energy costs, and the only pressure comes from the increase in wages of artisans who make platinum bags and Kelly handbags. price increases to create growth strategies”. According to an earlier report by WeChat public account LADYMAX, the price of Chanel’s classic handbags has increased by 60% in the past three years. The price of the small Classic Flap handbag in Europe surpassed that of Hermes platinum bag in November last year. Louis Vuitton and Gucci also Recently, the prices of most products have been raised by about 10% to 20% due to the increase in raw material and manufacturing costs. Even in 2020, when the epidemic was the worst, Hermès only made one price adjustment, and completed a new round of price adjustment on January 1 this year. The average global price increase was about 3.5%, although it was higher than the previous 1.5%. , but well below competitors such as Louis Vuitton and Chanel. In an interview with CNBC, Axel Dumas re-emphasized that the brand will not have plans to sharply increase prices or frequently increase product prices to maintain performance growth in the future. The confidence of Axel Dumas may come from the enthusiastic pursuit of Hermes in China. He revealed at the meeting after the earnings report that Chinese consumers, represented by millennial consumers, have significantly increased their attention and purchase rate of Hermès in the past year. Last year, 80% of Hermès Chinese buyers were millennials. The official e-commerce website has become the best platform for Hermès to attract new consumers. Therefore, Hermes, which has always been extremely cautious about opening stores, made frequent moves in China last year. Following the Beijing International Trade Store in the spring, Shanghai 66 Plaza and the brand's Hermes stores in Suzhou and Ningbo have been expanded, and new stores have been opened in Macau and Shenzhen. Thanks to this, China has become one of Hermès' performance growth engines, driving the Asian market's revenue to rise by 40.2% to 5.227 billion euros last year, accounting for 58% of the total revenue, but also because of the demand of the main group of Chinese consumers. To be satisfied, the Asian market of Hermès in the fourth quarter performed the worst, with sales only recording a 5.7% increase to 1.292 billion euros, a sharp slowdown from the double-digit growth in the first three quarters. Some analysts pointed out that whether Hermes admits it or not, the decline of the leather goods business in the fourth quarter against the trend is not unrelated to the brand's over-reliance on the classic product of the platinum bag. As early as last April, when the market value of Hermes broke the 100 billion euro mark for the first time, some people in the industry raised concerns about the market value of "whether the platinum package can support 100 billion euros". The logic is not complicated. Under a series of strategic measures such as shadow marketing, high price positioning, limited supply and permanent monopoly, the high threshold set by Hermès for platinum bags makes this handbag irreplaceable in the hearts of the target audience. According to the theorem of supply and demand, the circulation value of platinum bags in the market continues to rise, and it has remained at a high level in the value of handbags for 36 years, and has gradually become the object of investment appreciation. On the surface, with the desire for platinum bags, consumers will be willing to buy other Hermès products in order to get the handbags in their minds, thereby driving the improvement of overall performance, but this is also a fetter for Hermès. Once the shortage of supply reaches a critical point, consumers' demand for Hermès platinum bags will shift rapidly, and attention to other Hermès products will also decline, which will affect the brand's performance. In the second half of last year, consumers raised placards at the gates of Hermès China Shanghai IFC and Beijing SKP stores, saying that they could not get their favorite handbags after “required” by the brand sales staff. The number of likes, forwards and comments on Douyin for related videos has exceeded 10,000, and the number of playbacks has reached 460 million. From a product point of view, the irreplaceability of platinum handbags comes from the scarcity of the product, and its scarcity depends largely on leather. Even though the alligator leather handbag has been criticized, it still determines the top line of the Hermès brand. What makes Hermès even more vigilant is that with the rise of the concept of the metaverse, the platinum bags created by artists in the virtual world are also competing for its share. Recently, Hermès officially launched legal proceedings against digital artist Mason Rothschild, because Mason Rothschild sold about 100 virtual handbags called "MetaBirkins" in the virtual market Basic. The platinum bag is the same, and the single price is 250,000 yuan, far exceeding the official price of the platinum bag. In order to avoid a similar situation from happening again, Hermès not only asked for compensation, but also an injunction against Mason Rothschild’s NFT, delete all product examples, and hand over the domain name of the MetaBirkin website to Hermès. Although Basic.Space has removed the relevant information of MetaBirkin, MetaBirkin's Instagram account has more than 20,000 followers, and it can still link to the address of purchasing a series of NFT products. Mason Rothschild also publicly stated that he did not manufacture or sell fake platinum bags, but only sold his own creations of art. Axel Dumas mentioned at the financial report meeting that Hermes will not enter the virtual market for the time being, and will continue to focus on "the figurative expression of handmade objects". At the same time, Hermès is trying to divert consumers' attention from the Birkin to other products, especially the beauty business that is recognized by the industry as a "stepping stone" for luxury brands. Following the launch of lipstick and blush products in 2020, and the launch of nail polish and hand care products at the end of last year, Hermès is planning to further expand its beauty business, and will release its first facial in March, according to sources quoted by Fashion Business Express. Base makeup series, covering liquid foundation, powder cake and loose powder brush and other products, is divided into 12 shades. Last month, Hermès also officially issued a statement announcing Greek makeup artist Gregoris Pyrpylis as the creative director of beauty makeup. After taking office, Gregoris Pyrpylis will work with Agnès de Villers, the head of the brand's fragrance and beauty, and the global artistic director Pierre-Alexis Dumas. Under the artistic direction of , promote the development of Hermès beauty business. In addition, Hermes' share in the field of digital products is also expanding. In addition to cooperating with Apple to launch smart watches and straps, it also recently launched power banks, which are divided into mini and super large. Fitness has also been used by Hermès as the theme of pop-up events many times last year, aiming to generate new emotional connections with consumers. As for the supply of platinum bags, Hermès said that it will open two new leather products factories in Guyena and Montero, France as planned this year, but will not relax its high requirements for product quality, "making a Hermès bag requires 15 hours, even if the demand is high, we do not intend to reduce the working hours to 13 hours to increase production”, says Axel Dumas. Since 2010, Hermès has opened 9 leather goods factories in France and recruited more than 2,500 craftsmen, with an average of 400 new workers per year in recent years. It is reported that Hermès' leather goods department has more than 90 artisan trainers who will train apprentices for more than a year, including skills training and guidance for preparing and taking the CAP tanning exam. In September last year, the brand opened a leather processing training center in the Fitilieu leather workshop in Isère, France. This is the brand's first training center recognized by the French National Education Agency. In all leather workshops. What is certain is that in 2021, when luxury brands generally rebound strongly, Hermes' high opening and low walking will sound the first alarm bell in the luxury fashion industry this year. Citibank bluntly stated in the report that Hermes, as the head luxury giant that announced the fourth quarter and full year results of last year at the latest, did not achieve the same strong ending as LVMH, Kering Group and Richemont Group, which will disappoint some investors. . Wall Street Journal analysts pointed out in a report earlier this year that Cartier's parent company, Richemont Group, which was the first to publish performance data for the last quarter of last year, may replace Hermes as the most stable luxury goods giant this year. In the three months ended December 31 last year, Richemont Group's sales rose 35% year-on-year to 5.66 billion euros, an increase of 32% at a constant exchange rate, far exceeding market expectations and also recording a record compared with the same period in 2019. 36% and 38% growth. At the same time, LVMH's fashion leather goods division and Kering's revenue also recorded growth of 28% and 35%, respectively. The latest "2021 China Luxury Market Report" released by consulting agency Bain predicts that the growth rate of China's luxury goods market will further slow down in the first half of 2022. In November, Goldman Sachs had cut its 2022 growth forecast for luxury goods sales to 9% from 13.5%. On the whole, as the only head luxury goods industry still controlled by the founding family, Hermes is still unwilling to touch the interests of the core business, and will continue to bet on platinum bags in the longer-term development. As of the close of last Friday, Hermès’ stock price fell by 7%, the largest one-day drop since September 2016, with a market value of about 125.9 billion euros.