From the world of high fashion comes the news that Bernard Arnault, the force behind the Moët Hennessy Louis Vuitton empire has his eyes on his next big acquisition: the world renowned luxury brand Hermès.
Hermès is reportedly not thrilled with Mr. Arnault’s attention. Hermès describes itself as a company that focuses on refinement and creating beautiful things: a vision that they believe is counter to the approach seen at other companies under Arnault’s control.
“We don’t want to be a part of this financial world which is ruining companies and dealing with people like they are goods or raw materials,” said Mr. Thomas, a Hermes chief executive quoted in the New York Times article earlier this month. “It’s not a financial fight, because we would lose that. It’s a cultural fight.”
Hermes’ leadership has expressed worries that while Arnault’s leadership could indeed make the company more profitable, his proposed changes would alter Hermes’ identity in the marketplace. Once that happens, Mr. Thomas said, “People will say that Hermes is not what it used to be.”
A sentence like that can indeed be the death knell for a successful established brand. Companies such as Volkswagen and Apple invest significant resources into ensuring that the public perception of their brand is one of continual improvement.
Harley Davidson, now a dominant organization, was once in peril of going out of business when the bikes they were delivering failed to meet their best customers’ expectations. The effort to cut costs and corners in order to ensure greater profitability is one that Hermes fears that Arnault—who is now a significant investor, but does not have majority control—will try to impose on the company, with the same result.
At the heart of this battle, we see a great conflict: traditional values and aesthetics going head to head with a more modern, financially-aware approach to the world of fashion. Hermes has thrived and achieved their respected position by focusing their efforts on those customers—and only those customers—who value and can afford the extravagant wonderfulness of their offerings. They’ve never tried to produce bags for everyone; after all, as a particularly catty fashionista was heard to say, that’s why there’s Coach.
Knowing who you are, as an organization, is critically important. That importance is matched by the essential imperative that your customers share that same vision of who you are. If Hermes’ perception of themselves as a purveyor of luxury goods to the most well-heeled customers is in alignment with their customer’s perception of the brand, everything’s good. Those customers will continue to support the brand in the accustomed fashion, and Hermes will be able to keep Arnault at arm’s length.
If, however, the two sets of vision aren’t in alignment, whether through Mr. Arnaults’ machinations or a shift in consumer tastes, then Hermes has a problem. In a world of luxury, no organization can afford to become divorced from the reality of what their best customers want and value the most.
Understanding the psychological drivers of consumer behavior is the only way we’ll be able to tell who has a better handle on the handbag situation: Hermes, which wants to stick with a proven formula of success, or Arnault, who insists you can offer the best to more buyers without impacting quality.