Hermes. The scarcity trap.
Hermes Birkin bags have become so valuable they've outperformed the stock market for a decade, and now Hermes is doing everything it can to stop that. Its biggest success has become its biggest problem.
THE GIST ON HERMES: "The Scarcity Trap"
How do you buy a Birkin?
One does not simply walk up to Hermes and buy one. Buy enough belts, scarves, ties and ashtrays and maybe you'll be offered the chance. Demand outstrips supply, intentionally, so the bag became a status symbol that transcends wealth.
What went wrong?
The strategy worked too well and attracted the wrong buyer: people buying to flip at three times the price. So Hermes is fitting RFID chips into every bag, officially to stop counterfeits, but really to identify the false customers and stop them buying again.
Ferrari and Porsche do the same. Buy enough regular cars and you may be invited to buy a special one. On Autotrader there are more special edition 911s for sale than regular ones.
Can you have both?
The most exclusive products are now the most available on the secondary market. When you make customers earn the right to buy something, you make it worth earning, and worth speculating on. You create the desire and with it the financial logic for speculation.
These companies will admit it has made their brands more valuable. Every flipped Birkin is free marketing. But they want desirability without speculators, and you can't have both. The scarcity model only works while you control who wants it.
Is it fair to restrict who can buy a bag?
Your take. One tap, then see how everyone else voted.
Quick answers
How do you get a Birkin?
Buy enough other Hermes goods and you may be offered the chance.
What is Hermes doing about flippers?
Fitting RFID chips into every bag, officially against counterfeits, but also to identify resellers.
Which other brands do the same?
Ferrari and Porsche, according to Huw.
See you on the next one.
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