Which family firm turned over $5 billion in 2013 selling goods made entirely by hand?

The answer is Hermès.  There is a long profile of this company on the Forbes.com website, much of which is to do with the corporate structure of the company (which is complex) and family ownership (also complex).  However there are some great OM insights too.

First, I’ve categorised Hermès as a ‘manufacturer’.  But as Adams argues in her article, they might equally be regarded as a marketing company.  This is because they are able to sell their goods at extreme premium prices.  Indeed, second hand Hermès goods can sell for even higher prices!  They achieve this through their image and by actually making it hard for customers to buy their goods.  For instance, by selling some goods through only one of their 318 outlets – such as a $12,900 basketball exclusive to their Beverley Hills store.

Second, all their goods are hand made by 3,000 artisans, each of whom goes through a three day induction programme – ‘Inside the Orange Box’ – instilling the history and ethos of the Hermès brand.  This craftsmanship is at the core the brand.

Third, they are vertically integrated.  For instance, they own and operate two crocodile farms in Australia and an alligator farm in the USA, in order to assure the supply of skins.

Finally, they have a division devoted to making one off products – made entirely from production waste, such as unused swathes of silk or scraps of leather.


This entry was posted in Chap 02 Winning Customers, Chap 14 Operations strategy, Sector: Manufacturing and tagged , , , . Bookmark the permalink.

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