The handbag that money can’t buy

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With the price of a Hermes Kelly bag starting at $11,200 (The Herald Sun, 24th April 2016, p15), one might expect that a Hermes sales assistant would be pouring all over you, should you have the wherewithal to purchase one. But no, you’re likely be told you’re not ‘allowed’ to purchase one…well, not if your strategy is simply to ‘hand over the cash’. There is a much higher price you need to pay should you wish to own an iconic Hermes Kelly or Birkin bag.

Hermes have taken the luxury brand attributes of ‘exclusivity and tight control of distribution’ (Okonkwo, U 2007, p. 105) to new heights with their Kelly and Birkin bags. “Ordinary women are banned from purchasing them unless they have already spent thousands of dollars in Hermes and built up a relationship with a sales a2AE91B8000000578-0-image-a-54_1461541603356ssistant” (The Herald Sun, 24th April 2016, p15). Even then, according to various blog sites which compare and provide pricing details for the exclusive bags (purposely not readily available on the Hermes website), your annual quota is limited to two Hermes bags per annum, of which only one can be a Kelly or Birkin (should you be so lucky to find a store which actually has one in stock).

“Scholars argue that the true meaning of a luxury lies in its uniqueness, rarity, and the inability of the masses to obtain it.
” (Dubois & Paternault, cited in Kastanakis, M, & Balabanis, G 2012, p1399). Attributes of rarity and exclusivity are certainly coveted by Hermes customers (and collectors) and Hermes gives these VIP customers what they want; a product that others can’t have. A Hermes Birkin bag is the epitome of the status symbol worn proudly by the likes of Lady Gaga, Op337E95E900000578-3556882-Celebrity_fans_Victoria_Beckham_clearly_has_the_connections_to_g-m-5_1461571457316rah Winfrey, Victoria Beckham and (of course) The Kardashians;  a badge of wealth, for want of a better phrase, for the super-rich.

For some products, premium pricing is an indicator of quality (Kotler, P, & Keller, K 2012, p. 410). Additionally, for some consumers, the higher the price, the more appealing the purchase (Iacobucci, D 2013, p 116). In contrast to the standard demand curves that see demand decrease as prices increase, for many luxury items, the higher the price, the higher the demand until a threshold is eventually reached that starts to see demand slow. Marketers and retailers of luxury goods would typically seek to find this optimum threshold point. Hermes, however, appears to be turning even this on its head with a pricing strategy that, one could argue, has pushed past this point to slow overall demand, and in doing so, increase demand from its very high-end target market. A key component of this strategy is the clever measure (tactic) of restricting and ‘holding back’ the product from customers.

Although it could be (weakly) argued that the stratospheric pricing and long waiting lists are due to the use of premium quality raw materials and the lengthy time (up to several days) for a single artisan to hand craft each double stitched bag, the additional restricted supply to ‘approved customers’ is no doubt part of a clever plan (tactic) to ward off what Kastanakis, M, & Balabanis, G describe as  ‘bandwagon luxury consumption’ (2012, p 1399). For the aspirational buyer looking to join this elite set of Birkin and Kelly bag owners, the cost is extremely high. There are even guidance sites providing strategies on how to get your hands on one. Others have resorted to more extreme measures… Hermes handbags worth $1 million stolen from Brighton home.
There are of course those buyers for whom social status needs do not play any role in their purchase of these conspicuous products (Zheng, J, Chiu, C, & Choi, T 2012, p 827). Purported to be a better investment than gold  a brand new Hermes Birkin bag appreciates in value as soon as you step out of the gleaming store door. In January this year, a particularly rare and diamond studded Birkin sold for $US298,000 ($389,000), breaking the previous year’s record for a resold handbag of $222,000, which was also a Birkin.

Needless to say, if you do manage to make it onto the Birkin or Kelly waiting list or, lo and behold, to the point of sale in a Hermes store, far from expecting to be lavished with attention from the sales assistant, the Hermes marketing mix will no doubt have worked its magic and you will instead be thinking yourself extremely lucky to have the opportunity to spend $11,200 on a handbag! Plus you have reached the easy bit; your cost in getting to this point has far exceeded what is about to hit your Amex card.

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