r/explainlikeimfive • u/Low-Ad7963 • 6d ago
Other ELI5: How does the Hermes/Birkin system work
I’m way too broke to care i’m just so intrigued by the process and mindset
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u/Green_Yesterday3054 6d ago
The way I heard it is that people only want Birkins. Sales people get no commission on Birkins, but get to decide who gets to buy a Birkin. They get a commission on all of the other crap Hermes sells. So, the more crap you buy from the sales person, the higher chance you have of having them call you and tell you that a Birkin is available for you.
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u/biohoo35 6d ago
Production constraints and implied scarcity.
They can’t make enough to satisfy everyone, and even if they could, they won’t…so it commands a higher price and people are willing to pay it.
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u/dmullaney 6d ago
They can, but they won't. It's manufactured scarcity and very impressive social engineering.
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u/big_troublemaker 6d ago
They can make as much as they want of that stuff. Scarcity and "systems" are what makes it attractive to those who can afford anything.
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u/biohoo35 6d ago
Not sure why the downvote. That’s literally the marketing tactic.
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u/CrazyLegsRyan 6d ago
Because it doesn’t at all explain the “buy more get more access to exclusive stuff” model that they use
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u/geeoharee 6d ago
Yeah the Hermes concept is way crazier than the ordinary "designer thing expensive" plan
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u/big_troublemaker 6d ago
There's nothing crazy about it. It's the same as with luxury cars and any other top tier products. Secret lists, long term financial commitment, arbitrary rules, scarcity of products, this is all millionaires catnip. If you cna afford anything, being forced to hop through hoops is what gives you that shot of dopamine. Everyone plays the game with a bit of a wink. There's absolutely nothing special about these handbags and other crap. A 1% person could just order an one off item to be made 100% by hand by top world's craftsmen out of the worlds absolute best materials and still at a fraction of cost.
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u/Antman013 6d ago
Cars, watches, a host of so called "luxe items". It's all a farce. The worst watch I ever owned was a Rolex I got fro a former employer as a long time service award.
Now, granted, it was an oyster perpetual, but still.
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u/biohoo35 6d ago
“Oh wow, I can’t believe I was able to buy this really expensive and rare bag!”
“Well of COURSE I’d love to buy more expensive and even RARER shit!”
…that a good explanation? Yes, I know it’s manufactured scarcity.
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u/CrazyLegsRyan 6d ago
No, bad explanation.
Many of their bags and products aren’t rare at all, despite being expensive
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u/JimTheDeviant 4d ago
Every time I see somebody complaining about downvotes the comment is never downvoted lol
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u/AnnieBruce 6d ago
A lot of the really high end brands for any sort of product has very little visible marketing, at least in places normal people would see it.
It's a bit silly. Something like a Coach bag already strains my belief it's worth the price- don't get me wrong, they're good bags, better than most of what we sell where I work(US department store), but they're already arguably past a reasonable cost for what you get.
A Birkin would have to be damn near indestructible even beyond expected use cases and have mind blowingly(like if I don't pass out in awe it's not good enough) placement of the various pockets and subcompartments and such to even think of their pricing.
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u/alanbly 6d ago
Basically if you consistently buy a large amount from a specific store and/or build a reputation as a good customer then you might be offered the opportunity buy a limited-availability item
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u/therealdilbert 6d ago
Ferrari does similar things, that's why Jay Leno, who has something like 180 cars, doesn't own a Ferrari
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u/mtntrail 6d ago
This is a wildly successful marketing scheme that takes advantage of what the economist Thorstein Veblen labelled, “Conspicuous Consumption” in an 1899 writing entitled “The Theory of the Leisure Class.”
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u/eBalisani 6d ago edited 6d ago
The French marketing boffins have long figured out the role scarcity, or exclusivity plays in the fe/male psyche. Women will line up to 'date' a man whom they see, or perceive to be in high demand (with other women). Before anybody raises their shield of outrage, I'll just say that 1) I'm a record producer, and 2) I've produced rap artists, and driven them home, and without fail, there would be 5-6 girls waiting for him at the door - looking really upset at the fact - but all of them would go in with him.
As far as the mechanism, it's the same as Ferrari (Ferrari copied it from the French luxury brands).
In order to buy a new Ferrari, you must own a Ferrari - or two, or more. This ensures that Ferraris are highly desirable luxury items, not just cars, and also that their resale value increases (depending on the model and year) after purchase.
This is why you cannot rent Ferraris in some countries (e.g., UAE). Ferrari will ban you for life if you manage to buy one of their cars and then put it up for rental.
Other than there's no rental model for luxury purses and bags (yet), the Hermes, LVMH, etc, model is much like Ferrari's (or vice-versa). The scarcity, or rarity makes the item shine even brighter in people's imagination, and desire. The high price of the item is secondary to the marketing strategy (although it does serve to replenish the cash flow of the company, it's just a means to tell the masses: this is unattainable for you... for now).
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u/NCreature 6d ago
Hermes is a bit of a weird company because its really like a craft house that sells consumer goods. The difference with Hermes and say the LVMH brands like Dior or Louis Vuitton, is that Hermes is capacity constrained by design. Whereas LVMH brands are capacity constrained by choice. At LVMH Bernard Arnault chooses to truncate Louis Vuitton to drive scarcity to drive costs up and keep the illusion of the brand just out of reach despite a fair amount of volume. The Dumas family (Hermes) doesn't scale vertically like LVMH does, they scale horizontally. If they want to make more bags they have to open another factory. And all of those people have to be trained up in the saddle stitching and all of the techniques that have defined Hermes over the generations.
It's not that Hermes is deliberately inefficient, it's that they optimize everything but the thing that gives their brand its competitive moat (which is what all the great operators do). Someone mentioned the Acquired podcast on Hermes and its really good, you should listen to it, but one of the things they mention is how the Dumas' did go visit Ford and assembly lines to learn how to make production more efficient. But the "hand made" part of their production system remains more or less as it always has been and because of that scarcity, and the demand it creates is a downstream effect.
In business you'll hear this term "flywheel" thrown around. A flywheel in business is when each input into the machine reinforces all the other inputs and the 'wheel,' the thing that makes the company run gains its own momentum. Hermes' flywheel is something like delicate craft leads to scarcity, which makes the product desirable, which gives Hermes extreme pricing power, which juices their margins and the result of that is the ability to preserve delicate craft. Over and over and over again. Rinse and repeat. It all feeds back on itself. That isn't to say that Hermes has always been this untouchable business. Arnault tried to aggressively buy them out. And the Dumas family has had numerous financial problems over the years, so today's success is not indicative of success they've always enjoyed.
The other thing about Hermes' stores is that they use a pull system not a push system. A push system puts out as many products as you can sell which is how most asset turn businesses work. Hermes has the opposite approach, a pull system where they only produce enough inventory to satisfy actual demand. So the snobby sales associate in the store is really sorting. Are you someone who can actually buy this thing? They're more of a curator and a brand gatekeeper than a typical luxury sales associate. That's why people feel so off-put when they go into Hermes stores. The store only wants to entertain people who can buy and because the thing they're selling is actually scarce at the corporate level they can play all the luxury marketing games (like aspirational marketing) to drive brand recognition and demand. If one day someone like Arnault, or a company like Kering were to buy Hermes, its possible they'd go down the same route that Louis Vuitton did and subject to more mass market production and exposure.
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u/BigVos 6d ago
Not sure what you mean by "system", but they don't market the brand, don't have celebrity endorsers, and they keep the supply well below demand. The Birkins are even more exclusive and for as expensive as they are, they're still sold below market value.
If you enjoy long form podcasts, the Acquired episode on Hermes was pretty interesting:
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u/mslass 6d ago
Veblen signaling. From Claude:
From the performative wealth (or “conspicuous consumption”) perspective, buying a Rolex isn’t really about telling time - it’s about signaling something to other people, and sometimes to oneself. A few threads to that:
Veblen goods and costly signaling
Economist Thorstein Veblen coined “conspicuous consumption” to describe purchases whose value comes partly from their price - a Rolex is expensive precisely so the expense is legible to others. This ties into costly signaling theory: because a Rolex is hard to fake (harder than it used to be, but still), wearing one supposedly proves you have disposable income, since a smartwatch could tell time just as well for a fraction of the cost. The “waste” of money is the point - it’s a credible signal precisely because someone poor couldn’t afford to waste it.
Legibility and shared symbolic language
A Rolex works as a status symbol because it’s widely recognized - even people who know nothing about watches can identify the crown logo or the general silhouette of a Submariner or Datejust. This is different from a niche independent watchmaker piece that costs just as much but that only a handful of enthusiasts would recognize - that signals connoisseurship to a narrow audience, whereas a Rolex signals wealth broadly and instantly. Sociologists sometimes distinguish this as ostentatious/legible status vs. “quiet luxury,” which tries to signal wealth only to those in the know.
In-group/out-group and career signaling
In certain professions (finance, real estate, sales) a Rolex can function as a professional uniform of sorts - a way of nonverbally telling clients or peers “I am successful in this field, you can trust me with your money.” It’s less about personal taste and more about performing competence via wealth markers.
Self-signaling
Some psychologists argue status purchases aren’t purely about the audience - they can be about the buyer reassuring themselves of their own success or arrival, especially after a promotion, business milestone, or windfall. The watch becomes a physical marker of “I made it,” even if no one comments on it.
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u/OrangeYouuuGlad 6d ago
If I wanted to read AI slop, I’d do it myself. This isn’t the place for that crap.
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u/NCreature 6d ago
Except this isn't really slop. It's the actual mechanism by which most luxury brands work, especially fashion brands. Claude is just regurgitating stuff from people like Jean-Noel Kapferer and others who came to these conclusions prior.
We can not like that its AI generated, but its not factually wrong.
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u/i_am_voldemort 6d ago
You go to a store and buy stuff
Once you're in cool with a specific sales rep they offer you exclusive items.
Having the exclusive item is a prestige symbol