Hermès US chief sees future beyond “Birkins, Kellys, scarves”

Hermès is thinking local as it grows its retail network in the US and is looking to expand business in lesser known product categories, as Bob Chavez, the brand’s Americas chief executive, explains.

By guest author Christina Blinkley from Vogue Business.

Downtown Princeton, a quaint New Jersey town best known for its Ivy League university, will get its own Hermès store next year. It will be located near the university on Palmer Square to be convenient for students, their parents and anyone in town for events. It represents a fresh new US retail strategy for Hermès. “It’s going to be a small, charming store,” says Bob Chavez, chief executive of the Americas.

He also hopes that a recent surge in sales at Hermès of some of its lesser known product categories, including homewares and watches, will be further fuelled by the new store. Chavez says he has spent years trying to push beyond the Paris house’s core business, which he refers to as “Birkin, Kelly, scarves. Birkin, Kelly, scarves. Birkin, Kelly, scarves.”

The rapid social and economic evolution of the past two and a half years led Chavez to re-evaluate his plans for Hermès stores and the product lines they carry. When tourists disappeared from flagships, the ultra-luxury brand discovered that its local and regional clients were interested in exploring beyond the bags and scarves for which Hermès is best known. And, while online sales for Hermès in the US have more than doubled from 6 per cent of revenues before the pandemic to 14 per cent, according to the brand, Chavez discovered that clients were likely to make more purchases if they could easily get to a store. “We’ve realised customers want that localised convenience,” he says. So, Hermès is opening new stores in outlying communities outside of big global shopping destinations where there are pockets of wealth. Chavez says he’s either opening or looking for store locations in Aspen; Austin and San Antonio, Texas; Tampa; Nashville; and Minneapolis. He’s keen on adding a store in Brooklyn’s Williamsburg neighbourhood too. There are other surprises on his wishlist, including Portland, the Oregon city known more for its crunchy hipster vibe than Birkin-toting residents. “We’re not afraid to be pioneers,” Chavez says.

Coming up this spring is a store in Topanga, a suburban locale just north of Los Angeles that is also known for residents’ hip lifestyles. Hermès is finding pockets of wealth in all these communities, often linked to tech, media and other industries whose executives and employees appear ripe for the brand — and in particular, are ready to buy more deeply into Hermès’ product lines than its bags and silk scarves and ties.

Homewares and watches show potential

Chavez sat down for an interview the afternoon before Hermès announced the sort of quarterly earnings that caused executives to break out the champagne. First quarter revenue grew 33 per cent globally over a year ago. (The weak spot was Japan, which grew by 17 %.) Sales of watches — up 62 % — and homewares were among the primary drivers of the growth.

Homewares and watches aren’t among the leading products for which Hermès is known. Nor is ready-to-wear, despite the company’s high-profile shows at Paris Fashion Week. The clothes draw much less consumer awareness than the luxury brand’s enamel bangles, silks and bags.

However, during the pandemic, homewares became a driver of the company’s growth in the US. In the first quarter, Hermès sales in the Americas outpaced its global growth rate, up 44 % from a year ago. Sales of blankets and pillows saw a “massive” increase in sales, Chavez says. “Our porcelain sales just exploded. I’m convinced that people were suddenly eating three meals at home and wanted to upgrade their dishes,” he says.

Chavez says that momentum validated his instincts based on his experience working in homewares at Bloomingdale’s nearly a quarter-century ago. Bloomingdale’s had a booming homewares business, and he says he pressed for it at Hermès to the surprise of the company’s Paris-based management. “Even Paris was like, why are you focusing so much on home?” he says. “Now we have a booming furniture business. It started off niche and now we can’t make enough.”

The West coast is the fastest growing region for Hermès’s US revenue, Chavez says. It’s also been his learning ground for new store strategies.

For many years, the company focused on large footprint stores in urban centres or ultra-luxury malls. Some of those continue to grow. Needing more space for space-hogging products such as footwear and dishes, Hermès recently moved to an expanded 11000-square-foot space, from a 7000-square-foot spot at South Coast Plaza, an Orange County, California mall well known for its luxury brands.

The Seattle experience

Chavez says Hermès began to discover the power of being embedded locally after opening a store in Seattle in 2009. The company at the time didn’t have a store on the West coast north of San Francisco. Chavez was nervous about opening in a city known more for the casual lifestyles of its Birkenstock-wearing residents than as a hub for luxury. So the company tested the waters with a small 3300-square-foot space in Bellevue, a wealthy suburb.

Within less than a year Chavez had begun planning to move to a 9000-square-foot space in order to accommodate demand. Much of the business came from tech executives — Microsoft is one of many tech companies based in Seattle. But the annual meeting of managers at Costco, which is also Seattle-based, turned out to be another big week for Hermès sales.

In 2018, the company took another risk, opening a store in the tech hub of Palo Alto, 35 miles from San Francisco, where locals are known for wearing items such as Patagonia fleeces to the office. “That was an immediate success,” Chavez says of the store. Suddenly, tech bros and other clients were shopping in the store several times a week as they passed by. It was vastly different shopping behaviour than when the same clients had to travel into the San Francisco store. “Palo Alto taught us a lot,” Chavez says.

It’s the bubblegum approach to retail sales: Place the product in a convenient place, like by the cash register, or near home, and the sales will come.

Now, as he turns his focus to the village downtown of Princeton, New Jersey, Chavez is familiarising himself with the local institutions and social calendar there in minute detail. “I don’t know how well you know Route 1, which feeds into Princeton,” he says. “You have a lot of pharmaceutical companies that are headquartered there, and they come into town to go to dinner, or the university’s cultural events at McCarter Theatre Center. All of a sudden there’s Hermès and you’re thinking, my niece will get a pair of shoes or I want to buy a gift.”

And that’s not all. “Princeton has a huge alumni association,” Chavez adds cheerfully. “Reunions are massive at Princeton every year in June.”