On January 1, 2025, Hermès officially increased prices across its product line, with an overall adjustment ranging from 5% to 12%. The Birkin 25 handbag, for example, saw a price hike of nearly 12%, breaking the 100,000 RMB mark. However, due to the brand’s “purchase allocation policy,” acquiring a coveted Hermès bag often requires customers to buy other products in proportion at the boutique. Amid a slowdown in sales, this “unwritten rule” has begun to loosen, with some entry-level models now available without allocation requirements. Industry insiders point out that while price increases and allocation strategies will remain effective for Hermès in the short term, as consumers grow more rational and less willing to pay premium prices, these strategies may lead to customer attrition, slower sales growth, and eventual limitations on further price hikes and allocation requirements.
Price Increases Exceeding 10%
Hermès has raised its prices again. Recently, the brand completed a price adjustment across various product categories. Some accessories experienced price hikes of nearly 19%, watches increased by 6%–10%, and handbags saw price increases of 5%–12%. The Birkin 25 handbag, for example, jumped from 93,900 RMB to 105,000 RMB—a rise of nearly 12%—breaking the 100,000 RMB threshold.
In recent years, price increases have become the norm in the luxury industry. According to data compiled by Beijing Business Today, Hermès has conducted several rounds of price adjustments in recent years, with the increases becoming progressively larger. In 2019, Hermès raised prices across the board by 3%. In 2021, the price of some popular items increased by 5.5%. By late 2022, price hikes ranged between 5% and 10%. On January 1, 2024, Hermès triggered widespread discussion with its price increases: the Mini Kelly bag rose by 10,000 RMB to 57,000 RMB, marking a 21.5% hike, while the Birkin 30 surpassed the 100,000 RMB mark. Hermès China attributed the price adjustments to its overall pricing strategy, which considers changes in the international and domestic business environment, exchange rates, taxes, and related regulations.
Hermès is not alone in raising prices. In February this year, Louis Vuitton increased the prices of some products in the Chinese market, with an average hike of 6%. Just five months later, Louis Vuitton raised prices again, this time by 5%–7%, marking its tenth increase in three years. Similarly, Chanel announced its first price hike of the year in March, with the price of its small Classic Flap bag rising by 16%. Chanel then implemented another increase in September, adjusting prices by 6%–8%.
Despite these price hikes, the luxury sector has faced underwhelming financial performance this year. LVMH Group reported a 2% year-on-year drop in sales revenue for the first nine months of 2024, totaling 60.753 billion euros. Third-quarter sales fell by 3% year-on-year to 19.076 billion euros. Kering Group’s third-quarter revenue saw an even steeper year-on-year decline of 15%, dropping to 3.786 billion euros. In contrast, Hermès outperformed its peers, with sales revenue for the third quarter of 2024 growing by 10.1% year-on-year to 3.7 billion euros. However, this growth was slower compared to the second quarter’s 13.3% and the 15.6% growth recorded during the same period last year. According to Hermès Executive Vice President of Finance Eric du Halgouet, the brand offset declining foot traffic by “increasing the average transaction value,” selling more jewelry, leather goods, and ready-to-wear items.
Resale Market Struggles to Keep Up
Currently, Hermès Birkin 25 and Birkin 30 bags are priced above 100,000 RMB. However, high prices do not guarantee easy access. When asked at a Hermès boutique about the availability of a specific handbag, a sales associate informed Beijing Business Today that the monthly allocation for that model had already sold out.
Several consumers with experience purchasing Hermès bags confirmed that acquiring popular styles often requires buying other products such as furniture, clothing, or accessories in proportion to the handbag’s price. For Kelly and Birkin bags, the “allocation” ratio is typically 1.5–2 times the price of the bag itself. This means that to purchase a Birkin bag priced at 105,000 RMB in a sought-after color, the total cost, including allocated items, could reach 200,000 RMB. Furthermore, lower-cost, non-leather items such as menswear or furniture tend to dominate the allocation list, diminishing the overall value for customers.
Although Hermès has never officially acknowledged the allocation policy, a search for “Hermès allocation” on Xiaohongshu (a Chinese social media platform) yields over 480,000 posts, with many consumers sharing their buying experiences. The allocated items often do not meet customers’ needs, ranging from a 140,000 RMB globe to a 36,000 RMB windmill or a 3,000 RMB flyswatter. Many consumers have ridiculed these items as “bizarre allocations.” Functional items with broader appeal, on the other hand, are often resold at a discount. For instance, accessories typically resell for 30%–60% of their retail price, while watches and menswear often fetch even lower prices in the secondary market.
It is worth noting that despite Hermès’ price increases, the resale market has not mirrored these hikes. According to Chen, a professional in luxury resale, “Price hikes at boutiques have little impact on resale prices. What matters is the popularity of specific styles in the resale market. If a boutique increases prices for less popular styles, resale prices won’t rise, and customers with allocation requirements will still lose money.”
This “unwritten rule” has sparked widespread consumer dissatisfaction. In March this year, Hermès faced a class-action lawsuit in the United States over its alleged allocation policy. U.S. consumers argued that tying handbag sales to the purchase of other products violated relevant laws. Similarly, in January, Global Finance News reported a case in which a customer claimed they had to buy 1.4 million RMB worth of Hermès merchandise to secure a handbag, only to be told the bag was “out of stock.”
Allocation Policies Loosen
Against the backdrop of slowing sales growth, Hermès’ allocation policies have begun to relax. Recently, many consumers on Xiaohongshu have shared experiences of purchasing Hermès bags with “zero allocation” or reduced allocation requirements. According to Chen, a long-time Hermès customer, “Since the beginning of this year, the overall cost to obtain a standard leather Birkin bag has dropped to around 180,000 RMB, down from the usual 200,000 RMB. Entry-level bags, such as the Picotin and the Evelyne, can sometimes be purchased without allocation requirements.”
Sltrendshop Institute Director Zhou Ting noted that while allocation policies remain in place, instances of non-allocation purchases are increasing. These are primarily seen during promotional events or when new, high-quality customers are involved. Fashion industry expert Zhang Peiying observed that “in 2024, many entry-level bags could be purchased without allocation requirements, signaling a lower entry threshold overall.” Such measures naturally boost leather goods sales and drive the performance of allocated items.
Hermès has also been ramping up production. In September this year, the brand opened its 23rd leather workshop in France, employing 250 trained artisans to further enhance production capacity.
Zhou Ting believes that Hermès leverages its brand power and consumer demand to enforce allocation policies through hunger marketing. Price hikes serve to enhance brand image, solidify its leading position, and achieve higher profits to balance rising costs. “However, as consumers become more rational and less willing to pay premium prices, these strategies will inevitably lead to some customer attrition, reflected over time in slower sales growth and limitations on further price increases or allocations.”
To maintain its brand advantage, Zhou suggests Hermès continue to focus on high-end positioning while innovating products and services to attract customers beyond marketing tactics. Additionally, the brand should leverage digital tools to enhance customer experience and operational efficiency while further expanding its channels.