Hermes can no longer move its products either. Hermes International SA (ASX: HESAY) recently released its third-quarter report for 2026, showing revenue grew only 4.3% year-on-year, the slowest pace since early 2020 and falling short of market expectations.
On the earnings call, the CFO directly acknowledged that as the brand's largest single market, China is currently facing a very difficult market environment. Overall performance barely held flat, but foot traffic declined noticeably, especially in the ready-to-wear segment. Watches and accessories came under明显的 pressure, with only core leather goods managing to sustain double-digit growth, offsetting the decline in foot traffic through high average transaction values.
Domestically, multiple Hermes consumers have said that existing customers with purchase records at boutiques can now frequently walk away with hot bag models at zero bundle, something that was previously unthinkable. Some also believe that Hermes product prices have indeed risen exorbitantly, which amounts to a disguised form of bundling. Seasoned Hermes collectors bluntly state that Hermes' crisis lies in four to five consecutive years of steep price increases, with annual adjustments of 10% to 13%. This blind price hiking may reflect expectations that were set too high for the market. To cater to the new generation of consumers, lowering purchase requirements is the reasonable move for Hermes.
A more intuitive change is that the attitude of Hermes sales associates has shifted. Some consumers report that sales associates will even proactively ask "Is there any bag you'd like?" whereas previously they were very aloof. Meanwhile, the once-booming Hermes secondary market has seen prices plummet. Some merchants say that over 60% of secondhand Hermes bags are experiencing sharp price drops. Analysts believe that "the current situation of zero bundle or minimal bundle at Hermes is essentially the market's choice, and the entire market's balance has shifted significantly." Notably, Hermes officially has never acknowledged the existence of a "bundling mechanism."
No Need to Bundle When Buying Hermes
Hermes' big three, the Birkin, Kelly, and Constance, along with the entry-level star product Picotin, have long been the hardest-hit areas for bundling. Bundling is commonplace for buyers, and consumers even find it somewhat abnormal to purchase these star products without bundling. "Around Chinese New Year, you had to bundle over ten thousand yuan worth of goods to buy a Picotin, and now just a lipstick is enough? You don't even need to bundle," some consumers said, puzzled by why Hermes "changed face" so quickly.
Bundling essentially means a form of tied selling, where if you want to buy an item you desire, you need to purchase a set proportion of other items to get what you want. Hermes has its own set of unwritten bundling rules. All along, besides the Birkin, Kelly, and Constance, the Picotin has long required bundling as well. Bundling ratios vary by region. Seasoned individuals note that domestically, the coastal regions have a ratio of roughly 1:1.2, while inland areas are around 1:1.25. Due to the massive population base, for years, purchasing Hermes in mainland China has required the most money and time relatively speaking.
In fact, studying Hermes' bundling rules has even become a discipline, with many people summarizing their experiences. For example, Hermes' best-selling scarves, porcelain, H sandals, and H jewelry are all recommended purchases, as these items have high discount rates, good resale values, and can be resold or kept for personal use. Caution is advised when buying ready-to-wear and watches, which have excessively high unit prices and low cost-performance. Some even conclude that building a long-term relationship with sales associates makes it easier to secure goods, with relatively stable spending amounts each time.
Now, the attitude of Hermes sales associates has changed. Some consumers bluntly say that associates will even proactively ask, as prices are about to rise, if there's any bag you'd like, "whereas previously they were very aloof." A 17-year veteran Hermes collector, "Xi Ma Zhi Ren," told BUG that Hermes' bundling system is actually not rigorous in the domestic market, because the China region has always been a top-tier bundling zone. Due to factors like taxes and fees, purchase requirements have always been at the highest level. "Under these circumstances, to cater to the consumption philosophy of the new generation of consumers, who prefer more direct, clear, and open spending, it is entirely reasonable for Hermes to lower purchase requirements. It wants to retain consumers and also attract new customers, continuously bringing people into the 'horse-raising' game."
Has the Continuous Price Increase Strategy Reached Its End?
Some consumers have also voiced criticism of Hermes' sustained and significant price hikes, believing that "Hermes is using price increases to replace its original bundling strategy. After raising prices, going zero-bundle creates the illusion that bundling is no longer needed." The aforementioned seasoned individual told BUG frankly that Hermes' crisis lies in four to five consecutive years of steep price increases, with annual adjustments of 10% to 13%. This blind price hiking may reflect expectations that were set too high for the market. "From actual marketing conditions, because of excessive price hikes and consecutive increases, consumers' demand for core bags has trended toward stable value preservation, with more consideration of secondary market value, somewhat overshadowing their own preferences. This has continuously led to a lack of market competitiveness for several of Hermes' core bag models, and newly launched bags also lack sufficient market recognition due to unreasonable pricing."
"Xi Ma Zhi Ren" believes that this situation has gradually affected Hermes' reputation, including its financial reports and trading volumes. He stated that Hermes' most core issue remains pricing, "several consecutive years of disorderly price increases have caused problems for itself."
Hermes' years of continuous price hikes may change in the future. The aforementioned individual revealed to BUG that from reliable sources, Hermes' Quota Bags have typically seen annual price increases of about 10% to 13%. This year may be different. Affected by the broader environment, China and the US this year will very likely follow Europe's price adjustment policy, which is a 3% to 4% annual increase, avoiding the crazy situation of previous years, mainly to stimulate enough consumers to enter stores.
He believes that "the new generation of consumers, mainly those born in the 2000s and 1990s, are less inclined to cater to the brand's sales tactics. They are basically self-oriented, focused on their own needs, converting daily necessities into in-store demand. That's the principle they follow. Under such circumstances, it's natural that Hermes becomes easier to buy from." He worries that in the future, Hermes products will see a significant classification, with regular quota bags becoming easier to purchase, but advanced bags becoming even more difficult, because "top luxury is not fast-moving consumer goods, and having thresholds is only natural."
Over 60% of Secondhand Hermes Bags Are Falling
Hermes' secondary market is equally bleak. The owner of a large physical secondhand luxury store in Suzhou said the most disappointing luxury brand in the Year of the Horse is Hermes, "Hermes bag models that have dropped over 10,000 yuan within half a year can't even fit on one shelf." The merchant bluntly stated that over 60% of secondhand Hermes bags are experiencing sharp price drops, even 70% to 80%. He gave examples of several items in his store: "A secondhand Mini Herbag had already come down a lot before the market crash, with a peak price of 35,000 yuan, then dropping to around 23,000 to 24,000 yuan, and now directly to 21,500 yuan, and that's for black with silver hardware, the highest-value color combination."
Regarding Hermes' fall from grace, Zhou Mingqi, founder of industry research and consulting firm Jingjian Think Tank, said that in fact, Hermes' revenue growth has declined noticeably since 2024, falling below 20% that year, then below 10% in 2025, returning to single digits, and dropping below 5% in the third quarter of 2026, marking a near six-year low since 2020. Zhou Mingqi believes that the loss of momentum in the Chinese market is an important factor in Hermes' performance decline. "Luxury goods, especially top-tier luxury like Hermes, rely heavily on a kind of belief for their sales that buying equals earning, because prices always rise and items can even sell for higher prices in the secondary market. But now, Hermes bag prices in China's secondary market have lost their value-preserving and appreciating function, falling below the price of buying new directly, which is different from the past when the secondary market could sell at a premium. This actually breaks the belief in top luxury."
"Why was there bundling in the past? Wasn't it because buying bags meant earning, and they could be resold at a premium in the secondary market? Now it's the opposite, prices are falling, so the bundled items have no purchase value, and the bundled items' secondary market prices are falling even harder," Zhou Mingqi believes this is also the reason for reduced bundling at Hermes. He stated that Hermes' past rapid growth in China was largely related to bundling. He pointed out that Hermes' excess growth in recent years largely stemmed from the vanity consumption and asset expansion of China's "pseudo-high-net-worth individuals" (middle class, nouveaux riches). The underlying logic of the bundling system is that the brand uses high-margin "peripheral categories" (ready-to-wear, watches, tableware, accessories) as a passport to screen and bind consumers' liquidity, in exchange for the hard currency attribute of core leather goods. Once income shrinks and external asset expectations contract, the first thing this group does is cut off ancillary consumption that cannot circulate and has extremely high discount rates. Zhou Mingqi believes that "the current situation of zero bundle or minimal bundle is essentially the market's choice, and the entire market's balance has shifted significantly."
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