In the Bag: How Hermes Beats the Recession

Somewhere in Australia, basking in the waning rays of a winter sun, lies a crocodile with Eileen Robert's name on it.

The fate of this crocodile, a Crocodylus porosus to get technical, is linked to international financial markets, a 1970s British actress who made it big in France, a 172-year-old company that started out making horse harnesses, the tastes of the world's super rich -- and if she's very lucky and very patient, perhaps, too, to a New York City grandmother named Eileen Robert.

Within days this porosus will be killed. Its hide will be tanned and sent to an atelier (because to call it a workshop would be declasse) in the French town of Pantin. There, one of a few dozen highly skilled craftsmen will spend 48 hours over two weeks using tools specifically made for this task. He will use his own hands, two needles, a trademark stitch and a proprietary linen thread soaked in beeswax to craft one of the world's most expensive and highly sought-after luxury goods: the Hermes handbag.

This will be one of about 3,000 coveted saltwater-crocodile-skin bags made this year and will fetch somewhere in the neighborhood of $50,000.

People put their names on lists and wait two to three years to own such a bag. They spend tens of thousands of dollars on scarves and jewelry and clothing just for the opportunity to spend thousands more on a crocodile-skin pocketbook.

It is that obsessive demand -- combined with an intentionally limited supply -- that has allowed Hermes to prosper in an economic environment that has decimated its competition.

While many of its competitors are suffering under the strain of the global recession, Hermes, an iconic brand famous for its silk scarves and handbags, had a remarkably good first quarter. As some luxury brands like Gianni Versace shutter their stores, Hermes plans to open several new shops this year.

The French-based company's sales rose 3.2 percent to $603 million over the first three months of the year. Much of that growth is attributed to sales of leather goods, which rose 21.7 percent to $287 million.

"Hermes' position is unique; it is at the very top of the pyramid in terms of luxury goods," says Francesca Di Pasquantonio, a Hermes analyst for Deutsche Bank in Milan, Italy.

"The goods are very expensive. They make you pay for the quality they provide and the brand is classic, an icon. Handbags are the core of the business and a successful product. They are produced only in limited numbers, never overwhelming the market," she says.

Enter Eileen Robert.

Robert already owns a crocodile Kelly bag, one of Hermes' two most sought-after lines and named for actress and princess Grace Kelly. As for the highly desired other line, the Birkin, she says: "I totally want a Birkin."

Robert, a New York City real estate broker who gives her age as "grandmother," is a self-described "handbag lover" who insists she is "not an indulgent person" but owns at least 75 bags.

Lately, she has been buying bags from Bottega, another company, but Hermes she says, is a cut above the competition.

"The appeal of an Hermes bag is its design and its usability. It is a true luxury item, but it's affordable in a way that a yacht isn't," she says. "It's really an investment. Everybody wants one, but not everyone can have one."

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