Amina Habibula | 07.11.2025
How does Hermes Use Product Scarcity to Shape Demand and Maintain High-end Pricing?
Hermes is one of the luxury brands that has built its financial strategy around producing scarce products. Instead of relying on trends, Hermes has kept its production low, therefore limiting who can buy its items, releasing special editions in low quantities. This approach to its operation of selling goods has created one of the strongest demand and price relationships in the luxury industry.
One of the obvious strategies Hermes uses is its exceedingly limited bag production. According to the company’s 2023 report, Hermes is estimated to manufacture only around 120,000 handbags per year. This is extremely low compared to brands such as Louis Vuitton that produce around millions of bags annually. By maintaining small production, Hermes is able to make long waiting lists for bags such as Birkins and Kellys, which even the wealthiest customers have to go through this process. Financially, this allows Hermes to be able to increase prices without having to worry about decreasing demand. In 2025, Hermes has increased its prices by 6-7%, and yet customers are still willing to join the long waiting lists and pay for the goods.
Additionally, scarcity plays a huge role in encouraging customer loyalty. Since customers cannot simply walk in and buy a Birkin, they often return to build purchase history - called the “Hermes game”. This increases sales in other categories of the store, such as jewellery, ready-to-wear clothing items, accessories and scarves. This emphasises that Hermes is not just selling a bag to customers but the entire process of earning a chance to score one. This long-term engagement from consumers is more profitable than instant one-off purchases.
The concept of having limited edition items makes this strategy even stronger. Hermes releases a rare colour, leather or design on an irregular, unpredictable basis; therefore, collectors rush to secure the item as it's most likely not to be produced again for a long time. These limited edition items often become the favourite in the reselling market, where a study in 2022 showed that Birkin bags have averaged annual returns of 14%, outperforming gold over the same time period. Because supply is so low, and the production release is so unpredictable, the resale market becomes very strong, therefore reinforcing the idea that Hermes items are more of an “investment” rather than a simple purchase.
Hermes financially benefits from the resale market, although it does not directly profit from it, because the high resale values and extreme demand for its goods reinforce the brand's strategy of exclusivity, scarcity and prestige. For example, when a Birkin retails for $12,000, it sells on the secondary market for $20,000-$30,000, alarming the new customers that Hermes items hold immense value and continuously gain it over time. No other luxury brand operates this way, as most designer bags drop up to 30-50% of their retail price once they enter the secondary market, but due to Hermes’ strict scarcity rule, it protects its value long term. This gives the company pricing power, as there is no market competition, and most importantly, customers feel like they are making an investment rather than an impulsive purchase.
Overall, Hermes’ use of many strategies to maintain a prestige profile - such as maintaining a low production to reinforce the idea of scarcity, or the usage of limited edition items all of this is a carefully constructed financial strategy that benefits the brand and maintains a long-term value in their goods and services. This creates intense demand, which fuels the secondary market, creating an indirect profiting mechanism, and attracts more loyal customers driven by the idea that Hermes is not just a simple purchase but a long-term investment.
One of the obvious strategies Hermes uses is its exceedingly limited bag production. According to the company’s 2023 report, Hermes is estimated to manufacture only around 120,000 handbags per year. This is extremely low compared to brands such as Louis Vuitton that produce around millions of bags annually. By maintaining small production, Hermes is able to make long waiting lists for bags such as Birkins and Kellys, which even the wealthiest customers have to go through this process. Financially, this allows Hermes to be able to increase prices without having to worry about decreasing demand. In 2025, Hermes has increased its prices by 6-7%, and yet customers are still willing to join the long waiting lists and pay for the goods.
Additionally, scarcity plays a huge role in encouraging customer loyalty. Since customers cannot simply walk in and buy a Birkin, they often return to build purchase history - called the “Hermes game”. This increases sales in other categories of the store, such as jewellery, ready-to-wear clothing items, accessories and scarves. This emphasises that Hermes is not just selling a bag to customers but the entire process of earning a chance to score one. This long-term engagement from consumers is more profitable than instant one-off purchases.
The concept of having limited edition items makes this strategy even stronger. Hermes releases a rare colour, leather or design on an irregular, unpredictable basis; therefore, collectors rush to secure the item as it's most likely not to be produced again for a long time. These limited edition items often become the favourite in the reselling market, where a study in 2022 showed that Birkin bags have averaged annual returns of 14%, outperforming gold over the same time period. Because supply is so low, and the production release is so unpredictable, the resale market becomes very strong, therefore reinforcing the idea that Hermes items are more of an “investment” rather than a simple purchase.
Hermes financially benefits from the resale market, although it does not directly profit from it, because the high resale values and extreme demand for its goods reinforce the brand's strategy of exclusivity, scarcity and prestige. For example, when a Birkin retails for $12,000, it sells on the secondary market for $20,000-$30,000, alarming the new customers that Hermes items hold immense value and continuously gain it over time. No other luxury brand operates this way, as most designer bags drop up to 30-50% of their retail price once they enter the secondary market, but due to Hermes’ strict scarcity rule, it protects its value long term. This gives the company pricing power, as there is no market competition, and most importantly, customers feel like they are making an investment rather than an impulsive purchase.
Overall, Hermes’ use of many strategies to maintain a prestige profile - such as maintaining a low production to reinforce the idea of scarcity, or the usage of limited edition items all of this is a carefully constructed financial strategy that benefits the brand and maintains a long-term value in their goods and services. This creates intense demand, which fuels the secondary market, creating an indirect profiting mechanism, and attracts more loyal customers driven by the idea that Hermes is not just a simple purchase but a long-term investment.
