Birkin Bags and Business: A Story of Luxury and Legal Drama

Because I think that everybody should do exactly what Birkin is doing. I'm sorry, what Hermes is doing. And we did this at the end of last year at the scalable side. It used to be we had our mastermind founders board and if you applied and you qualified, you could get in. Now it doesn't work that way anymore. Now you have to first go through our operating system accelerator. You get. We've got to work with you as a client for 12 weeks. We want to make sure that you're somebody that we can help, that you're. You know that Seth Godin has this quote, before I can work with you, I need to work with you. Right. And so that's same kind of thing. Well, let's make sure that we both like each other at the end then if we both agree, you can receive an invitation.

Hey everybody.

We are back with another episode of.

Business Lunch and your co hosts, Ryan Deiss and myself, Roland Fraser. Good to be here. Good to see you, Ryan. Good to see you. I think you had something about one of our favorite brands or at least our wives favorite brands that you wanted to talk about today.

Yes, this is, this is kind of funny. So Hermes, or as some like to call it, Herms Hermes, the luxury brand that sells very expensive 30, 40, 50, as much as you want to spend thousands dollar handbags and blankets and all other types of fashion, they're being sued for allegedly violating antitrust laws because, wait for it, they're making customers buy certain items before they're granted the privilege of buying the more desirable items. That is the Birkin bag. So for those who don't know, the Birkin bag is one of the most in demand handbags out there. And if you think you can just saunter in to an Hermes, well, number one, you can't saunter at all. Security is probably going to stop you. They're probably going to make you wait in line. But even if you do get into the store and you ask can I get one of those new, one of those Zermaze bags I've heard so much about, they're just going to laugh at you. You must make multiple purchases before you buy said bag. And so apparently they are now being sued and because they say this violates antitrust and I think it, I think it's funny. So from a couple perspectives, One, just get your general take on the merits of that kind of. I know you're not a practicing attorney anymore, but I would love to just get your general take because this is a federal class action Lawsuit filed in San Francisco. So, so it's class action lawsuit. People grumpy that Hermes won't just sell them a Birkin bag. I think that's, I think there's a couple things I want to get your take on that. I also think it's just worth discussing how valuable a brand is that they can do this kind of thing where they say, like, no, we're not going to let you buy our most expensive deal. You have to jump through these other hoops first to even have the right to buy it. So just general thoughts, feelings, emotions. What do you think?

It'll be interesting to see. I should read the complaint before to understand what the causes of action are, because there are lots and lots of causes of action. My guess is that it's going to be presented as an illegal tying arrangement where you can't say to buy this product, you have to buy these products as well, when those products could stand independent of the others. But, but it doesn't seem like that's what they're doing because if you go, if you go into the store and say, you know, I'm interested in this, they're like, we only have a limited number of those and we make those available to our best customers. Is that antitrust? Is that anti competitive? Does that.

I mean, I don't, I, I don't.

Think it is because you're talking about branded products. They're not tying them to other brands. It's all within the same brand.

So.

And they're not stopping other people from selling handbags. Like if you sold, if you sold a, a bottle and, and you said basically, you can't get the water that's in this bottle without buying this cap and this container and using this label. That could be a tying issue because what if I want to use my own colored cap and I want to put it in a canteen instead of the plastic? That's anti competitive because you're saying you don't get the thing that's inside unless you buy the, all of our stuff that's on the outside too. But they're not saying that. They're saying buy whatever you want to put in the handbag. Buy whatever coats and plates and blankets you want. If you want our thing, you've got to be a customer that's at a certain level and has spent a certain amount of money. It'll be interesting to see. Seems like a tough case without knowing more. And like, they're not, they're not price fixing. They're not, you know, it's Actually significantly less expensive to buy a Birkin in Hermes than it is to buy one on the secondary market. And you've got companies like Patek Philippe and all the luxury brands, ap, you know, that, that do similar things, even Chanel, to kind of climb up the ladder to get the, the nicer, rarer stuff. So I think they're going to have a tough time doing it. And really like the secret, you can go and buy Hermes on your first visit with no appointment. You can walk in a store. I know, because we've done it. And if you have a conversation with the people and create a relationship and yes, spend some money, but maybe 5 to 7,000, then they'll sell you a bag. If they've got one, they will sell you a bag. I. It has happened multiple times to us in different Hermes stores in different countries. So that, you know, I think there's a little bit of a myth as to how difficult it is. And I'm sure that Hermes doesn't hate having that myth that's out there. But the truth is, is that if, if you go in and you spend a little bit of money, then you can get that as well. And is that antitrust? Because like, that's like, is that stopping competition? I don't see.

It seems tough to me. According to the lawsuit. So this is a quote from the lawsuit, the sales associates. So the lawsuit claims that the average customer can't just walk into an Hermes store, find a Birkin on display and buy it. Rather, customers that are deemed worthy. This is the quotes deemed worthy will be shown a Birkin in a private room. Hermes sales associates are tasked with choosing customers that are qualified to buy Burton Birkin's according to lawsuit these. And again, this is a quote from the lawsuit. These sales associates are directed by the defendants to only offer Birkin handbags to consumers who have established a sufficient purchase history or purchase profile with the defendants or defendants ancillary products such as shoes, scarves, belts, jewelry and home goods. So they're basically saying that it's unfair and dare I say, illegal, that they require you to make all of these other purchases and build up enough for reputation before they'll sell you their most luxurious, most in demand bag, which, which.

They only have a certain number of. Right. They like. Very often they're not even on display.

You know, and this is, this is where. I mean, I hope this thing just gets thrown out. I mean, the idea that I don't want the government telling. I mean, it's one thing if the government says, hey, you Can't. Discrete. You can't discriminate. You can't not sell this bag to somebody, you know, on the base of, you know, race, gender, sexual orientation, which.

I think already exists.

Exactly. We have laws for that. Those already exist. Got it. But this idea that you can't essentially establish a sales funnel in your business, you know, I don't want the government tell, like, what a terrible precedent this would be. The government. Because now what's the government going to say, well, you need. If somebody wants it, you need to.

Sell it to them. Yeah. Really?

Everybody. So we can't.

I don't have it. What if I only have a few of them? Because literally there. There's limited production. Right. So I only have a few. So can I not reward the people who are my best customers by giving them something? And, you know, and maybe the argument is, well, it's not defined well enough, and therefore it ultimately is discriminatory. But that wouldn't be an antitrust claim. That'd be. I think it's a Title VII claim. Right. That'd be more. That'd be a different kind of claim. So, I don't know, man. It's. But, yeah, I agree with you. Bad, bad, bad precedent to. To have. But it sounds like some attorney tried to get, you know, their wife or husband or partner a Birkin bag and got pissed that they couldn't.

I think that's exactly what happened. I think somebody. Somebody wanted one. And my guess is they sauntered in like a freaking prick. Like, the kind of person who's going to put forth this lawsuit is the same kind of, like, arrogant that's going to just saunter into a place and be like, hey, everybody, you're welcome. I'm here. I have arrived, and I demand to see your most expensive Birkin bags because as you can tell, I'm a person of distinguishing taste, and I have much money to spend, and it's important that you know that, like, that freaking clown is the same person who's going to be like, I'm gonna sue you if you won't sell me this bag.

So we have those in our business, too. We get people, and we don't sell them anything. They're like.

And they're exactly something. They're exactly who you want to keep from walking around. I think this is the piece that every business owner needs to keep in mind. The value of something is so often dictated by who doesn't get to own it. Right. It's like masterminds and somebody. The values is oftentimes determined by who's not allowed in the room. Now again, if you're doing this on the base of race, gender, sexual orientation, that's bad. So let's take that off the table. I'm not talking about that. But to say that we're going to apply standards in our business is kind of one of the, an essence of a brand like they, they, it needs to be people who align with our values. And maybe what they want to say is, look, we want people who are serious about the brand. We don't want somebody who's just going to buy one to try to resell it because they don't care about the brand.

Which is exactly one of the things, exactly what's happening. But, but the, the other thing to me there is, is why can't we reward people for being good customers and saying, you know what, if you're a good customer, we've got a thing that there aren't a lot of. And, and so we don't like, you know, we can't sell them in mass. We, we don't and we believe the quality would be less if we did. And so for the people who are great customers, we make these things available. You know, it's a, it's our higher end line and it's a simple ascension path, you know, and just like we won't send, sell someone into some of our programs until they have experienced some of the other things. Who I, I guess it all comes.

Back to how is that stopping competition?

Right. So discrimination. Maybe they should look at that and be sure that's not happening. Great. As far as antitrust limiting competition, I think, I don't see it. You know, I really don't see it.

So we both agree this is ridiculous. Here's my suggestion I think would be fun to discuss because I think that everybody should do exactly what Birkin is doing. I'm sorry, what Hermes is doing. And we did this at the end of last year at the scalable side. It used to be we had our mastermind founders board and if you applied and you qualified, you could get in. Now it doesn't work that way anymore. Now you have to first go through our operating system accelerator. You get, we've got to work with you as a client for 12 weeks. We want to make sure that you're somebody that, that we can help, that you're, you know that Seth Godin has this quote, before I can work with you, I need to work with you. Right. And so that same kind of thing. Well, let's make sure. That we both like each other at the end, then if we both agree, you can receive an invitation. Now, since we've done that, the quality of the people coming through, and I don't just mean the quality of like the human being. These are all amazingly wonderful people who have tremendous value to give to this planet. I mean, the quality of the businesses and the value that they're able to bring to the room is so much higher because they've gone through this prerequisite experience. Right. So I think it's worth asking yourself, how do, like, what's the Birkin bag in my business and how do I start putting some barriers in front of it? Because at the end of the day, scarcity is what creates value. It's all going to be basic supply and demand. And we don't value Eric as heirs free and everywhere. And yet we do value the Birkin bag.

Why?

Because it's quote unquote rare. Well, they could make more if they wanted to. They don't because they want to preserve the value. So what in your business is the thing that you could and should hold back and what are the things that you should tell people? You can't have that yet until you buy, you know, some of these other things. I truly think just about every business could, you know, burkify their product line.

The Birkinification of business. I like it.

And I think the risk of getting. I think the risk of getting sued from an end. This is not legal advice, but I think the risk of getting sued with some type of antitrust deal for your business is going to be slim to none.

Hey, interesting Hermes fact that I did not know until not that long ago is that they take all of the scrap leather from all of the bags that they make and they turn those into recycled things. And there's only one store in the world that that has the things that are recycled. And it is in Paris, in Saint Germaine du Pre. And I think it's on like Sevier or Severin or something like that is the street. But we went there a few weeks ago and it's really cool because it used to be a public pool, the building. And they remodeled it and it's been closed as a public pool for I think like 40 years. But there are still people, they said at the store that come in, that used to go and swim there. So it's.

They like walk in with a towel over their shoulder.

No, just they're like, oh, I used to swim here back in the day. But. But basically it's A like, I think three stories high. And you walk in and the. There's terraces around, and then in the middle, there's, you know, like a big atrium. And the pool was in the bottom. And now they've got three big, like, cabin, cabana kind of things that are. That go up most of the height that are some display areas. And they've got a really, really cool bookstore and cafe. And the bookstore has all of these really cool books on the history of fashion and things like that. Fashion, textiles, art. One of the better selections I've seen. Really, really fun. Not, you know, super expensive or anything. They're book. They cost what books cost. And the, you know, hot chocolate and the coffee costs what hot chocolate and coffee costs. And. And it's kind of cool. You can just go in there and sit and check out the books in their library. And then they have the. All the recycled stuff. And they've made everything from, like, trays to coffee tables to little eye patches with, you know, all the different slivers of leather that. That got cut. So they're really using all of it from a sustainability thing. And also it's not bad for profits, but that's the only place you can do it, which is kind of cool. And then on the walls, they. They have these murals that they left that re. That were swimming related. And so it's just a really cool place to visit if you are an Hermes fan. And I will tell you that we went in and we were. In fact, they actually had a display of all of their rarest Birkins that were there. And. And we went in, met someone in the patchy thing we spent maybe €2,000 on for all of our friends. I think probably Emily's gonna get one.

Wait, a literal, like. Like a pirate eye patch?

No, like a sleeping mask kind of thing.

Oh, sleeping mask.

I like the iPad. They could have sold twice as many for the same price. But anyway, and then the guy walked us around and we were offered the ability to. And they keep the country records in different stores, by the way. So, like, if you're in one country. But, but, but we do have a profile and we have bought Birkins before, but these were like the, you know, they only make 10 a year. And. And we were offered that. So it's like, you know, you do.

It's not.

And we buy, like, we don't buy tons and tons of, you know, hundreds and hundreds of thousands of dollars of stuff there a year. So it is, it is a funnel. It is a funnel, and it is a legitimate funnel of we want you to be a customer. And when you're a customer, because we only have a few of these things, you can get them. There was one that I actually was going to buy, but I couldn't. So. And it wasn't that I couldn't, because I couldn't. It was that I couldn't because they just only had one, literally one. And it was on display in their museum show. But. But, you know, and I'm happy that I didn't after I got the bills from all of our travel, because I would think. But, but anyway, you're like, I need.

To sell really cool store.

If you ever get the chance and you're in Paris, you should definitely go see their recycled stuff because they have things that are not terribly expensive that you can buy there also. And it's very unique.

Well, I think. I think there's a couple lessons. One, the, you know, be nice and you can probably get what you want if you're. If you're nice and you're patient in this world. It's amazing, right? So many of these people want. Most humans want to do favors for people that they like. And so if you can just be a very likable person and give somebody the opportunity to do you a favor where they can maybe also earn a little commission, they're probably going to want to do that. They're probably going to be excited to do that. But number two, I don't want the government telling me, you know, how. How I'm going to sell what I'm selling or who I'm selling it to with, you know, outside of the laws that already exist on discrimination. So I hope this thing is thrown out because it's just freaking garbage. And number three, something that we don't.

Know about it, you know, so I'll. I'll check it out. But, like, unless there's something we don't know about the suit, where they are doing something that, you know, that is wrong in some way. But, like, on the face of it, you can't, you can't require people to achieve a certain level before they get certain benefits or opportunities. Seems to me to be absurd.

Well, in my. I read an article on the Internet, and so based on my understanding of.

This case as it was reported through. Through a news outlet, I'm guessing.

Yeah. Through NBC News. Yeah. I've determined that it is stupid, frivolous. Okay.

All right.

Yeah.

I mean, it's really incontrovertible at that point.

I don't know if the Judge is listening to this. But I just saved you a lot of time. You don't even need to read the case. It's just. There's no way.

There's no way.

This is not. And, but I, I do think as a business, everybody should be asking themselves, how can we do this? H. How can. How can we create a path? How can we put certain barriers in place? Not just because it'll. It's going to increase the value of what you're offering. And I mean that like literally. It will increase the value because it's more scarce, but it. You will get better customers who you enjoy working with a lot more and who are happier to be there when they. When they get there and they treat your products and your people better. If somebody has had to invest to be able to before to get into this new place, I can assure you they're not going to be tromping around like they own the joint. They're going to be far, far, far better behaved if it took some investment on their part to get there. So sometimes we want to make the purchase process as easy and as frictionless as possible. On the other hand, a little friction can be a really good thing when you're building a brand. So keep that in mind as well.

Awesome. Well, I hope you guys found this valuable. And, and if you are Hermes, Hermes haters or Hermes lovers, however it is, I definitely think there's some lessons that you can take from a company that has built something that is so in demand and so desired that people are willing to sue to be able to have access to it. That alone think of the, like, the value of the press of that is pretty daggone good. So hope you found it valuable. If you did, please share it with everybody. And if not, then listen to more of them because there's some really good ones on here. See you guys next time.

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