Hermès vs Chanel

Thierry Hermès founded a harness workshop in Paris in 1837, making bridles, saddles, and equestrian equipment for European nobility at a time when the horse was the primary means of transport for the wealthy. The quality of Hermès harnesses became legendary; the company supplied equipment to several royal households. Thierry's son Charles-Émile moved the workshop to its current location on Rue du Faubourg Saint-Honoré in 1880, where Hermès remains today.

The automobile gradually replaced the horse in the early twentieth century, threatening the harness business. The Hermès family expanded into leather luggage and accessories for motorists — bags, gloves, and eventually clothing. The pivot preserved the craft traditions of the harness workshop while applying them to new products. Hermès introduced the iconic Kelly bag — originally called the Sac à Dépêches — in the 1930s. When Grace Kelly was photographed using the bag to hide her pregnancy in 1956, Hermès renamed it in her honour.

In 1984, Hermès CEO Jean-Louis Dumas was seated next to actress Jane Birkin on a flight from Paris to London. Birkin's straw bag fell open and her belongings scattered across the cabin floor. She complained that she could never find a leather weekend bag she liked. Dumas sketched a design on an air sickness bag during the flight and promised to make it for her. The Birkin bag became the most sought-after handbag in the world and, by most measures, the best-performing investment asset in luxury goods over thirty years.

In October 2010, LVMH announced it had quietly accumulated a 14.2% stake in Hermès — widely seen as the prelude to a hostile takeover attempt. Bernard Arnault denied any hostile intent. The Hermès family, which retained approximately 73% of the company, rallied together: family members pooled their shares into a holding company to make a takeover impossible. LVMH eventually sold its Hermès stake in 2014 after reaching a settlement with French market regulators. The attempted acquisition increased Hermès's profile and, arguably, reinforced its independence as a brand value.

Academic research published in multiple financial journals has consistently found that Birkin bags have outperformed gold, the S&P 500, and most traditional asset classes over thirty years as investments. Hermès produces Birkin and Kelly bags in deliberately limited quantities and allocates them through a relationship-based system that requires clients to establish purchasing histories before being offered one — creating scarcity that drives secondary market prices to multiples of retail. Hermès reported revenues of €13.4 billion in 2023, with an operating margin of approximately 42% — one of the highest in global luxury — and continued to outperform every major luxury conglomerate during the 2024-2025 slowdown. The company that made harnesses for horses had become the most resilient luxury business in the world.

Gabrielle Bonheur Chanel was born in 1883 in Saumur, France. Her mother died when she was eleven; her father deposited her in an orphanage run by nuns in Aubazine, where she spent six years. For the rest of her life, Chanel lied about her origins — claiming to have been born in 1893, raised by aunts, never mentioning the orphanage. The nuns taught her to sew. The geometric patterns of the orphanage's stained glass windows, which she stared at for years, later appeared in her jewellery designs.

Chanel opened her first shop — a millinery boutique — in Paris in 1910, funded by her wealthy lover Arthur Capel. Her early clients were the mistresses of rich men: women who needed to look fashionable but could not be seen at couture houses frequented by their lovers' wives. Chanel's hats were simple and unadorned at a time when elaborate decoration was fashionable. Society women initially dismissed her as a dressmaker for kept women. Then they started copying her.

Chanel No. 5, launched in 1921, was the first perfume to bear a designer's name. Chanel chose the fifth formula presented to her by perfumer Ernest Beaux and named it with characteristic directness. She reportedly said: "I want to give women an artificial perfume. Yes, I really do mean artificial, like a dress, something that has been made." Chanel No. 5 became the best-selling perfume in history and remains so today. A bottle is sold every 30 seconds worldwide.

American Vogue published Chanel's little black dress in 1926, describing it as "the Ford of fashion." Black had previously been associated with mourning. Chanel made it the foundation of modern women's dressing. She also introduced jersey fabric — previously used only for men's underwear — into women's fashion, and replaced the corset with comfortable, functional clothing. She later said: "I freed the body." The Chanel suit — braid-trimmed jacket and matching skirt — became one of the defining garments of the twentieth century following her 1954 comeback.

Chanel reported revenues of $19.7 billion for 2023 — making it one of the largest fashion houses in the world, comparable in scale to Gucci and Louis Vuitton but without any of their parent companies' public reporting obligations. Chanel remains entirely privately held by the Wertheimer family, who acquired a majority stake from Coco Chanel in 1924. The company has consistently rejected calls to go public, arguing that quarterly earnings pressure is incompatible with the long-term brand investment that luxury requires. The girl from the orphanage who lied about her origins for 70 years had inadvertently built one of the most secretive — and most valuable — companies in fashion history.