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

0:00Because 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. 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?

0:35And 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.

0:47Hey, everybody. We are back with another episode of Business Lunch and your co-hosts, Ryan Dice and myself, Roland Frazier, 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 wife's favorite brands that you wanted to talk about today. Yes, this is kind of funny. So Hermes, or as some like to call it, Hermes. Hermes, the luxury brand that sells very expensive, 30, 40, 50, as much as you want to spend $10 ,000 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, i.e.

1:42the 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 Hermes 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 because they say this violates antitrust. And I think it's funny.

2:24So from a couple of 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 it's a class action lawsuit. People grumpy that Hermes won't just sell them a Birkin bag. I think there's a couple of 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.

3:02You 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, you know, 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 if you, to buy this product, you have to buy these products as well when those products could stand independent of the others. But it doesn't seem like that's what they're doing. Because 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.

3:54Is that antitrust? Is that anti-competitive? Does that, I mean, 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 a bottle 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 all of our stuff that's on the outside too.

4:47But 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, um, to kind of climb up the ladder to get the, the nicer, rarer stuff.

5:28So I, I think they're going to have a tough time doing it. And, um, really like the secret, you can go and buy our maze on your first visit with no appointment. You can walk in a store. I know cause we've done it. Um, and if you have a conversation with the people and create a relationship and yes, spend some money, but maybe five 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.

6:09But 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. And 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 Birkin.

6:50Birkin's according to the lawsuit. And again, this is a quote from the lawsuit. These sales associates are directed by the defendants, i.e. Hermes, 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.

7:31Which they only have a certain number of, right? Like very often they're not even on display, you know. And 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 that the government says, hey, 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. Yeah, 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 to 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 yeah 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.

8:44That'd be, I think it's a title seven claim, right? That'd be more, that'd be a different kind of claim. So I don't know, man. It's a, but yeah, I agree with you. Bad, bad, bad precedent to have, but it sounds like some attorney tried to get, 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 wanted one. And my guess is they sauntered in like a freaking prick. The kind of person who's going to put forth this lawsuit is the same kind of arrogant asshole that's going to just saunter into a place and be like, hey, everybody, you're welcome.

9:21I'm here. I have arrived. And I demand to see your most expensive Birkin bags. Cause 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 going to sue you if you won't sell me this bag. And we have those in our business too. We get people like that. And we don't sell them anything. They're like, no. So I'm saying they're exactly who you want to keep from walking around. And 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?

10:04It's like masterminds and somebody said, 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.

10:39Which 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, 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 sell someone into some of our programs until they have experienced some of the other things.

11:19Who? 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 here's my suggestion, what 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.

11:59Now 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 this value to give to this planet.

12:36I 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, 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, hey, scarcity is what creates value. It's all going to be basic supply and demand. And we don't value air because air is 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.

13:14They 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 that I truly think just about every business could, you know, Berkify their product line. The Berkinification of business. I like it. And I think the risk of getting, I think the risk of getting sued from an, and 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.

13:52Hey, 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 uh in the world that has the things that are recycled and it is in paris in saint germain to pray and i think it's on like severe or severin or something like that is the street but um we went there uh a few weeks ago and um it's really cool because it used to be a public pool the building um and they remodeled it and um 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 walking with a towel over their shoulder no just they're like oh i used to swim here back in the day but um but basically it's a uh like i think three stories high and you walk in and um 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 um 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.

15:30Fashion, textiles, art. One of the better selections I've seen, really, really fun. Not, you know, super expensive or anything. They cost what books cost. And the, you know, hot chocolate and the coffee costs what hot chocolate and coffee costs. 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 all the recycled stuff. And they've made everything from trays to coffee tables to little eye patches with all the different slivers of leather 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.

16:09And then on the walls, they have these murals that they left 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 we went in, met someone in the patchy thing. um we spent maybe 2 000 uh euros on um eye patches for all of our friends i think probably emily's gonna get one um and wait a literal like like a pirate eye patch no like a sleeping mask kind of thing oh sleeping mask i like i like the ipad they could have sold twice as many for the same price but don't um but anyway um and then uh the guy walked us around and we were offered the ability to, uh, and they keep the country records in different stores, by the way.

17:10So like if you're in one country, but, um, 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, uh, and we were offered that. So it's like, you know, you do, it's not, and we bought 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.

17:45So, um, and it wasn't that I couldn't cause I couldn't, it was that I couldn't cause they just only had one, literally one. And it was on display in their museum show. But, um, uh, but you know, and I'm happy that I didn't after I got the bills from all of our travel because I would have been another thing. But anyway, 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 there's a couple of lessons. One, be nice and you can probably get what you want if you're nice and you're patient.

18:28In this world. It's true. 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 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.

19:03And there's something that we don't know about it, you know, so I'll, 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. um well in my i read an article on the internet um and so based on my understanding of this case as it was reported through uh through a news outlet i'm guessing yeah through abc news yeah um i've determined that it is stupid and 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.

19:57You don't even need to read these. There's no way this is not. But I do think as a business, everybody should be asking themselves, how can we do this? How can we create a path? How can we put certain barriers in place? Not just because it's going to increase the value of what you're offering. And I mean that literally, it will increase the value because it's more scarce. But you will get better customers who you enjoy working with a lot more and who are happier to be there 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 gonna be tromping around like they own the joint.

20:38They're gonna be far, far, far better behaved if it took some investment on their part to get there. So sometimes we wanna 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 if you are 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.

21:15That alone, think of the value of the press of that is pretty daggone good. So I 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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