The Scarcity Paradox: What Hermès Can Learn From Ferrari

-

 Can a business grow so successfully that it begins to weaken the very thing that made it valuable? That is the question raised by the recent UBS downgrade of luxury brand Hermès.

UBS has raised concerns that the increasing availability of Hermès products, particularly non-quota handbags, could gradually weaken the scarcity that has helped support the company's extraordinary desirability and pricing power.

But this isn't simply a story about luxury handbags. It's a business strategy story and we've seen the pattern before.

When Scarcity Creates Value

Most businesses are encouraged to grow. Increase production. Reach more customers. Expand distribution. Generate more revenue. Normally, that makes perfect sense.

But what happens when scarcity itself forms part of the value proposition?

Ferrari faced a similar challenge.

For decades, deliberately restricting supply was an important part of Ferrari's strategy. Yet the company has substantially increased the number of cars it produces while continuing to protect the exclusivity surrounding the brand.

It has done this through different models, limited editions, waiting lists, personalisation and carefully controlled access to some of its most desirable vehicles.

The important lesson is that scarcity doesn't necessarily mean producing very little. It can mean controlling access and protecting perceived value.

Could Hermès Follow the Same Pattern?

That brings us back to Hermès. If greater availability allows more customers to enter the Hermès ecosystem while products such as the Birkin and Kelly remain genuinely difficult to obtain, the company may be able to grow without destroying its exclusivity.

But if greater availability changes customer perception and Hermès begins to feel less special, the economics of the business could change too.

That is what makes the UBS downgrade interesting. It isn't simply about whether Hermès sells more handbags. It's about the connection between production, scarcity, customer perception, pricing power and ultimately company valuation.

Newton's Law of Connectivity: Nothing happens in isolation.

An operational decision to increase production can create a ripple throughout a business:

Production → Availability → Scarcity → Customer Perception → Desirability → Pricing Power → Profitability → Investor Expectations → Valuation

What begins on the production floor can eventually influence what investors are prepared to pay for the company. And that lesson applies far beyond Hermès and Ferrari.

Before scaling any business, we need to understand what customers actually value about it. Because growth is only beneficial if we protect the thing that created the demand in the first place.

How Do You Grow Without Becoming Ordinary?

In my latest Business & Wealth Strategy article, The Scarcity Paradox: What Hermès Can Learn From Ferrari, I explore the Hermès downgrade alongside Ferrari's historical approach to scarcity.

I also share a personal experience from taking part with my husband Ron in the Guinness World Record Ferrari gathering at Silverstone an event that demonstrated something interesting about exclusivity, scale and the power of the customer experience.

Sometimes the biggest challenge facing a successful business isn't finding more customers.

It's growing without destroying the reason those customers wanted you in the first place.



Comments

Post a Comment

Popular posts from this blog

When The Money Runs Out: The U.S. Shutdown - Should A Politician Be Paid

-
 When governments stop paying their workers, economies don’t just pause — they fracture. At the start of October 2025, the U.S. government entered another budget standoff, triggering a partial shutdown that left 1.4 million federal employees either furloughed or working without pay. The cause? Congress failed to agree on a spending package before the fiscal deadline. While the political headlines focused on partisan blame, the deeper question is far more structural: How does one of the world’s largest economies run out of money — again? Why the Money “Ran Out” In the U.S., federal agencies can’t spend without congressional approval. Each year, lawmakers must pass 12 appropriations bills that fund everything from border control to national parks. If they don’t, operations legally grind to a halt. This year, sharp divisions over defence spending, foreign aid, and deficit control led to a funding lapse. Without an approved budget or a temporary extension (known as a continuing reso...
Read more

What Investors Should Watch This Weekend (UK Budget Commentary)

-
Image
 This week’s UK Budget has created more questions than answers, particularly after the OBR’s latest figures revealed a £4 billion credit rather than the widely discussed fiscal “black hole.” The contrast between the government’s narrative and the underlying numbers has caused understandable confusion. Rather than focusing on the political noise, this commentary looks at what really matters: how financial markets may interpret the situation when they open next week . In moments like this, investors don’t react to headlines — they react to signals. What the OBR Numbers Actually Showed The initial expectation earlier in the autumn was a significant funding shortfall. However, the OBR’s updated pre-Budget forecast showed a small fiscal surplus. This sharp difference between expectations and actual figures has fuelled much of the current uncertainty. For investors, the concern is not about which interpretation is “right,” but that conflicting narratives create instability . When d...
Read more

The Weekend Crypto Crash - Why Traders Lost and Investors Saw Opportunities

-
 Over the weekend, the crypto markets experienced one of the largest liquidations in history — more than $19 billion in leveraged trades were wiped out in just 24 hours. The headlines called it a “historic crash,” and for many traders, it was exactly that. But for investors with a long-term strategy, it wasn’t a disaster — it was an opportunity. What Happened Over the Weekend The crypto market saw what analysts are calling the largest liquidation event in its history , with over $19 billion in leveraged positions forcibly closed. Bitcoin and Ethereum led the declines, falling by around 10–12%, while some smaller altcoins dropped by as much as 80%. But this wasn’t the result of a fundamental breakdown in blockchain technology or investor confidence — it was a trader-driven event . When markets move suddenly, leveraged traders who have borrowed funds are forced to sell to cover their positions. These forced sales create a chain reaction — each liquidation drives prices lower, trigg...
Read more