Alligators

Something is rotten in the state of Louisiana.

As we all know by now, the luxury market was hit hard by last year’s economic collapse. Despite what some snide fashion-haters would tell you, the industry in fact does affect people at every level of the economy, and Louisiana’s alligator farmers are just the most recent people to feel the pressure as a result of tough economic conditions in the fashion industry, according to The New York Times.

It would follow logically that reduced retail sales have lead to a drop in international interest in exotic skins, of which alligator is among the most expensive, but the farmers tell it a bit differently. According to them, it’s all Hermes‘s fault.

The economic progression of alligator skins goes something like this: farmers on the American Gulf Coast, mostly in small operations in Louisiana, harvest eggs from natural habitats. 12% of the hatched gators are returned to the wild, the others are raised for their skins. Tanneries buy the skins from these small farmers and process them in order to be suitable for the manufacture of watches, handbags, and other various and sundry luxury goods. When they’re done being processed, luxury manufacturers purchase them and turn them into the asininely expensive things that we know and love.

Once upon a time, those three were completely separate from each other, but then Hermes started buying up tanneries. Now they’re the biggest tanners in the business and are therefore able to control the flow and prices of alligator skins in ways that were previously impossible, according to the farmers. Hermes is now its own middle man, in addition to being the middle man for a huge swath of its luxury competitors.

The farmers think that that may indeed be the cause of their current problems. Prices for raw alligator hides have dropped precipitously, to the point where its not profitable for some operations to continue raising the animals, and many skins go unsold completely. On the other end of the equation, non-Hermes luxury brands complain that the cost of tanned alligator skins has risen so much that it’s almost no longer profitable to use them in the manufacture of things like watches and loafers because consumers are unwilling to keep pace with the rising prices.

Well isn’t that odd? If my memory of freshman econ serves me correctly, prices shouldn’t be way up on one end of the supply chain while prices are rock-bottom at the other end. Something’s going on in the middle, and many people posit that that something is Hermes’s tannery ownership. The farmers accuse the company of hoarding the skins for themselves, making the purchase of finished skins prohibitively expensive for other brands, which makes overall demand for untanned skins (as well as prices) drop on the farmer’s end.

Hermes representatives claim that they only buy up about 30% of the available gator skins, but one has to wonder if that’s really the case, considering the disparate price problems coming from farmers and competing luxury brands. Or maybe 30% is enough to throw the entire industry out of whack and give Hermes a significant competitive advantage. Either way, something is going on that may wipe alligator off of the luxury market completely if things don’t change. Except for at Hermes, of course.

Original story via NYTimes.com
Image via TheOnion.com

  • http://www.purseblog.com/ Megs Mahoney Dusil

    Amanda – An absolutely amazing article. I never realized that Hermes had such control on the alligator market, though it completely makes sense.

    Mostly it makes no sense if the prices of alligator skins have gone down in price so much and Hermes continues to up their prices.

  • Ana

    I never gave much thought about Croc skin, but now that I’ve realized that their grown on farm specifically for their skins, I’m kind of revolted. Not only that, this article has given me another reason to dislike Hermes. Other than the fact they are totally overrated and overpriced, unbelievably conceited, they’ll do anything to make a profit, even if it means taking business away from the middle-class when they are making billions of dollars a year. For me, Hermes is about as luxurious as the people who carry them, and the one person I can think of carrying Hermes is Heidi Montag. Enough said.

    • Al

      LOL, Brilliant!

    • http://www.purseblog.com/ Amanda Mull

      For what it’s worth, the NYT article does explain how the rest of the animals are used. There’s a large voodoo community to southern Louisiana that buys the heads and feet and the meat from the animals is used as food. It’s actually a popular protein source along the Gulf Coast, I’ve eaten it before. Tangentially related: being from the South is sometimes like being on a perpetual episode of Fear Factor. Anyway, their description of the various ways that the alligators are used after they’re killed reminded me a lot of the beef farming industry and how it provides leather for bags.

      • Amanda R

        I just read what you said to my southern boyfriend, and at the “fear factor” comment he completely lost it.

      • http://www.purseblog.com/ Amanda Mull

        Haha, I love it. He probably knows EXACTLY what I’m talking about. I grew up in a nice suburb of Atlanta, so I was completely and totally shielded from most aspects of life in the deep South for a long time (living in or around Atlanta is pretty much like living in or around any big city because such a huge proportion of the citizens moved here from another part of the country), but I had a boyfriend in college that was from a really rural background and I tried some truly strange things while visiting his parents. I didn’t want to be rude, after all. I’ve got two words for you: squirrel biscuit.

    • Rashmi

      Amen!!!!

    • Nico

      You are so right! When I found out that cattle in general were farmed for their meat and skin… o man, was I revolted. Farm animals, yuk!

  • Janinevs

    Oy, sounds similar to the shenanigans in the diamond industry. Of course that hasn’t stopped consumers from buying diamonds. If Hermes picked up a few marketing tips from the diamond industry, they’ll be okay.

    • Terri

      Exactly! This will be a story for a few weeks then as we Americans with our short attention span( I include myself ) will move on to another cause that we don’t follow through with a just resolution.

  • pe. riche.

    Hermes exercised a business tool known as vertical integration. This practice was first noted during the 1800′s with the Robber Barons (Carnegie and Rockerfeller), where a business or corporation will purchase or assume all of the separate and various entities needed to create a single product.

    Although vertical integration puts smaller business out of a job, for the major corporation assuming the smaller businesses, it creates a monopoly, allowing said corporation to dictate price, quantity, quality, because the market is void of competition and dominated by one business.

    This is why Hermes is able to make such outstanding profits while the farmers are not. Hermes simple purchased their own tanneries, and therefore are not dependent upon the farmers. Although this is an excellent move for the company initiating vertical integration, the “victims” so to speak, are left trying to compete with a large entity with liquidity. (Think David v. Goliath, with for this instance, Goliath being triumphant).

    • Jane

      Nicely put!

  • Helen

    Great piece Amanda. Luxury is frankly an artificial construct, and Hermes’ quality and exclusivity is often overstated. It is absolutely to the detriment of society when luxury brand consumers obsess over who is wearing what to re-affirm their own definition and image of luxury while being completely oblivious and negligent of social and environmental implications. Sure Hermes makes pretty bags, but If you really need a Hermes to prove your worth in society, maybe you should be spending that money on a shrink, or better yet – education.

    • tadpolenyc

      wow! terrifically stated.

  • kristin

    The whole fashion industry is just as bad as the food/meat industry… it’s all fu#ked.

    http://lemmemakeit.blogspot.com/

  • 19yearslater

    Wow, that’s interesting. I wonder where it will go from here, with the economy not making an overnight recovery (impossible).

  • anonymous

    Maybe there will be a revolt, and those carrying Hermes (or any bag, exotic or leather) will have their bags spray-painted like fur coats have been. I wonder why we haven’t heard from PETA about this.

    • http://www.purseblog.com/ Amanda Mull

      PETA has responded to Hermes over their farming practices before: http://www.purseblog.com/in-the-news/peta-in-response-to-hermes.html.

      Although we’ll never hear from PETA on a problem where the main issue is people losing their livelihoods. PETA isn’t concerned with the welfare of people.

      • gpc

        Amanda, your point is taken, but we shouldn’t begrudge PETA for their cause – animals. There are plenty of organizations out there to take care of us humans. Let’s just remember that humans cause way more suffering, to one another and to animals, then any animals ever to do their own or us.

      • Amanda R

        I completely agree. I feel that PETA’s narrow minded, unwavering stance on animal rights HURTS their cause more than it helps. I love animals and I’m all for animal rights, but not the way that PETA goes about it.

      • Jane

        I am from a small farming community in upstate NY, and I know how difficult it is for farmers to survive. I can’t even keep count anymore of all the families who have lost their farms and homes because of this business practice. The farms in my town are all dairy farms and you wouldn’t believe how important it truly is to support the local farms. They are the backbone of America.

  • Anna Cooperberg Gzz.

    What an brill article, Amanda! I read the NYT article a few days ago and you did a super job of making it much more understandable and purse-relevant.

  • A

    This is why I buy Chanel.

  • theresa

    Janinevs is 100% correct it is just like the diamond trade (the only time the supply and demand theory works is in an uncontrolled market) but when an entity may control the supply and price of the tanned skins (in this case Hermes)they may also control the price to others. However if some savvy person starts their own tannery and purchases the currently low priced skins from the farmers things could change. :) The tanning of skins is not a trade secret.

  • Karin bag4bag

    Great article. Typical luxury company screwing the primary producer. Now I have more reason to dislike the infamous Birkin. Why doesn’t Purseblog substitute the competition prize of a Birkin for a more socially responsible brand? (And No I am not against leather products – there is just something morally wrong about these giant corporations controlling the entire production process)

  • http://www.purseblog.com/ Amanda Mull

    @gpc: Regardless of how much I believe in most of the the causes that they support, PETA is a repugnant organization almost from top to bottom.

  • Kimberly Marney

    Just take a look at the price increases on Nancy Gonzalez. Once obtainable only about 3 years ago A large bag would sell for UNDER $2,000. Now, well over $3,000. THEY OWN their own crocodile farms, so it should be inexpensive, right? WRONG. They seem to be controlling the pricing as well! It’s kind of like when cattle farmers were getting rock bottom prices yet beef was becoming an extravagance. I understand Hermes keeping their prices high. There’s a waiting list to get on their waiting list! Just because another designer sells for much less, it isn’t going to hurt their sales. It will just increase their cache’. But because everyone else is catching up in price, doesn’t that sort of dilute their own brand? Interesting topic!

  • June

    I am a long time reader of the purseblog and I really enjoy the writings (and bags!) and the inside scoops. This discussion has brought up related issues of ethics and economics about skins and leathers and I was hoping that you guys could weigh in on 2 questions I’ve always had.

    I’ve always wondered if people who buy snake skin accessories realise the unethical side of the business. Snakes are not farmed and are usually taken from the forest. The people who catch them do not earn very much. I used to live in Singapore where there are often huge confiscations of snake and lizard skins, illegally imported from Indonesia- solely for the skin trade and increasing in volume on an annual basis. Similarly for lizards, there are no ( to my knowledge) farms for monitor lizards, where most of the skins are taken.

    There are some articles here:

    http://www.dailymail.co.uk/femail/article-482849/Pythons-skinned-left-die-The-shocking-reality-fashions-new-obsession.html

    A holistic look at the monitor lizard trade

    http://www.mampam.com/index.php?option=com_content&task=view&id=101&Itemid=86&limit=1&limitstart=1

    1. Do most people know how skins are obtained? (Do you know what snakes and lizards are being used?)

    2. Does it matter to you personally?

    Would be great to hear what you guys think. It’s not meant to be a judgement or anything but I’ve always wondered about this.

    June

    • http://www.purseblog.com/ Amanda Mull

      1. I don’t think the vast majority of people have any idea where the materials they own come from, or give it a great deal of thought.
      2. It does weigh on my mind a bit, but I’ve never been in the position of deciding whether or not to buy a bag made out of snake or lizard, so I can’t say with 100% certainty whether or not it would stop me. But I would consider it.

  • Rashmi

    Now can you imagine if the crocodile farm is in a third world country like Nepal how worse the farmers’ lives must be there and how humongous a profit Hermes is making? I heard the Himalayan Croc Birkin or Kelly has the leather from Croc skins from Nepal. If that’s the case then Hermes must be paying only $500 dollars for a bag that they price $100,000!!!

  • Mochababe73

    I don’t think about where the skins from my leather handbags or lizard shoes come from. I buy what I like. However, I am from the South where I am certain that the meat is being eaten by plenty of people. My opinion is that most Southerners are meat eaters. My great-grandfather was into voodoo as well. So, I think that it is noble to care about animals in this capacity, but I’m just not that noble.

  • Spriit

    My sister’s fiancee bought her a crocodile-skin bag when he was traveling in Central/Southern America. The seller had killed the crocodile himself and usually just sold skins to wholesalers, but would occasionally make a bag. It was absolutely gorgeous and cost $50, together with a matching wallet!

  • chloehandbags

    Never liked Hermes and now I have a real reason for not to, other than their current, juvenile ‘artwork’ and overpriced (and really rather dull!) leather goods!

    Can’t say I’ll be shedding any tears (not even crocodile ones, I’m afraid!) for egg poachers/croc killers, though.

    People who drive stakes through animal’s heads and let them die slowly, just for their skins, for a living don’t deserve too much pity, in my book.

  • chloehandbags

    ^ Sorry, animals’, not animal’s.

  • chloehandbags

    BTW, much as I’m happy (or happier!) to hear that the meat is also used – if it is not the primary reason for the animal to be killed as it, supposedly, is with most non-exotic leathers (someone told me otherwise, the other day, but I’m not sure how accurate that info was?); it’s not really the same as leather production from cows.

    Also, cows aren’t killed in an especially cruel way, just to preserve their skins.

    • http://www.purseblog.com/ Amanda Mull

      As someone that’s lived next door to a slaughterhouse before (I kid you not, I had some weird apartments in college), I’m not entirely convinced that the way that cows die is any more humane. I’ve heard the sounds.

  • Bagolicious

    Well said, Helen!

  • Rahsan

    Can’t be sorry for someone who beats the crap out of an animal just to make some dollars. Just as the seal-hunters in Canada. Just as those designers who have their own fur or gator farms. They have no morals.

    • Lena

      Most people who object to the killing of exotic animals eat chicken and pigs who have been raised in very small boxes to the extent it can be called torture. I think killing a wild animal is more moral than raising an animal in a box. Am not sure what kind of living conditions do Hermes alligators have. Usually the argument against killing exotic animals is that they are endangered. Well, some alligator species are endangered others are not. Another common comment is it is not right to kill for beauty… Well… The question is subjective, but from the animal’s point of view, it hardly cares does it die for meat or for beauty – it only cares it dies. Even more precisely, it cares how it lived… Was it stressed in a box, or happy in freeness…

  • Rooster Shamblin

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  • Rosecity

    I really enjoy these discussions. After having visited the “Hermes” portion of the Purse Forum, I’ve noticed that these topics never surface over there……

  • Lena

    it somehow doesn’t make sense… the price cannot be “too high” and “too low” at the same time…