People are obsessed with Supreme.
But why? I mean it's just a logo, right?
The street wear brand has a borderline called following,
the company only has 11 brick and mortar stores
worldwide but the brand is valued at one billion dollars.
So, what's the secret to Supreme success?
The answer is scarcity but not in the traditional sense.
Instead of using scarcity to raise prices,
it uses scarcity to increase hype,
and it's worked but it might have worked too well.
Affordable exclusivity is what makes Supreme
cool but it's also what limits the company's growth.
Commodity theory deals with the psychological effects of scarcity.
It states that scarcity increases the value of anything that can be possessed.
Most companies use commodity theory traditionally and
charge exorbitant prices for exclusive items.
For example, HERMES Birkin bag is one of the most scarce items on the market.
The opportunity to purchase one will cost you years on
a waiting list and a retail price of $11,000.
Supreme however, uses commodity theory differently.
Its products are scarce but affordable.
The brand sacrifices profits and instead cashes in on coolness.
Where an orthodox company collects monetary value,
Supreme collects perceived value.
An intangible status that's come to be known as hype.
That formula people are still trying apply to their own company.
Supply and demand, supply is low,
the demand is high then the price is high.
So, that also makes the hype high.
So how did Supreme figure out how to manipulate commodity theory?
To answer that question,
we have to go all the way back to the beginning.
Those are nice aroma in the store.
But yeah, it's fun.
In 1994 James Jebbia opened
a small skate shop on Lafayette Street in the East Side of Manhattan.
He hired young local skaters to work the store.
All of these workers in Supreme are super fine but we can't
turn it into a clubhouse because that's where everyone goes out,
that's where you skated from and that's where we came back from.
We are just like crazy gang that no one understood.
Supreme started by selling other skate brands.
Then they started to create their own products.
First, with t-shirts where the infamous box logo was popularized.
It's simple design and high production quality made it
stand out from other state close of the time.
The shirts naturally fell into an exclusivity model,
simply because the company couldn't make the shirts as fast as they were selling them.
Next, it expanded the product line to include sweat shirts,
then skateboard decks, then pants until eventually launching a full streetwear line.
Throughout the early years,
the store gained a following beyond just New York skaters.
Streetwear collectors, artists, and high school kids from
Japan and Europe latched onto the brand's exclusive products.
But what really sets Supreme apart was their collaboration with Nike in 2002.
The shoe release combined the sneaker head worlds with Supreme's growing cold following.
When SP launch, they launch from the done super done.
In the streets that dung itself,
that's a go way of life for people.
To find a different color a way they've never been out,
that's what just created all the energy comes from Supreme,
we carried at the time most of the stocks you all can get.
Whatever dance come out, that was special at Supreme.
Supreme continued to collaborate and grow in
the shadows all while keeping their products scarce.
Supreme releases two collections per year.
Fans can see previews of each item in the collection after it's shown on the website.
Rather than release every item at once,
the brand slowly releases pieces in stores and
online in what it calls drops every Thursday.
Supreme shows fans what items will be available before each drop,
which creates hype around the products.
Once a product runs out,
it's typically not restocked.
So you only get one chance to buy most products.
The limited supply and high demand create
affordable exclusivity and increase value for the buyer.
Combine this with the excitement that builds for each drop and you get
the typical supply and demand model on steroids.
It's become known as hype branding.
The hype around Supreme got so high that it sparked a secondary market.
Resellers buy as much as they can when a new season drops.
Then, sell items at markups that can reach over 1,200 times their retail value.
The menswear designer of the year is Supreme.
In 2018, Supreme won the CFDA's menswear designer of the year award,
pulling the brand further into the mainstream fashion world.
One year earlier, the company accepted the private equity firm,
The Carlyle group's massive investment and opened a new store in
Brooklyn with the aim of allowing more people the chance to buy Supreme.
The expected growth seems counter to everything Supreme has done to grow so far.
Supreme was built on a less is more strategy.
So if more people can access Supreme,
will it lose its competitive advantage?
It's getting really popular.
I do see it getting like maybe a little watered
down and a little oversaturated with they kind of their clientele.
I mean, James is a genius,
he knows exactly what he's doing.
So, whatever the plan is now, there's a plan.
Fashion experts expect an expansion into Asia.
Supreme has six stores in Japan but none in China or South Korea.
It may be possible to be exclusive in a lot of places but overall,
more stores means more stock which for Supreme means a less hype.
Supreme is at an interesting crossroads.
Do you think they can expand and stay cool
or do you think they're trapped by commodity theory?
Let us know what you think in the comments below and please like and subscribe.