The Brilliant Strategy Behind Streetwear Retailer, Supreme’s Success

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By Tricia McKinnon

Streetwear brand Supreme was founded in 1994 and started as a skateboard store in New York City. It primarily sells hoodies, t-shirts, and other accessories online as well as in its 11 stores. It was founded by British-American entrepreneur James Jebbia and it is one of the most sought after apparel brands within the millennial and teen segments.

The popularity of the brand caught the eye of private equity firm The Carlyle Group which made a $500 million investment in the brand in 2017 valuing the company at $1 billion.  The deal was significant because it was the first time such a large private equity firm invested in the streetwear market.  What has led to Supreme’s ascent and dominance in the clothing market? It can be traced back to a carefully crafted strategy that has capitalized on (1) the scarcity of its products, (2) the credibility of other brands, (3) the growth of the resale market and the power social media and (4) ever evolving fashion tastes. 

1. Scarcity that heightens demand. With a level of precision and discipline that is characteristic of the widely popular streetwear brand, every Thursday morning at 11:00 am during the summer/spring and fall/winter seasons Supreme drops a limited collection of merchandise. Demand for Supreme’s drops greatly outstrip supply with merchandise often selling out within seconds.  The carefully crafted drops have created a habit that keeps customers coming back to Supreme each week to see what new merchandise is up for sale.  

This approach is different than the one taken by designer brands that drop an entire collection all at one time.  The effectiveness of Supreme’s approach should not be underestimated as habits are central to human nature.  Supreme’s customers automatically check the company’s website each week at 11:00 am on Thursdays to see what is new and exciting.  Having the drops occur at a specific time reinforces this habit.  Customers do not have to guess when new merchandise will be available they know the exact times and are always ready to shop.  

Even more impressive is the fact that once merchandise is gone it is almost never sold by Supreme again.  This creates a heightened level of desire since customers know that if they do not get their hands on a piece of merchandise they will never see it in a Supreme store or on its website again.  This turns all of Supreme’s drops immediately into limited edition collections. With consumers often driven by FOMO – a fear of missing out, traffic to Supreme’s website during one of its drops can increase by up to 17,000%.  

Speaking about in-demand streetwear brands, Adam Alter, a marketing professor at NYU Stern School of Business has said: “if you want to create a scarcity frenzy, and your brand has a strong following, all you need to do is release a large number of different products, but very few of each one.”

2. Collaborations that create a bigger audience. In the early days of Supreme’s existence, its Founder noticed something interesting.  Customers that shopped in his store in Soho in New York were often wearing designer clothing along with Supreme clothing. Then Jebbia realized that customers liked shopping high low by paring clothing from Supreme with brands such as Louis Vuitton.  Since its early days Supreme has collaborated with other brands but it was a collaboration with designer brand Comme des Garcons in 2012 that was one of the first ones that significantly increased the brand’s exposure. 

Supreme has also collaborated with Lacoste, Nike, Timberland and Louis Vuitton.  These collaborations helped to elevate Supreme’s status while giving the brands it partnered with more street credibility. Celebrities, especially those from the hip hop culture have also helped to generate word of mouth for the brand with celebrities such as $AP Rocky, Tyler the Creator and KanyeWest wearing the brand. Once more and more hip-hop fans saw their favourite artists wearing Supreme it expanded Supreme’s each. 

3. Resale and social media growth provide free marketing and more exposure. Resale clothing is one of the fastest growing segments of the apparel market with the number of second-hand buyers estimated to increase by 40% by 2022.  Many of the customers that race to get their hands on a Supreme drop often resell their merchandise online for as much as ten times the original retail price.  Items selling at such a high premium only adds to the cachet of the brand.  Then once someone buys Supreme on the resale market often the person who was once a buyer becomes a reseller generating an even higher markup for the merchandise.  This fuels an ongoing cycle in the resale market that makes the brand even more exclusive and popular.

That phenomena was not created by Supreme but it has fueled the brand’s growth.  Many of the customers that are driving products to sell out are only buying these products so that they can make a profit in the resale market.  Reselling hot merchandise has become a lucrative business for many.  

Social media is a key enabler for the resale market as social media makes it easier to market exclusive merchandise.  In the past if someone had an exclusive pair of sneakers that may have only been known among the owner’s friends and acquaintances.  Now the latest Supreme collaboration can easily be seen on Kendall Jenner and  by over 100 million of her Instagram followers.

4. Evolving fashion tastes lead to even more demand. Today the fashion style that is prevailing is a mix of luxury, streetwear and sportswear. Brands like Supreme are benefiting from a shift within the general public to wearing a more casual style of clothing.  

What defines luxury merchandise is also changing. Speaking about the evolution of luxury products, Demna Gvasalia, the Creative Director of Balenciaga said: “The luxury product has changed, unfortunately, in my opinion.  The emphasis has gone from quality and craftsmanship into the uniqueness of the product. The younger generation are looking for something that stands out and makes them special rather than necessarily an amazing finish that you would find with some traditional brands.” The CEO of Balenciaga, Cédric Charbit, speaking on the same topic said: ”the value and the money [millennials] want to spend on things has changed. They’re maybe not the generation who’d invest in a $3,000 jacket. But they might buy a $450 T-shirt.”  Lazaro Hernandez, Proenza Schouler’s Co-Founder also speaking about the evolution of luxury products has said: “I think a true luxury brand today can work in so many different price points, you can sell a t-shirt for $300, $200 and still be considered a luxury brand these days. Those parameters of what is considered luxury and what is not, I think, are sort of disappearing.”  

Millennials and Gen Z generate 30% of global luxury sales and that number is supposed to increase to 45% by 2025.  As consumer tastes are changing so is the fashion industry.  If there was ever an indication of where fashion is going it can be seen by the appointment of Virgil Abloh as Artistic Director at Louis Vuitton last March.  Abloh is also a streetwear designer and Founder and CEO of popular streetwear company Off-White.  

 

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Tricia McKinnon