The Brilliant Strategy Behind Supreme’s Success

Photo of a man carrying a red supreme bag

Streetwear brand Supreme is one of the most sought after apparel brands in the world. British-American entrepreneur James Jebbia started Supreme out of a skateboard shop in New York City in 1994. The popularity of the brand which sells jackets, hoodies, t-shirts, and other accessories online as well as in its stores 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. In 2020 VF Corporation, which owns The North Face, Timberland, and Vans bought Supreme for $2.1 billion. Supreme generated $561.5 million in revenues in 2022. What has led to Supreme’s ascent and dominance in the streetwear 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 brand collaborations, (3) the growth of the resale market and the power of 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 have historically outstripped supply with merchandise often selling out quickly. 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. But Supreme fans have noticed that it is easier to get their hands on merchandise as the company has grown. No longer an upstart Supreme appears to be offering merchandise in greater quantities than it has in the past.

Supreme’s overall approach is different than the one taken by 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 can spike dramatically after a drop by as much as 17,000% in the past.

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 Jebbia 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, Louis Vuitton and Burberry. 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 A$AP Rocky, Tyler the Creator and Kanye West wearing the brand. Once more and more hip-hop fans saw their favourite artists wearing Supreme it expanded Supreme’s each.

3. A resale market that provides free marketing and more exposure. Resale clothing is one of the fastest growing segments of the apparel market with the market for secondhand apparel growing from $28 billion in 2019 to an estimated $64 billion by 2024. Many of the customers that race to get their hands on a Supreme drop often resell their merchandise online at a much higher price. The average price premium of Supreme apparel and accessories on StockX was 57% in 2022 down from 67% in 2020. Items selling at a premium on a secondary market 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.

This 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 on Supreme’s website or in store 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.

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.

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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 are expected to generate 50% of global luxury sales by 2025. As consumer tastes change so does the fashion industry. If there was ever an indication of where fashion is going it could be seen when Virgil Abloh was appointed artistic director at Louis Vuitton in 2018. Abloh, who passed away in 2021, was also a streetwear designer and founder of popular streetwear brand Off-White.

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Sources

https://www.voguebusiness.com/companies/next-big-streetwear-brands-supreme-palace-off-white

http://www.bbc.com/capital/story/20180205-the-hype-machine-streetwear-and-the-business-of-scarcity

https://www.wired.com/2017/05/using-bots-to-buy-supreme-limited-edition-streetwear/

https://www.gq.com/story/supreme-williamsburg-brooklyn-james-jebbia-interview

https://www.npr.org/2017/11/26/556090186/is-the-streetwear-market-headed-for-the-mainstream