Have you ever wondered why Supreme clothes are so expensive? No, they are not made of diamonds, expensive glitters or pure gold. Let me explain you the Supreme business of scarcity!
The brand Supreme have very few stores around the world (10 stores located in the US, UK, France and Japan) and this is in accordance with its successful strategy. The brand releases every week a drop list called the Supreme’s weekly drop lit. It presents the new products the brand will release, and their prices are not so expensive (around $120 for a hoodie) but the brand is playing on exclusivity. Indeed, those items will be released in a very limited number. We can draw a parallel with limited editions products: all Supreme products are limited editions.
So far, you probably still don’t understand why are Supreme’s products that expensive if even the brand is not setting crazy prices. Well couple this scarcity with a huge hype and you have the recipe of a successful hype-centric business model. Because the apparels are rare, and customers are hyped then they queue for hours at each new products release. Supreme customers behave like Apple addict but every two weeks and not to get the product first but just to get the product at a Supreme price. The hype is so huge that more of the buyers plan to resell their purchases and fuel Supreme’s gigantic secondary market. Supreme weekly drop list became such a thing that some people are even using web bots to purchase as fast as possible on the Supreme website. Check out the business of two American, Matt and Chris, who developed a bot to buy Supreme product. It begins in 2015 when these two American developed this tool and charged $100 per product purchased using the bot. Nowadays, thousands of persons are using their invention at every products releases (Here is a link to discover their history https://www.wired.com/2017/05/using-bots-to-buy-supreme-limited-edition-streetwear/). Once you see the prices reached by Supreme products online you realize that it is worth to pay for such a service. On E-Bay for instance, Supreme products can be sold more than a hundred times its original price, especially when it comes to collaboration. Indeed, Supreme has become a master in collaboration with others luxury brands what fuels it hype model. Look at the success of the Louis Vuitton and Supreme collaboration, hundreds of fans waiting for hours in the cold and a hoodie on E-Bay at the price of a car. Welcome to the Supreme World!
Fans queue overnight in New York expecting Louis Vuitton Supreme collaboration (straitstimes.com)
From Ebay.com
When I understood this business model, I asked myself a simple question. Why is Supreme not selling its products at a higher price if their products are bought at astronomical price on the secondary market. Well, I guess the answer mainly relies on two points. First, Supreme targets millennials and exclusively selling at a high price may prevent some millennials from buying Supreme’s apparel and on the contrary attract older and wealthier costumers. Secondaly, Increasing prices may also kill the secondary market and this market maintains the hype. Supreme is not even managing this market and costumers are maintaining the hype themselves. If Supreme weaken this secondary market it may also weaken the hype and therefore its entire business model.
To put it in a nutshell, Supreme business model is about reconciling hype and scarcity. The company achieved to create and maintain the hype (with the help of its secondary market) and Supreme is taking advantage if it. In late 2017, the brand sold 50% of its stake to the private equity company Carlyle Group for $500 millions dollar, thus we can value the brand as billion-dollar company. Supreme unique business of scarcity is paying off because all the ingredients are gathered and Supreme does everything not to harm the hype. By having a very limited number of stores around the world the brand is creating a desire strategy through its secondary market. London designer Ricky Harriot affirmed that Supreme targeted consumers are more likely to see Supreme’s products than touching them and this is what create the desire which also fuels the hype!
Supreme is such a singular brand and we still have many aspect to explore. Sounds like a treasure hunt, right ? So exciting !
See you later treasure hunters !
As usual here are the links used for this article don’t hesitate to check them out to fully understand Supreme’s model.
https://www.gq.com/story/supreme-billion-dollar-valuation https://medium.com/@maxdoblin/why-supreme-s-business-model-probably-won-t-work-for-you-8eef481be1c5
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/
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