How Supreme's Success Could Also Be Its Downfall

July 17, 2018

Supreme has been able to capitalize on "hype" in order to become an exclusivity brand. Will this artificial scarcity lead them on a path of continued growth or will any increased distribution lead to dilution of the value of the brand?

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Supreme releases two collections per year. Fans can see previews of each item in the collection after it’s shown on its website. And rather than release every item at once, the brand slowly release 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. And once a product runs out it’s typically not re-stocked, so you only get one chance to buy most products.

The limited supply and high demand create affordable exclusivity, and increases 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, in fact, 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 1200 times their retail value.

SOT: Trevor Noah: “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 their competitive advantage?

SPENCER FUJIMOTO: I do see it getting, like, maybe a little watered down and a little oversaturated with like kind of their clientele, their customer base is seeming maybe not as core as it used to be. I mean, obviously, most of the people don't skate, they don't wear this shit anymore. -- James is a genius. He knows exactly what he's doing. So, whatever the plan is now, there's a plan. You know, it's not just out of the blue. They- they= they definitely have formulated and plot and planned this out.

Fashion experts expect an expansion into Asia. Graphic 06 Supreme has 6 stores in Japan, but none in China or Korea. It may be possible to be exclusive in a lot of places, but overall more stores means more stock. Which, for Supreme, means less hype.

Supreme is at interesting crossroads. Do you think they can expand and stay cool, or do you think they’re trapped by commodity theory?