Why is Supreme so expensive?

An economics assignment I worked on back in 2021 during my undergrad.

How could two identical jackets both made by The North Face, and both using Gore-Tex technology, have a price difference of a thousand dollars, just because one of them has a Supreme logo on it?!

$300

$1300

Supreme is a streetwear brand and streetwear is a fashion movement based around surfing, skating and hip hop. Streetwear brands have broken into high fashion. The one brand that’s taken over is Supreme. Supreme is a cultural phenomenon built on hype. “Hype” is kind of a big excitement mostly amongst teenagers that has deep emptiness at it’s core. Supreme has so much hype it’s worn by musicians, actors and even famous philosophers.

Even though it only has 11 stores worldwide, Supreme is worth a billion dollars, and it all boils down to one thing, the “iconic” box logo, which Supreme slaps on everything. The logo has so much cachet, people even stamp it on themselves.

The lines out of Supreme stores are ridiculous. It’s just like the lines outside bakeries in the 30’s.

Supreme store (2019)

The great depression (1930)

This is all because of the brand’s “drop” culture. “Drop” culture is when Supreme releases a limited amount of products online and in stores and when its gone its over. It’s the opposite of Amazon, Supreme is actually inconvenient.

And because Supreme “drops” sell out immediately, people have to buy it on secondary or resale markets, and these items become even more expensive on the resale market.

Retail: $ 889 Resale: $ 3800

That’s a return of 327%!

The Supreme business model is about scarcity, it’s about supply and demand. People want things that other people can’t get and they are willing to pay more money for that. Then again, if everybody can get one, nobody wants one. It works by having a high level of rejection rate, by keeping things scarce. They’re like the Harvard of streetwear, high rejection rates but that is also one of the predominant reasons why everybody wants to get in.

It’s interesting how with brands like Supreme when we increase the supply it decreases the demand. It’s essentially increasing demand by limiting the supply.

“Conspicuous consumption” is a term for this which was coined by an American economist, Thorstein Veblen in 1899. Conspicuous consumption is when a person shows off by buying things other people can’t afford.

Conspicuous consumption leads to something called the “Veblen goods”.

Usually when price for a good goes up, demand goes down, but for Veblen goods as price goes up, demand also goes up, which explains the brand getting away with their astronomical price tags.

All in all it seems like Supreme’s whole model is built on “hype”, and if the element of scarcity used to fuel this hype ever goes out of the equation, it can cause the brand to collapse. Fans are fickle and hype is fragile and in and of itself is meaningless as you can’t take hype to the bank. Hype has a shelf life. People buy Supreme to stunt or show off, if everyone has them then nobody will want them anymore, as for the most part Supreme’s target audience consists of insecure teenagers who are terrified of being themselves and who need a Supreme fanny pack to make them feel good about themselves.

Dhruv Kulkarni

Roll Number: BECO21223