Suddenly Obsessed

How Supreme went from a small NYC skateboard shop to a $1 billion global phenomenon

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How Supreme went from a small NYC skateboard shop to a $1 billion global...

Supreme is the rare brand that can inspire the same level of extreme devotion from private equity billionaires and streetwear aficionados.

The 25-year-old skateboarding and apparel brand is famously shy about publicity and it only has 11 stores (soon to be 12) around the world. But that doesn't stop throngs of fans and "hypebeasts" (the term for the streetwear-obsessed) from lining up for hours at a time for the mere hint of an opportunity to buy the latest items to have a red and white "Supreme" box logo slapped on them.

That's because the brand has managed to amass a growing following even as it's come to symbolize the ultimate in underground cool.

It's exactly that sort of rabid loyalty that spurred a reported $500 million investment (for a roughly 50% stake), valuing the company at $1 billion, from The Carlyle Group in 2017. (Supreme is a private company and does not report revenue, but the company was projected to hit $100 million in annual revenue in 2017, the year of the Carlyle investment, Women's Wear Daily reported at the time. Supreme declined interview requests for this article.)

But Carlyle's investment still had some wondering exactly how a marketing-shy skateboard shop with a cult following fits in the portfolio of a private equity giant that's previously invested in the likes of car rental giant Hertz, consulting firm Booz Allen Hamilton and Dunkin' Donuts fast-food chain operator Dunkin' Brands.

Starting small

Supreme launched in 1994, when designer James Jebbia opened an unassuming skateboard shop-slash-clothing store on Lafayette Street in SoHo, the heart of New York City's hip fashion scene. Jebbia, who had previously worked with skateboarder and designer Shawn Stussy, has said he was drawn to the edgy and effortlessly cool style of the young skaters he knew in the city.

The Supreme brand even sponsors a team of professional skaters that originally included skateboarders and actors Justin Pierce and Harold Hunter, who both starred in the 1995 cult classic film "Kids" — a controversial movie that both drew on skating culture and fashion of the mid-90s, while itself influencing both. When the first Supreme store opened, the first employees were extras from the movie "Kids," according to Vogue.

Over the past 25 years, the brand has expanded at a snail's pace, reluctant to relinquish Supreme's standing as a symbol of the underground, in-the-know streetwear fashion scene. It was a decade before Supreme opened a second location, in Los Angeles, and today the brand has two stores in New York City, six in Japan and outposts in Paris and London, while a location in San Francisco is planned for later in 2019).

Along the way, Supreme's fashion world street cred has been bolstered by high-profile collaborations with the likes of luxury fashion house Louis Vuitton as well as iconic global brands like Nike, Vans and Levi's.

"Over the years, they've worked with all kinds of different artists, all kinds of different brands, and it's part of what makes the brand so cool," Justin Gage, a data scientist and streetwear analyst, tells CNBC Make It. Gage adds that Supreme's collaborations with high-end luxury brands like Louis Vuitton and Gucci "really push the boundaries" of how consumers view skateboarding culture.

And whether Supreme is releasing a new line of its own apparel and accessories, or if Jebbia's company is dropping new items from its latest big-name collaboration, it's become commonplace for Supreme fans — dubbed "Supreme-heads" — to line up for hours on end outside a store for product release events that sometimes sell out in a matter of minutes. Supreme shoppers at these events will pay anywhere from $30 to $100 for a shirt or a hat, and from $150 to over $450 for a jacket.

Joe Migraine (a pseudonym, for privacy reasons) is a Supreme super-fan who also works full-time on the streetwear unit at the website StockX, an online marketplace for re-selling high-end fashion products. Migraine has been collecting clothing and other items made by Supreme since roughly 2011. He recently told CNBC Make It about the rigorous process he had to go through just to secure a spot in line at a recent Supreme product drop event in New York City.

"If you want to attend an in-store release ... you have to register online for that in-store release," Migraine says. "Those registries close very, very quickly. It's very, very difficult to register for a drop, generally because so many people are trying to go for it and they will close the page down as soon as it fills up."

If you do manage to get registered to attend an event, Migraine continues, you'll likely get a text message confirmation and then Supreme will tell you what time to come to the store to wait in line. "You show up at that time with the credit card and photo I.D. that you used to register. And then you can possibly wait in line for up to three to four hours just to get inside," Migraine says.

In this case, Migraine traveled to New York City from his home in Detroit to wait in line for about six hours on a hot August afternoon. He ended up spending about $3,000, he tells CNBC Make It, on a variety of items that included about eight t-shirts, six bags, seven skateboard decks, a few key chains and pins and one Supreme-branded Pyrex measuring cup.

Billing himself as the "world's #1 Supreme collector" on an Instagram account where he boasts nearly 140,000 followers, Migraine now owns a massive collection of Supreme products.

Supreme collector Joe Migraine displays some of the items he's bought from the brand over several years.
Source: Joe Migraine Instagram @joemigraine

A cult following, inspiring knock-offs

Supreme fans jump through hoops for the opportunity to pay up to $100 for a Supreme t-shirt, nearly $340 for a wool varsity jacket or even almost $200 for a Supreme table tennis set. But what do Supreme-heads do if they can't secure a spot in the line to get those items before they sell out? That's where Supreme's extremely active resale market heats up, with sites like StockX and other resellers listing sold-out items for resale at astronomical markups, like a t-shirt featuring Supreme's simple red box logo that sells for an average price of more than $900 over the past year on StockX. The shirt previously retailed for just over $30 through Supreme.

For Migraine, the reason he obsesses over collecting Supreme items over those released by other fashion brands has to do, in part, with his respect for Supreme's backstory, growing its clout from a small skateboard shop to a global brand over decades. He's also enamored with the wide variety of pop culture references touted in many Supreme products, which recently featured shirts paying homage to iconic art-house rockers The Velvet Underground, while past product lines included references to cultural icons ranging from Miles Davis to The Muppets to the artist Jean-Michel Basquiat.

View this post on Instagram

Supreme/Basquiat M-65 Cassius Clay (1982)

A post shared by Supreme (@supremenewyork) on

"I really think a great aspect of what they're doing is they're educating people. You know, they have a younger audience base and they're educating people on art, on music and on fashion," he tells CNBC Make It. "They're educating the youth of [today] as to what's cool, what's relevant and what they need to know about."

In fact, the Supreme brand is so sought after that the company also faces a problem with copyright infringement stemming, in part, from the fact that Supreme was unable to trademark its brand until 2012 due to the brand name's similarity to too many other products and brands with "Supreme" in the title. ("Supreme wasn't meant to be a brand ... It's a good name, but it's a difficult one to trademark," Jebbia told Interview magazine in 2009.)

Supreme also won a lawsuit in Italian court in 2018, against a company called "Supreme Italia," which sold what trademark lawyers called "legal fake" products that closely resemble Supreme's products, right down to the red box logos with the word "Supreme." Supreme Italia was forced to withdraw from the Italian market, however it is still selling knock-off Supreme items in other countries, including Spain and China, according to The Wall Street Journal.

Marketing research company SEMrush found that Supreme topped its list of brands with the most online searches for fake and replica products in both 2017 and 2018.

Managing the hype

One explanation for Supreme's popularity with young consumers — enough so to make them line up for hours at a time — has to do with the idea that the brand's products are "emblematic of rebellious youth culture," according to Gage.

"I would call it a brand that's heavily integrated with art and culture that tends to drive demand through consumer desire and consumer passion as opposed to explicit marketing."

In fact, Supreme barely markets itself at all. "Supreme has become successful in marketing their brand, paradoxically, by not marketing their brand," Gage tells CNBC Make It. "They don't invest in paid marketing at all to the same degree that most apparel or media companies do. What makes them really successful is the community that they're part of and that they've built."

However, in its own way, Supreme has found a way to use the brand's own mystique to generate hype that has helped the underground brand gain a global following.

"The magic lies in their ability to take word-of-mouth marketing and turn the launches of their products into sort of micro-experiential events," Cliff Sloan, a branding expert and founder of marketing agency Phil & Co., tells CNBC Make It about Supreme. "And that means that people have to go to places, buy tickets, get on lists, end up lining up outside stores. That ends up generating a lot of buzz, a lot of curiosity to the public."

Supreme also generates buzz with a never-ending lineup of branded curiosities — items no one would normally expect to see sold by a skateboard or streetwear brand, but when slapped with Supreme's unmistakable red and white logo, they instantly become must-have products for the most ardent Supreme fans. The company has sold everything from Supreme-branded hammers, nunchucks, and kayaks to a Supreme brick (literally a red clay brick stamped with the Supreme logo).

Many of those oddball items are still available to buy second-hand online, where a Supreme brick can sell for $130 on StockX.

"At some point they realize that their demand is so strong that they can literally manufacture anything and people will still buy it because the brand is so strong," says Gage.

The brand even recently teased a Supreme-branded dirt bike through a partnership with Honda and Fox Racing.

The more random a Supreme item may seem, the more sought after it's likely to be by the biggest Supreme fans. "Some items are easier to get than others, but the ones that are really fun are those ones where they really go out on a limb, whether it's a kayak or a motorcycle or a full sized mountain bike," Migraine tells CNBC Make It about Supreme's most surprising products. "You know, those are the fun ones."

Private equity influence?

Whatever the reasoning behind it, Supreme's reluctant, guerrilla-style marketing seems to have had the desired effect. Research on teenagers' retail habits by investment bank Piper Jaffray has shown in recent years that streetwear styles, led by brands like Supreme and Vans, have spurred increased spending among teen consumers. And, a Spring 2019 survey from Piper Jaffray found that Supreme was Generation Z's 10th favorite brand, though the bank's analysts have noted that the brand's popularity might finally be starting to taper off with teens.

Is it possible the association with a private equity giant like the Carlyle Group is taking a bite out of Supreme's cool, edgy aura? Can the brand maintain its hype-fueled mystique and street-cred with a private equity behemoth as its 50% owner?Supreme has already come under fire from critics like comedian Hasan Minhaj, whose Netflix show "Patriot Act" skewered the brand's partnership with the Carlyle Group by making t-shirts featuring red box logos similar to Supreme's own logo, but with the words "Private Equity" swapped out for the Supreme name. (Much like Supreme's products, Minhaj made a small run of 100 shirts, sold them for a low price, and then watched them fetch many multiples more on the resale market due to the laws of supply and demand.)

For instance, as branding expert Cliff Sloan points out, it's always possible that the Carlyle Group could want to see more revenue from Supreme and push the brand to move away from its strategy of limited releases that drive up demand for new products in favor of a more mass-market approach. "Companies make investments in order to grow those investments," Sloan says of Carlyle's investment in Supreme.

It remains to be seen, though, how the most ardent Supreme fans would view such a move.

"One runs there is that if the brand does go mass, it is, you know, contradictory to the way that it built its model with the limited edition releases. And that stands to potentially compromise its street cred, compromise its sense of cool with its core audience base," says Sloan.

For Migraine, the Carlyle Group investment left him "a little bit concerned, initially."

"You wonder, 'Are things going to change or are they going to stop being who they are?'" Migraine says. But, he adds that the past two years since the deal was announced haven't brought any of the potentially major changes to Supreme's business model that diehard fans like himself might have worried about.

"The evidence shows that they haven't stopped being who they are," he says.

Additional reporting by Allison Lau.

Correction: This story has been corrected to reflect that Supreme won its court case against Supreme Italia in 2018. 

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