“Expectations of consumers- future prices”- Due to the limited stocks and consumers might not get it on time, there are often many consumers who resell the new releases at high price on resale marketplace Grailed. For example, a bomber jacket which is originally sold at $3000 is priced at $20000. As consumers expected the price of the jacket to be resold at a price much higher than the original, they would want to buy it when it is released, not when it is resold. This will cause the demand for new items every Thursday to increase drastically.

“Number of buyers”- Supreme has collaborated with several luxury brands such as Louis Vuitton and Comme des Garçons. In its recent collaboration with Louis Vuitton, it has spiked the interest and excitements of Louis Vuitton’s fans. This blockbuster collaboration has garnered a lot of attention from both Supreme and Louis Vuitton’s fans, which helps to put Supreme in front of new audiences other than young consumers. Older luxury shopper as taken an interest in this collaboration and this largely contributes to the increase in demand for Supreme products.

“Taste and preferences”- There are several elements that have contributed to Supreme’s stealthy ascent to global success, and remaining “cool” 20 years after launching. Firstly, Supreme has adopted a retail strategy that certainly helps to feed the hype around its products. It has never exhibits at trade shows and it is only officially available via its own stores and website. The brand has limiting advertising and is consistently sticking to its own independent plans,and it does not accept interviews as well. Secondly, Supreme has popularised the system of product arriving at structured times or in “drops”. It creates collection twice a year which are structured to weekly deliveries online and in stores, which are dubbed as “Supreme Thursday”. The limited drops keeps the system relevant which are “cool” to consumers. Once the items are sold out it seldom get restock. They felt unique to wear items that are “limited edition”. This contributes to the increase in demand for Supreme products

The HeadQuarters of Supreme as according to they insists on keeping production levels low. By doing so, it causes the the supply curve to be very high. Causing equilibrium prices to be kept at an all time high. As students, Supreme will be the best case study we have to see how important supply slide scarcity is to a brand’s popularity and desirability.

According to the chosen News Articles and further research done on streetwear. It has been implied that factors that may affect Supreme’s supply and profits would primarily include “Number Of Sellers In The Market”, “Expectations Of Producers” and “Technology”

With regards to the factor of “Number Of Sellers In The Market”, Supreme has a constant increase in the number of competitors that they have as people are always coming up with new Street Wear Trends. When this occurs, they are constantly forced to lower their product’s prices to remain productive as according to the supply curve. It would have shifted right, increasing supply and decrease price levels. Examples of prominent competitors include Off-White, Stussy, Mastermind and Billionaire Boys Club. These competitors are constantly coming up with newer designs and allowing for an influx in supply that can cause Supreme to follow the trend of increasing their good’s supply. However, This does not necessarily affect Supreme as according to further research, Supreme is known to have a large following of loyal shoppers that are not willing to take a switch to other luxury streetwear brands. Allowing for Supreme to stay true to keeping production levels low. Thus, even though “number of sellers in the market” of streetwear would affect supreme. It would not affect the supply of supreme to such an extent whereby price levels would drop due to movements in the supply curve.

In addition, the expectations of producers can play an extremely large role in determining the supply of Supreme products. When there is a higher demand for such goods and services. Companies would obviously increase their supply in order to gain a higher profit from what they would be selling. However, supreme is unique in a sense whereby they understand when the supply should be limited to. By doing so, it allows for their products to become very highly priced while still ensuring that demand is met to a certain level such that losses and dissatisfaction of customers would occur. Also, as according to one of our articles chosen (GQ), “Supreme founder confirmed that private equity firm The Carlyle Group had acquired a significant stake in the business.” This strongly suggest that the expectations of the producers are increasing drastically. The Carlyle Group invested $500 Million USD to acquire 50% stakes of Supreme. This suggests that producers are confident that the industry alongside supreme will only continue to grow as investors would not just invest such a large sum of money in something that they are not confident about.

Additionally, Another important factor that can cause the supply of Supreme to change would be technology. This is because, in our modern day and age, we have become extremely dependant on new forms of streetwear making technology such as sophisticated printers. With this knowledge and information and improvement to tech. It can allow for more efficiency when producing Supreme’s Clothings as lesser resources would be needed to produce the same amount of good. Allowing for a lower cost of production. Causing the supply curve to shift right.

In conclusion, Supreme is a luxury brand and the supply of it can be extremely determinant on the economics and income of people. This would directly lead to changes in supply as it would be link the the elasticity of the products. However, what causes Supply would be demand and due to the extremely high demand for this form of luxury good. Supreme, with their extremely well marketing and controlling of their supply. Is able to manipulate the supply chain such that supply is kept at the level whereby equilibrium prices are always the highest. This is done through controlling important factors such as the 3 mentioned above

“The cult of the line” was the term used to describe the popularity and explain the growth of Supreme. What makes Supreme blossom from standoffish streetwear brand to Louis Vuitton-collaborating behemoth is the perception of fashion-hypers. The idea of queuing in the line hours before the release of the new Supreme collection is made fashionable and those who are in the line are subsequently trendy and “supreme”. This is because Supreme does not mass produce its merchandise and holds an incredibly fast sell-out rate. Due to its scarcity from limited production, the enthusiasts or Supreme-heads make sure they are one of those few who get Supreme merchandise on first hand, off the store. This remains their fashionista status of a trend-follower. Followed by the fallacy of composition, others who purchase authentic Supreme clothes redeem themselves one level higher than those who do not. This is because they are cooler than most of us who are unable to splurge on such luxury. However, there are criticisms around this hype as many see it as a waste of time and money to chase after such tangible goods. The plain designs of Supreme’s products do not do its justice to the marked-up price they carry. Therefore, it adds up to the debate on branded clothings and those who are willing to spend a fortune on it. It portrays Supreme as a blue moon of the fashion world due to its rare appearance. As a result from its brand quality, rarity and controversy, Supreme grows both in its image and revenue tremendously over the decades. 

Fallacy of ignoring secondary effects: 

As it has been said, Supreme produces its products at a relatively small rate and does not support the idea of mass production. It does accumulate sumptuous revenue for the brand, but, also boosts the development of the second market. Second market is an underlying problem with any luxury brand as it hammers the economic profits of a company by re-selling the company’s products. Similarly, a Supreme t-shirt with an original price of $36 was overcharged with $600 on an unauthorised clothing website. Platforms like Grailed and eBay are where Supreme’s secondary market is splintered. The average listing for a Supreme product is $240 on Grailed, and the average sell price is $146, often anywhere from two to ten times the product’s actual retail price. Thus, Supreme’s secondary market is likely equal to or bigger than the company’s annual estimated sales of $150-300 million. 

As much detrimental as it sounds, second market helps resonate the Supreme vogue. It illustrates the high demand of Supreme up to date and how elastic Supreme products are. Hypebeasts around the world are willing to spend every paltry of dollar they have on these luxuries due to its popularity, resulting in its rise in pricing on such listings. However, Supreme needs to keep growing to get its new investors the returns they want. But at the same time, it needs to keep its products relatively scarce for Supreme to stay Supreme and for the secondary market to keep thriving, which is crucial for the brand to continue resonating.

Supreme has been well-known for deliberately keeping low supply of products and rarely stocking up its products in response to its popular demand which dramatically raises the demand of Supreme. However, the limited supply of Supreme products give consumers more time period under consideration before getting the re-stocked product. This allows consumers to be more able to switch from Supreme, a relatively more expensive product, to a relatively cheaper product in the same streetwear fashion lining, such as Stussy. Hence it causes the demand of price to be more elastic over time, and when demand curve of Supreme is drawn out, the demand would have a gentler gradient which depicts the increasing price elasticity. 

 

Collaborations within luxury mega-brands, pop culture and celebrities has attracted waves of consumers excitement. However, such collaborations increases the value of Supreme products significantly. For example, a standard Supreme tee costs around SGD $60 but a Louis Vuitton x Supreme tee costs around SGD $630, which is around 10 times the standard price. Collaborations are one of the reason for demand of Supreme to be price elastic as consumers will be more hesitant to buy products that are highly inflated. Overpriced Supreme clothings will cause consumers to purchase clothings of other brands, which consumers are responsive to change in price of products.

Supreme sells $40 graphic T-shirts to hyped-up teenagers, wanting to follow the leading trends, and is worth one billion dollars due to its limited supplies. Trends are one of the reason why consumers are so willing to spend money on clothings regardless of the price, as some purchase Supreme products to be considered in trend, cool and fashionable in today’s society. Thus when prices of products of Supreme changes, consumers’ willingness and ability to purchase it will change and this leads to demand of Supreme being price elastic. For example, if prices of Supreme clothings decreases, more consumers would purchase it and if prices of Supreme clothings increases, more consumers would not purchase it. This shows that consumers are responsive to change in price.

 

As compared to other retail brandings, such as Cotton ON, Supreme is considered a luxury brand. Demand of luxury goods are more price elastic as it is not a necessity where consumers have to purchase it for everyday uses and consumers can choose other clothing brands that are cheaper and have more substitutes.

Supreme is considered a luxury streetwear brand so its demand is more income elastic. There is larger proportion of income spent on Supreme products as compared to other streetwear brands, so demand of Supreme will be in response to change in income. When consumers have higher income, they would then purchase Supreme products as consumers can purchase cheaper clothings when they do not have relatively high income. Therefore when a product is more income elastic, the demand curve will shift towards the right. This depicts that at a particular price, there would be more quantity of Supreme products being sold.