What the heck is streetwear?

Streetwear is an aesthetic – or a style of dress – that incorporates unique, scarce, and obscure items into an outfit. The definition is fluid and constantly evolving, but here’s what a typical streetwear outfit might look like.

The streetwear aesthetic relies on pieces, or “grails” as they’re called in the community: outfits are built modularly from sneakers, jeans, shirts, etc. that have their own personality or calling. Here are a few classic streetwear pieces:

• Adidas Yeezy Boost 350 (shown above) – $400
• Off-White Sweatshirt – $600
• Supreme x CDG Logo Tee – $500

Not all items are this expensive, but it typically is a very costly hobby.

Streetwear is heavily community-driven, and this differentiates it from other areas of fashion. One of the major reasons why people invest in streetwear is to connect with others who care about it – walking by someone on the street wearing a similarly obscure outfit often creates a cool level of mutual understanding. The streetwear world thrives on details, limited information, and scarcity (more on that later) – all which lend themselves to small groups and insider culture.

There are entire publications dedicated to streetwear, Twitter accounts that exist solely to give news on when sneakers are for sale, and in-house content operations at the marketplaces we’re going to look at. Staying up to date and understanding trends is more difficult here than in more transparent domains.

Streetwear is a segment of the fashion market that operates on wartime supply and demand curves. In normal fashion (as with most other lightly regulated markets), manufacturing operates on a supply and demand basis: if clothing sells well, more will be manufactured. Accordingly, there is no aftermarket: what you want will be available at retailers, and you’ll buy it from them.

Streetwear turns that model on its head by fixing supply and ignoring demand. Streetwear relies on a relatively old concept in fashion – manufactured scarcity – to drive hype and create an aftermarket. Essentially, despite the fact that there’s demonstrated demand for a particular item or brand, manufacturers and labels will not increase supply to match it. Pretty weird, right?

• Normal brands: you want to buy my stuff? I’ll make more of it!
• Streetwear: you want to buy my stuff? Good luck!

It makes a lot of sense if you understand it as a marketing strategy instead of a sales one. By successfully manufacturing scarcity (more on this below), brands can build suspense and future demand. This isn’t a new idea: it exists in luxury brand strategy like at Ferrari, the early days of iPhone, and (remarkably) with Canada Goose sizing. Brands effectively sacrifice meeting current demand with an eye on growing future demand and building a brand.

Manufacturing scarcity isn’t as simple as just not making something. Properly executed scarcity relies on 3 core tenets:

• All of your stock at retailers sells out quickly
• There’s a robust aftermarket for your stock on multiple platforms
• Prices on aftermarket platforms are significantly higher than retail

Not all items and releases will follow this playbook (some will be unsuccessful), but brands must execute on each of these to successfully manufacture scarcity. For a great example, let’s take a look at Supreme – the granddaddy of scarcity – and how they’ve built a brand on top of people not being able to buy their stuff.

Supreme is a streetwear brand that makes random stuff: t-shirts, bricks, boxes, a thermos, a hand-axe, and other assorted items. Here’s how it works:

• Supreme releases a season line in drops or sales windows: each season’s line is released at a set time
• Items usually sell out immediately (like the within-10-minutes-kind of immediately)
• Buyers looking to flip their items list them on aftermarket platforms for multiples of the retail price

Attempts at buying this stuff at retail have gotten more and more sophisticated: hackers now sell bots that auto-buy things whenever Supreme releases them. It’s getting a bit nutty.

Supreme is its own brand, but bigger apparel manufacturers have also made their stake in this market. Adidas and Nike have both had their share of streetwear success in the past few years (and decades) – Adidas with their Yeezy and Pharrell lines, and Nike with Jordans, SBs, and the recent Virgil Abloh collab. Here’s how these drops work:

• Adidas and Nike have mobile apps (Adidas’s used to be called Confirmed, and Nike’s is called SNKRS)
• “Drops” are scheduled in advance for streetwear that Adidas / Nike anticipate will be viral
• Mobile apps alert users when “drops” are happening (either in advance or ad hoc)
• Supply is so scarce that the apps carry out raffles to determine who gets to buy the drop (you read that right: the raffle is for the chance to buy something)

Adidas and Nike have the resources to create their own apps, but not all drops happen this way. Supreme has its own site for drops, and other players make use of physical retail as well. Most Adidas and Nike drops also incorporate their stores as well as resellers.

Drops are a culture in of themselves. The experience of waiting to see if you’ve won a drop is unique, and the line you wait on at the Nike store to pick up your prize is a community. People in the know what you’re there for, and the mutual respect can be intoxicating.

One of the bittersweet parts of “big streetwear” – or when bigger apparel brands have successful streetwear releases – is how they leverage those hits into market share. Unlike indie brands like Supreme that live and die by scarcity, Adidas and Nike are large brands: selling a single line of shoes, even above retail, doesn’t move the bottom line. Instead, they turn their streetwear into normwear. Here’s their playbook:

• Build a successful line of streetwear products
• Pick one stylistic or material element of a successful streetwear product
• Create a new mass market item that incorporates that element
• Profit

Adidas and Nike have done this again and again, and it works. Adidas pioneered their Boost technology with their Yeezy line (a Kanye West collaboration), and it ended up becoming a staple of most of their new models. They also created the Deerupt Runner, which has a very similar silhouette to Yeezys. Nike recently had a bunch of success with their React Element 87: so they copied the sole and upper shape into a mass market shoe that’s half the price.

Market demand creates beautiful art, and then consequently destroys it through mass market copies.

• Grail – a streetwear item that you covet (“What grails you looking at for FW18?”)
• Cop – purchase and own (“Did you cop those Sesame Yeezys yesterday?”)
• Drop – a limited release and sale of an item by a brand (“I got ‘em at the Adidas SoHo drop last week”)
• Flip – selling a grail on an aftermarket platform (“You trying to wear or flip these?”)

The aftermarket players and platforms

GOAT is a marketplace just for sneakers, based out of LA and well funded by venture investors. It takes a while to get approved as a seller (it took me 2 months, and was only resolved after I tweeted at them), and all verification goes through their warehouses. They allow sellers to post new, used, and new with defects items.

Based out of Detroit, StockX is a marketplace for sneakers and streetwear. The company is big on collecting sales data, and displays some basic analytics for each item (price fluctuations, average price, etc.). They only deal in new items, and just raised a nice round of funding.

StadiumGoods started out as a physical store, but now has a major presence online. They deal in sneakers and apparel, and raised a seed round from well known investors last year. The site only allows sellers to post new items, and even accepts returns.

Grailed is a user-driven marketplace where buyers and sellers can exchange anything: from high end streetwear to old Tommy Hilfiger sweatshirts. Unlike the other marketplaces, sellers ship directly to buyers, and verification is community driven. Grailed just raised $15M from awesome investors too.

While all of these platforms are technically marketplaces (they don’t control supply or demand), Grailed is the only true marketplace among them.

Grailed is very different from the other platforms on this map: it’s a real marketplace:

Items are listed as listings, all individual from each other.

• On the other platforms, there’s an SKU-based hierarchy, meaning that items are sold. On StockX and StadiumGoods, for example, you don’t really know who you’re buying from. You're getting an abstracted item.

The buying and selling process is iterative and heavy on bargaining.

• On the other platforms, the price is set in advance. You can bid on StockX and GOAT, but the process is asynchronous and there’s no direct line of communication between buyer and seller (no messaging).

Verification is community and moderator based.

• Grailed has moderators looking over the marketplace, but sellers ship directly to buyers (with a money-back guarantee in the case of fraud). The other platforms all require sellers to ship to them for verification.

What changes does scale introduce for streetwear?

An important insight in studying complex systems is that some relationships don’t scale, and the same might be true for streetwear. As streetwear grows in popularity, it paradoxically will lose much of the allure that it garners with insiders. Above, we covered the personal and insular element of the streetwear community: part of the fun is that it’s unique, can look kinda weird, and makes other people confused. The more mainstream streetwear becomes, the less those benefits apply.

To understand this trend more deeply, it’s helpful to segment the users of these aftermarket platforms into a few groups:

I suspect that sales on aftermarket platforms are heavily driven by the “Hypebeast” persona: these are people who are experts in streetwear, know exactly what they want, and are extremely savvy on price. As streetwear expands in popularity, this is the group that becomes marginalized and is at risk of leaving / getting into another trend. They also buy the highest price stuff, which translates to higher average revenue for marketplaces (commission based).

For a concrete example of what this means, consider Adidas’s collaboration series with Kanye West: Yeezy. Typically, Yeezys are dropped every few months and are wildly popular: they almost always sell for more than 2x retail on the platforms in question. That has been the case for years, but the landscape has been rapidly changing over the past few months: Yeezys have been becoming more available.

The last two Yeezy drops – the 350v2 Butter and the 500 Utility Black – were dropped in such great quantities that they’re barely selling for more than retail now. Aside from the Yeezy Powerphase (which was generally considered a failure), that’s totally unique in Yeezy history. This is not a fluke: Kanye has publicly expressed his desire to get Yeezys into the hands of whoever wants them, and indicated that the Cream drop on September 21st will be the largest ever.

Yeezy 350 V2 Butter

Yeezy 500 Utility Black

If streetwear staples like Yeezys are readily available for prices similar to retail, what does that mean for aftermarket platforms? Going back to the 4 core benefits of aftermarket platforms:

• Buying and selling used clothing – no change
• Buying and selling scarce items that are sold out at retail (manufactured scarcity) – timeline gets pushed out, demand plummets
• Buying and selling non-scarce items that retailed years ago (natural scarcity) – no change
• Community, content, and general “insider” culture – insider culture gains major importance as streetwear becomes mainstream

As streetwear and streetwear culture becomes more mainstream, it begins to erode the value proposition of aftermarket platforms for certain user personas. Growth will mean moving

If the bulk of aftermarket platforms rely on the “Hypebeast” persona to drive high priced sales on their platforms, this market shift means that the end of that is near, and these platforms are starting to hit the mass market. I suspect that’s the basis of many of these large funding rounds.

The aftermarket platforms in this market all started out by catering to a niche group – “Hypebeasts” – that were reliable, serviceable, and great pilot customers. But hitting venture scale means moving on to service other market segments. Non-core users – in our case users that aren’t heavily committed to streetwear – have a different set of priorities:

Platforms that can take advantage of this shift will have a much larger market to cater to, but the shift will be difficult to execute. Post-shift, they’ll also need to worry about much stiffer competition with traditional retailers and e-commerce players. New customers will expect fast shipping, clear pictures and expectations of what they’re getting, and will have no tolerance for fraud: this is a different persona, or in other words “what got you here won’t get you there.”

As with many niche businesses, scaling will mean a much larger market opportunity but consequently a higher risk, less differentiated business. They’re shifting from a true marketplace to more of a quasi-retailer. I would be surprised if a few of these platforms don’t start to work with brands directly for listings.

The major impetus for newfound investor interest in this area is growth: streetwear has been making its way into the mainstream for years now, and it’s finally reaching critical mass. Supreme is becoming a household name (albeit not a household-owned brand), Kanye is an artistic symbol, and we’ve all heard of kids waiting on lines for Jordans.

StockX has the best seller UX in the group. There’s no seller verification process required (unlike GOAT), you don’t need to upload any pictures (like Grailed), and the product makes the process fairly simple and clear. GOAT has a relatively simple process, buy you need to get verified first: that process is totally opaque and disappointingly unprofessional for a company of their stage. Grailed is totally self serve: selling is an iterative process of lowering your ask and conversing with buyers (more on that later).

Buying on GOAT and StockX is ridiculously easy: find your size, pay, and be done with it. Shipping is too slow because of the required verification at their warehouse, but that should improve over time. StadiumGoods prices tend to be much higher for buyers, which hurts the UX. And buying on Grailed relies heavily on user knowledge and understanding, which isn’t great at scale when your users are novices.

Grailed is miles ahead of the competition in catalog breadth: you can pretty much find anything on there. That’s because they don’t require verification, and sellers ship to buyers directly. StockX has a very good selection of sneakers, streetwear, and accessories. GOAT only sells sneakers, and StadiumGoods is limited even though they’re broad in categories.

Grailed takes the trophy again here: with messaging, advanced filters, and an impressive content operation, it’s a much richer platform than the others. GOAT’s capabilities around used and new with defects items puts it ahead of StockX and Stadium Goods, which basically are just e-commerce platforms (although StockX does have a newsletter).

Overall, I don’t see any of these platforms as best positioned right now. StockX and Stadium Goods are ideal for buyers who know exactly what they want and don’t want to bargain. Grailed is much more of a community, and is a place to buy tons of different things with the flexibility to negotiate on price. GOAT finds a sort of middle ground.