History

A brief History of Drops.

Yeezy sneakers, Supreme gear, PlayStation 5s, Hot NFT collections. What do they all have in common? They’re highly desired products with limited supply.

Once the province of event tickets such as concerts and sporting events, limited product releases – referred to as ‘Drops’ - have become a mainstay of brand marketing. They rely on ‘Hype’ - grassroot driven excitement. Once relegated to word of mouth in niche circles, social media technologies have brought these hushed forums into virtually every pocket with a phone and Twitter account.[i]

Drops originated in Japanese streetwear brands in the 1990s before spreading to the United States, where the technique was popularized by brands like Supreme and The Hundreds. Drops provide a way for companies to generate a steady drumbeat of press coverage and brand awareness. In the process of shopping a drop, customers often learn everything about the brand story, or the artists that made it. It’s powerful from the brand perspective, so much so that even large, established companies use them in between proper, fully fledged product releases. For example, drops now play a prominent role in Nike’s direct-to-consumer strategy.[ii]

While sneaker companies have been one of the most visible beneficiaries of drop culture, perhaps the largest beneficiary have been resellers. Around 50% of all Nike sneakers that were released in the first quarter of 2021 were available on StockX (a leading reseller marketplace) and had a price premium of 50% or more. Cowan estimates the sneaker resale market at $2B in the US alone, part of a larger $24B resale market.[iii]

But herein lies a downside of this marketing strategy – if a reseller gains an advantage over other customers in purchasing a limited release item, they can snatch up much of the entire drop for themselves, and thereby extract unearned value from the resale market they effectively control.