The evolution of Energy Marketing from Street Culture to Main Street
Los Angeles, Ca. January 2021.
by Reggie Casagrande
I come from working with brands in streetwear & sneaker culture where we developed a new form of marketing for drop culture. Energy, high touch, or scarcity marketing as it is called is an extension of sports and entertainment marketing and is now becoming more prevalent during a period of extreme digital acceleration. This has been atleast a decade or two in the making. It was before Covid 19, when people talked about shopping online but weren’t forced to do it or use apps to get their groceries for fear of death. We all know Gen Z and Millennials like shopping online, mostly on a mobile device. Drop culture is here to stay as we steer through the retail apocalypse, the gamefication of shopping, the #ootd era of Instagram and Covid in a post Trump world.
For years, I worked with Stussy, Adidas, Nike and Converse crafting strategies to connect each brand to culture. Regardless of the product, I was part of the team figuring out who was the target consumer, which influencer to talk to, which collaboration made sense, how are we going to activate them, and what story are we going to tell with the goal to stay relevant. What’s happened in the last two decades with sneakers and streetwear is that products became commodified. Without a story, they didn’t mean anything, or resonate emotionally with the consumer, there was no differentiator. You needed a “lens” to tell the story through.
Some people say product is king and marketing is the queen. We know you can’t have one without the other in drop culture. A lot of people say Nike is a marketing company that makes product. A lot of the innovation that came to be known as culture, energy or high touch marketing started and evolved through sneakers and streetwear brands. Companies like Supreme were instrumental in perfecting the DTC drop culture model in the United States. They were not the first mind you, this model started a long time ago in Tokyo Japan with the UraHara brands.
These brands were the “hidden Harajuko” where youth spent all their time shopping. These were brands were Nigo and Hiroshi Fujiwara got started. Bape, Visvim, WTaps, Neighborhood, GoodEnough, Mad Hectic, Bounty Hunter, even Stussy. This started in the 90’s. I remember spending a lot of time in Tokyo working with these brands and kept noticing kids lined up outside the stores, especially the Head Porter store. They were all waiting for the drop way before Drop Culture was a thing or the digital transformation even started. This was way before social media or shopping apps. These strategies and tactics are now being adopted by industries all over the world that want to connect with youth.
Culture marketing is not an HR function, although you always hear HR talking about a companies culture. Culture marketing is an extension of traditional marketing and it is about community building and demand generation using organic digital, influencer and disruptive tactics . Like minded individuals coming together over a shared passion or love of a brand or brand ideology. Tribes and sub-culture’s that formed to celebrate music, style, design, sports and creativity. That is what street culture is about, and that’s why it is so globally pervasive in youth culture, because social media has made it so accessible. It’s fun, it’s creative, it’s sexy and it’s something that can be interpreted through the lens of any sub-culture.
We are now in a time when High Touch Marketing initiatives and collaborations started becoming more important to a brand’s survival. High Touch Marketing means that you are very close to the consumer and there is an entertainment component. Jerry Buss saw this when he built the Lakers franchise. Sports as entertainment. That model has now become adopted to shopping and consumerism as entertainment. In Tokyo, youth culture shops for fun, that is how they consume identity and express themselves. When brands started working with cultural figures like Pharrell, Kanye, Snoop, Rita Ora, it was about getting that figure as close as to the consumer as possible. Whether it was watching them on stage or when Kanye West handed out Yeezys at the adidas store on Broadway. He surprised the consumer, and the media went bananas.
Fandom is a huge part of street culture. From transactional to relational. It is NOT about selling the consumer, but about creating demand and building a relationship with that consumer, hopefully for life. The sale always follows. It is peer to peer community development and selling products through value and experiences and it leads to explosive growth. This was the beginning of what they now call “energy marketing” or scarcity marketing which developed from the drop culture retail model that the Japanese brands started and Supreme perfected; a phenomenon that came out of streetwear. It works off this idea that if the customer can’t get it, they want it more.
What brands have realized is, you can create a “halo effect” around this that drives revenue for your brand. People line up to buy the limited edition stuff, and if they don’t get it, they still buy something less exclusive because they have already decided that your brand is cool and desirable and they want to advocate. Nike, Vans, Adidas, Supreme realized this a long time ago. Having a line in front of your store is a sign of success. When Converse dropped the A$ap Nast shoe, Footlocker sent a thank you note to our CEO because of the line. Our team bought pizzas for the kids waiting, knowing there were only 200 shoes and they would sell through in minutes. But kids had fun, and Footlocker cemented a very important strategic relationship with Converse moving into the future.
In order to sell 1 million pairs of the basic shoe, a brand would need to sell out quickly of the Virgil Off-Whites, or the Supreme Timbs, or the Palace track suit etc. The partner drove the demand and the storytelling, and there always had to be storytelling to drive the social engagement that drove the demand. With the rise of social media eco systems and influencers social capital, commerce through content was a big part of it.
Energy is marketing at the top of the consumer chain or pinnacle. In products and consumer segmentation there is a product pyramid. Pinnacle or “limited edition” sits at the top, with a high price point and low quantity. The middle is a combo, sometimes wholesale and the bottom is where you make all your money. The idea is that the demand for the top informs the bottom. And unlike trickle down economics, halo product marketing works. Even the design elements are paired down, materials simplified, and the product is released later once the customer has been “incubated” to the look, silhouette and feel of the product. This is particularly effective for new product propositions that the consumer is not used to. You incubate about 6 months before with an energy partner and then you drop the inline proposition in time for back to school or Holiday shopping.
All sneaker companies and most streetwear brands use this model. The bottom is your more mainstream, late adopter consumer who is price sensitive, style conservative and they don’t care about limited edition or exclusivity.
The top is expensive and hard to get and makes a brand culturally relevant and desirable. It is hard to sell a million white Nike air force ones or adidas superstars if you don’t have a juicy collaboration of 1000 sold out in seconds driving that demand to trickle down.
The Dior x Jordan collab sold out in presales immediately and then went to the secondary market where it was for sale for $20–30K, there were only approx. 8000 made and released globally.
You know those kids that wait in line outside Supreme and Bape waiting for the drop on Thursday? That has evolved drop culture into; the “culture of the line”. Kids that wait out are often “drop lordz” as I like to call them. Drop Lordz are kids that buy the product at retail, wear it, post it on Instagram and sell it for a profit afterwards. They are usually some sort of style or sneakerinfluencer in their own right.
As brands move into more of a profitable DTC model, this becomes the blueprint. Some brands started on IG and already use this methodology as it is all they know. More matrixed companies with a wholesale model that is more omni channel want to move in that direction. Who doesn’t want customers waiting to buy things outside the store? DTC (direct to consumer) is highly profitable, creates more margin and more brand control. It allows brands to dictate when they want to drop products, how and what storytelling or experience they want to create so its much more desirable from a business and brand point of view.
What is a Drop? A drop is when a brand brings a new product or collection to market. The consumer graves newness and social media platforms like IG have accelerated this phenomenon. Drop culture really started in Tokyo with the Urahara street culture brands over 20 years ago. Brands like Neighborhood, WTaps, Hysteric Glamour, Bounty Hunter, Porter and Bape would drop new items once a week and kids would wait in line to purchase. It was all very civilized and normal. There was limited quantity and the idea was to sell through as quickly as possible. Stores were for experiences, they were curated, not shoved with merchandise like a department store. Everything was elevated. Unfortunately, because of the value of sneakers and limited edition products kids started getting robbed and hurt after purchasing their items. Thats why many brands like Supreme function on a lottery system online to minimize theft and street crime which is bad for the culture and for business.
During my time working at adidas I watched this high touch digital transformation happen. What adidas did right, and this is thanks to the brilliant and now deceased CMO, Hermann Deininger was sign two brand ambassadors that would change history, culture and the company forever. Those two creators were just starting to make noise, they were Kanye West and Pharrell Williams.
It was the perfect storm. Kanye was already on his way to being a cultural disrupter and mega star. They were both stars, but not to the level they are now where they became global phenomenons. Pharrell had been on a hiatus of sorts and was just coming back into the public eye when he released a song that would become a cultural phenomenon, the song was “Happy”. It was part of the soundtrack for the movie Despicable Me 2. The song went on to catapult Pharrell’s star when he performed it at the Oscars in 2014. He was wearing a custom made adidas shrunken leather jacket that we created for him. It wasn’t for sale, but customers freaked out and all our key regions called and said they wanted it asap, it was madness. This experience and the demand it created was the epitome of what they now call high touch marketing.
Around this time, the culture at adidas went from moping in the hallway to high fiving in the cafeteria. The employees were ecstatic and felt rejuvenated that we were onto something. The culture had shifted from the dusty heritage brand that made soccer jerseys to something kids cared about, and that brought enormous positive change. That change was success, cultural relevance and sales in the marketplace.
It took 5 years for adidas to go from no one wanting it, to being hot again. From $4 to $14 billion in 5 years. During this time Kanye West was given carte blanche to establish his Yeezy footprint. The first shoe was a mistake since he changed his mind at the last minute and they had to change the fabric. This resulted in a very limited number of shoes coming to market and kids went crazy. Everyone wanted it.
That mistake really cemented Yeezy as a desirable brand for adidas. Yeezy went on a trajectory of tremendous growth and now generates about $ 2 Billion a year for the brand and like Kanye’s untamable ego, continues to grow into an even bigger behemoth. The fashion shows were there for hype, unfortunately, the clothing didn’t really sell. But what it did sell was the brand and the cultural mystique necessary to stay relevant.
What’s interesting is watching so many other industries start to adopt this model. First it was luxury when Kim Jones did his Supreme collab at Louis Vuitton. That proved the model works to drive demand and all luxury took notice. I think the red back pack is worth about $40 grand right now on the secondary market. These products become sublime objects of desire. They are contextualized into aspirational status symbols. This generation doesn’t drive, so they covit sneakers and bags and front row fashion week seats. They grave the fandom, experience and culture of the line because they grave community.
You now see that moving into other discretionary products; not only beauty, luxury, and food (McDonalds) but also cars have adopted this model. Witness Virgil’s collab with Mercedes, Murakami, Futura x BMW and artist Daniel Arsham (and frequent Kim Jones collaborator) with his Porsche collab that came out in 2020. The Arsham Porshe 911 also had a collectible mini car for all to make the collab more accessible and fuel viral social media storytelling. Again, the object or product is commodified and the artist and/or collaborator adds a language and story to it. This is disrupting the automotive industry. It’s storytelling, and you need it to stand out in the current landscape of digital noise. You need partners and art to create objects of desire, you need to have minis (mini objects like little Be@arbricks) that are affordable and collectable so kids can collect them and talk about it on social media.
I can’t wait to see what happens the next few years and how the industry evolves and disrupts this business model. The Cactus Jack happy meal was next level and did so well those corporate people didn’t know what hit them. Most brands don’t want to sell out or through, they think it’s better to have enough inventory to appease everyone. But get this, with energy, selling through =good and inventory =bad. Collaborations have to be mutually beneficial to have success and are about connecting a product to youth, or to cool, or to a community that you don’t have.
J Balvin is the next hot drop from McDonalds. This tells me they have the ear of youth and are innovators, willing to adopt a new model, to communicate in new places. Any company that applies this model to their product and brand marketing is destined for cultural relevance, growth and success if they do it right and align with the right people. It has been 2 decades in the making. Supreme does it, Stussy and the Ura Hara brands finessed it and the current crop of progressive brands is driving it. I’m in- are you?
