July 3, 2016

The Power of Limited Stocks Only

I've been obsessed lately with getting a pair of Adidas NMD R1's. The latest colorways were officially released last June 10 and I entered the lottery by Adidas PH to see if I would be lucky enough to win the right to purchase these hot shoes.

My wife also entered the lottery and actually won! 
Adidas NMD R1 in Off White
These shoes aren't cheap, so I'm surprised they sell out so quickly.

Why do they sell out so quickly? Here are a few obvious reasons:
  • The shoes are produced in limited quantities only. This increases the desirability factor among shoe collectors and makes regular people like myself want a pair.
  • The shoes are actually quite good. Those with a pair rave about not just how good the shoe looks but also how good the shoes actually feel when worn.

Shoes companies like Nike and Adidas have leveraged on this "limited edition" or limited stocks only effect to increase hype and publicity for their products. To a degree this is a legit marketing strategy and it is also basic economics: limit supply to increase demand.

The benefit is that it fuels the sneakerhead culture that just continues to grow. Many people collect these shoes and a whole secondary market has emerged with people buying and selling these limited shoes with great profit.

You can argue that the shoe companies fail to fully take advantage of the huge demand created. If they produced more, people would buy more, thereby increasing their sales. In effect, by having such a great shortage in supply of a particular shoe, say the Adidas NMD, those in the secondary market eventually reap most of the benefit. Some of the earlier, more desirable models for example easily sell for twice their original retail price.

However, it is exactly this shortage in supply that triggers an almost obsessive desire for regular customers to grab a pair, any pair even, of a particular shoe brand. And once these regular customers eventually cop a pair, they become full brand ambassadors, wearing the shoes with pride and even talking and raving about it to friends and family. 

From a customer journey perspective, the shoes companies have jumped from the awareness stage (finding out about how beautiful the Adidas NMDs are for example) directly to the loyalty and advocacy stage (raving about it and swearing by it to friends). This then drives a virtuous cycle where new people are brought into the sneakerhead culture and want a pair, do everything in their power to try and grab a pair and talk about it endlessly to friends once they have a pair.

The strategy works for shoe companies in that it brings in a constant pipeline of new customers and from it is very likely that they are more than happy to let some of their most loyal customers benefit and profit via the secondary market. Everyone wins.

For now, all I can do it write about this while I continue to hunt for my own pair. Maybe when the next colorways drop I will be "lucky" enough to grab a pair.