On November 28, famous designer and cultural icon Virgil Abloh died from a rare form of cancer, cardiac angiosarcoma, at the age of 41. was revered by many in the fashion, music and sports industries.
Abloh first rose to prominence as the Creative Director of Kanye West and was responsible for acclaimed album covers like “Watch The Throne” and “Yeezus”. He was also a DJ and helped spread the streetwear craze with his first brands Pyrex Vision and Been Trill.
Then Off-White was founded in 2012, embracing and evolving beyond its previous creative endeavors.
Off-White was born from Abloh’s ‘3%’ design approach, a premise that assumes that a new design can be created with a 3% change from the original. Its metamodernist aesthetic was akin to sampling – taking principles from hip-hop remix culture to bring new and innovative products to life.
Abloh’s work with Nike is particularly iconic and forms the basis of much of his work in the sports arena.
- 2017: “The Ten” collaboration between Nike and Off-White, in which Abloh reinvents 10 of Nike’s most iconic sneakers with new deconstructed models.
- 2018: Off-White partners with Nike and Kylian Mbappe ahead of the World Cup to create a football capsule.
- 2019: Serena Williams walks the clay court at Roland Garros in a custom Off-White outfit.
- 2019: Nike launches the “Athlete In Progress” collection for women’s athletics with Off-White.
What will become of the brand now that its author is no longer with us?
In 2015, New Guards Group (NGG) – an Italian luxury fashion production and distribution holding company – became the exclusive licensor of the Off-White brand, although Abloh still owns the brand.
Four years later, NGG was acquired for $ 675 million by FarFetch, another online luxury retail platform. This meant increased distribution capabilities and greater reach for Off-White., and Abloh’s brand value has remained intact.
Intangible assets – “indefinable” non-monetary assets – are a major indicator of the value of Off-White. In FarFetch’s financial statements, the 2021 balance sheet shows that more than 61% ($ 1.3 billion) of the company’s total assets came from its brand value, an intangible asset.
A French conglomerate took notes. In August of this year, LVMH bought 60% of the Off-White brand from Abloh. LVMH now indirectly controls part of FarFetch’s balance sheet.
- The license rights agreement between FarFetch and Off-White runs until 2026.
- With LVMH holding majority creative control of the brand, a transfer of license rights could be imminent.
The transfer would be positive for both the integrity of the brand and the preservation of Abloh’s legacy. Abloh was Louis Vuitton’s first black creative director and his parent company has shown a strong commitment to the designer’s vision over the years. They should be a strong provider of the brand in the future.
Assuming LVMH keeps the brand and continues to invest in Off-White, what is their upside potential?
The streetwear market
In 2019, PWC partnered with online streetwear and fashion blog Hypebeast to conduct comprehensive streetwear market research. The summary presented the industry as “one of the most significant retail and fashion trends to emerge in recent years.”
According to the report, the global streetwear market was estimated at $ 185 billion, or 10% of the entire global footwear and clothing market, at the time of publication. 54% of respondents said they spent between $ 100 and $ 500 per month on their favorite brands.
- The average age of consumers was under 25
- Average income was less than $ 40,000
- 61% of respondents were most likely to buy sneakers
- 40% of consumers said their biggest influencers were from sports
- 65% of those surveyed said Off-White best represented streetwear
More than half of the participants were willing to spend 10% of their income on these products, demonstrating an almost cult following.
As this cohort of consumers matures into their HENRY phase (high incomes not yet rich), there could be an explosion in space, as capital shifts from traditional luxury brands to a set of endemic products. younger people focused on streetwear. Successful deals like the $ 2.1 billion acquisition of streetwear brand Supreme by VF Corporation seem to cement this notion.
In 2020, the luxury fashion industry was estimated at $ 324 billion, according to the Italian Luxury Trade Foundation. With changing consumer preferences and continued expansion, it’s possible that streetwear, once seen as just a counter-culture, could become even more of a juggernaut in the mainstream consumer goods space.
The luxury economy
Most brands are governed by the basic economic laws of supply and demand. Open any economics textbook, you will find the classic graph showing an upward sloping supply curve and a downward sloping demand curve.
As the price of a good increases, demand should decrease as buyers look for more profitable goods. However, there are exceptions to this rule.
Consumers see brands like Rolex or Off-White outside the scope of standard economic law.
The Veblen effect, invented by American economist Thorstein Veblen, postulates that when the price of a luxury product increases, its demand also increases. Streetwear is changing the paradigm of what is considered luxury – Abloh and Off-White have been instrumental in shaping this perception.
Sneakers, in particular, have taken on a life of their own, with a full swap built around the world’s most sought-after shoes. Statista Estimates Indicate Global Sneakers Market To Reach $ 102 Billion By 2025.
The sport and how Abloh’s vision for streetwear has been embraced by everyone from Naomi Osaka to the NBA cannot be separated from the story of the category’s unprecedented boom.
Much of the credit goes to Abloh’s prolific production and now legendary work ethic. He was able to create a brand of the highest caliber – a Veblen good – his legacy lives on in the field and Track.