Streetwear Site HYPEBEAST Goes Public: How Did It Get Here From a Blog?

HYPEBEAST grabbed the internet's opportunities from the very start — and at first that rested on nothing more than a young person's instinct for how trend news travels.

In streetwear circles, "hypebeast" means a specific kind of person: someone so fixated on fashion and trends that they will do anything to get hold of whatever is hot.

HYPEBEAST, the Hong Kong fashion company founded in 2005, began as one man's streetwear blog. It drew young people hungry for trendy goods so quickly that it now runs three streetwear news sites and an e-commerce platform. Quartz, the digital outlet owned by The Atlantic, called it the "king of underground fashion".

It is still not a big company. In the 2015 fiscal year, which ended in March 2015, total revenue came to less than HK$100 million. Now it wants to raise money to grow. On April 11, HYPEBEAST LIMITED listed on the Growth Enterprise Market (GEM) of the Hong Kong Stock Exchange; the proceeds from the new shares will go toward its team, its e-commerce brands and more product categories.

Investors were wildly keen at first on a company that mostly serves 18-to-35-year-olds. On its first day of trading, HYPEBEAST's market value touched HK$5.6 billion. The share price fell back later that day and it closed worth HK$2.1 billion — close to the HK$2.242 billion market value at the same time of I.T, the Hong Kong clothing retailer and local streetwear elder that listed in 2005. But I.T's revenue was about 70 times HYPEBEAST's. In the 2014/2015 fiscal year, I.T's retail sales rose 6.9% to HK$6.893 billion.

By the fifth day after listing, though, HYPEBEAST was worth HK$770 million. Investor faith in its future had slipped, yet its price-to-earnings ratio was still more than seven times I.T's. The P/E ratio compares a stock's price per share with its earnings per share; the higher it goes, the more the market likes the company.

So how did a company that started with one employee get this far, and what trouble might lie ahead?

What is HYPEBEAST?

One sentence: a platform that both supplies fashion and streetwear news and sells the clothes. "Trend" is the keyword.

HYPEBEAST began as a streetwear news site for male fashion readers (in English, Japanese and Chinese, with a print magazine added in 2012). Then came Popbee, in Chinese, for women, and Hypetrak, in English, for pop-music fans. It also runs an e-commerce platform, HBX (English and Chinese), selling newly released sneakers, street clothes, bags and accessories. As of September 2015, HBX had more than 8,900 items on sale from 408 brands.

It all started in 2005. Founder Kevin Ma (Ma Bairong), who grew up in Hong Kong, was studying at the University of British Columbia in Canada. He loved sneakers and street fashion and read Japanese trend magazines. When blogging caught on, he started sorting and filing the sneaker news he came across in blog form. That was the ancestor of the HYPEBEAST site, and its readers then were the people at the center of streetwear: young men.

Ma later told Port Magazine that within six months of launch the blog was getting 10,000 visitors a day. Three years later Time named it one of the 50 best websites of the year. In 2008 and 2010 he launched Popbee and Hypetrak, stretching his audience from male streetwear fans to women and pop-music fans.

In 2013, his eighth year building the business from nothing, Business of Fashion named Ma its "Person of the Year".

HYPEBEAST's headcount has since gone from one to 101, and its 2015 revenue was about HK$99 million, up 35.8% year on year, most of it from advertising and e-commerce.

There are plenty of streetwear sites. What makes HYPEBEAST different?

HYPEBEAST was not built on powerful media connections or a fat investment. Before he founded it Ma worked at a bank; at university he studied economics and psychology. In an interview with Bloomberg Businessweek a year and a half ago he confirmed the company had never taken venture money. According to its listing documents, the site's advertising has always paid the bills — and readers like those ads, because streetwear news and streetwear advertising look much the same, which is how the fashion business works.

Still, plenty of outlets do what HYPEBEAST does. HighSnobiety and Pause Online, for instance, and the original Chinese-language streetwear magazines 1626 and Milk, both of which also run streetwear news sites.

Hong Kong, where HYPEBEAST is based, has been one of Asia's streetwear capitals since the 1980s. Ma grew up in that atmosphere, and the same atmosphere produced another classic streetwear magazine, Milk. But as late as 2012 Milk had still not answered its growing online readership, and it slowly lost the lead it had spent more than a decade building.

HYPEBEAST grabbed the internet's opportunities from the very start — and at first that rested on nothing more than a young person's instinct for how trend news travels. Readers of any news site stay for speed and coverage; readers of streetwear news demand them. The site Milk eventually launched showed it was still not decisive enough about the internet age, posting four to seven items a day. Pause Online posts about ten fashion items a day (fewer still bear directly on streetwear labels), HighSnobiety close to 40, and HYPEBEAST close to 50.

Ma knows exactly what hypebeasts want. "Readers want to know what Kanye (meaning Kanye West) has been up to, what he's done in fashion lately," he said in one interview. "Whether or not they like him, people want news about him. It's stories like that — about brands, and about people like Kanye — that keep our readership growing." (As it happens, in a 2011 interview with Forbes Ma said Kanye West was an early HYPEBEAST reader, and that West had mentioned the site on Twitter and on his blog, which raised its profile.)

In some ways HYPEBEAST does more than a news site does. In the streetwear world, the right to set the terms of the conversation counts for a great deal. Since 2014 it has published an annual list of the "100 most influential people of the year" in streetwear, and it has used the same list format on Hypetrak, its music site.

HYPEBEAST's sites now draw 46.9 million page views a month. Next to the billion-odd daily page views a portal news site pulls in without trying, that is not a startling number. But its audience is precise and sharply drawn: the "hypebeasts" who care about street fashion and sneakers. The more precise the audience, the more an advertiser will pay to reach it. The company has 126 advertising agreements running, worth HK$43.4 million in total.

For its tenth anniversary in 2015, HYPEBEAST made a limited-edition shoe with adidas, the "HYPEBEAST x adidas Ultra Boost Uncaged", and released it a week early on its own store. The sneaker cost US$180 and has already been flipped on eBay for US$1,899.

The short films the site makes itself are another draw, and HYPEBEAST plans to expand its digital content and video team after listing so it can charge more for ads.

Asked how it turns the pull of its content into purchases, HYPEBEAST has offered one number: 78% of its readers have bought a trendy item the site recommended.

Over the past two fiscal years, according to the listing documents, e-commerce and digital advertising have brought in roughly similar amounts — about 48% and 52% of revenue respectively in fiscal 2015. E-commerce's share is a little larger, and most of that money comes from the United States, streetwear's mature market.

What are its chances, and its risks?

HYPEBEAST says its main customers are 18 to 35. Young people are the future: they will have real money to spend, and they are the most brand-loyal generation yet.

For young people, trend is a business with room to grow. Reuters figures from 2011 put the streetwear market in the United States, HYPEBEAST's main market, at US$60 billion that year. By 2013, a report from the research firm WeConnect put it above US$75 billion — about a third of the entire U.S. apparel market.

Street fashion no longer keeps the sharp line it once drew against high fashion. Its audience is widening and its market is growing. Last year Anthony Vaccarello, creative director of Versace's young label Versus Versace, joined YSL as its creative director.

Ma has told reporters that the company's biggest clients now include Ralph Lauren and Chanel as well as adidas. That is no direct proof the streetwear market is expanding, but it does suggest the two worlds are drawing closer: luxury brands want to find future customers among streetwear shoppers, and luxury shoppers have long been happy to mix streetwear in. Trend stopped meaning street style some time ago.

The other force is the past two years of sport merging with fashion — Rihanna taking Puma to New York Fashion Week, the clothes Alexander Wang made during his time at Balenciaga, the "Yeezy" sneakers Kanye West designed for adidas — which has given a culture that once belonged to the street much more room to imagine.

The gains from this market do not belong to HYPEBEAST alone, of course. Rivals have sprung up around the world, and there are many of them. Its listing documents name at least these —

Strictly speaking, each of those rivals sits somewhere different. Mogujie aims at ordinary young Chinese women; Shopbop at mid-to-high-end women worldwide, China included; Zalando, which takes the conventional mass-fashion route, sells mostly in Europe. But in a sense they are all fighting over the same shoppers — not the "deep" hypebeasts of the strict old definition, but young people who want to look a little cool.

Being based in Hong Kong may give HYPEBEAST a bigger advantage than other foreign rivals in entering the mainland Chinese market, in geography and in shopping culture alike. And China may be an enormous new streetwear market.

By region, the markets that bring HYPEBEAST the most money are, in order, the United States, Hong Kong and mainland China.

In China it has huge potential — and competitors

Between fiscal 2014 and fiscal 2015, HYPEBEAST's revenue from mainland China grew from HK$3.74 million to HK$7.46 million, close to a 100% increase and the fastest of any market.

Look at what HYPEBEAST does today and the ambition to expand into the mainland shows.

HBX already takes Alipay and works with SF Express, and alongside the English interface it runs both simplified- and traditional-Chinese versions. Popbee, the company's women's fashion site, went further: when it launched in 2008 it said plainly that its readers were native Chinese speakers.

The Chinese streetwear brands and shops that have appeared on the mainland in recent years show what is opening up. In 2013 Nike opened X158, its third streetwear concept store in the world, in Shanghai, after New York and London. NPC, the streetwear shop Li Chen and Wilber Pan opened together, has added branches in Beijing, Shanghai, Hangzhou and Chengdu. And every time Clot Family, the streetwear group Edison Chen founded, opens a new mainland store, people talk about it.

A "map of niche-culture lifestyle trends" published by IDEAT magazine with Taobao found that street culture — along with bohemian subculture, light sportswear and vintage clothing — is one of the lifestyles young Chinese people care most about. Searches for "fixed-gear" bikes topped 23.56 million over the year; Taobao sells 3,726 skateboards a second and 496 flat caps an hour, and its DJ-related listings reach 162,000.

Another report, from Taobao and CBNData, found that mainland shoppers born in and around the 1990s want brands with character: they "buy relatively niche brands more often and look for a personal way of dressing". In first-tier cities, the brands at the core of their wardrobes are about "quality, oversized fits and trend".

But shoppers in this new market still know relatively little about global streetwear news and brands. The streetwear retailer YOHO! Buy was set up in 2009 and its sales passed 500 million yuan by 2013 — though a good number of the brands it carries are homegrown Chinese labels.

"For the mainland market, beyond growing the online store, what we want more is to use the Chinese-language site to give mainland readers more instructive information," Ma told Bloomberg Businessweek (Chinese edition) in an earlier interview.

HYPEBEAST's rivals also include the streetwear resellers and buying agents on Taobao, one of the main ways mainland shoppers get hold of streetwear labels. Search "street" on Taobao and more than 2.25 million items come up — never mind how alike many of them are; by count alone that is about 225 times what HYPEBEAST carries. HYPEBEAST's edge may be price and release date.

Entering the mainland, though, the marketing rules HYPEBEAST used in the United States may not hold. To grow sales fast, it will have to go more local in every respect.

HYPEBEAST set up a Chinese-language site and a Weibo account, in its words "to learn what mainland readers like". But it has 170,000 followers on Sina Weibo, far short of its 2.2 million-plus on Facebook and 2.3 million on Instagram. American consumers are used to being reached by email newsletter; in China the channels people prefer are Weibo, which HYPEBEAST joined in 2011, and WeChat — and it did not post its first message on its official WeChat account until the end of 2015. It has yet to build an efficient way of talking to Chinese consumers.

The listing documents say 35% of the IPO money will go to upgrading sales and marketing. That very likely includes better e-commerce for Chinese customers, and another question it has to answer is how to get around their reliance on Taobao and Tmall so it does not repeat Asos's mistake. Its warehousing and delivery times leave room to improve too.

All of this could weigh on investors whose confidence was already shaky because of relations between the mainland and Hong Kong.

Cover image from Hypebeast.com