Threadless
= an ongoing t-shirt competition, lets users submit t-shirt designs which the Threadless community can vote on for a period of seven days. The Threadless team picks t-shirts to be printed among the top scoring designs and sells these in their online shop. Not every user may get to wear his or her own design, but all the t-shirts are user-designed. [1]
Description
1.
Description from the Openeur blog at http://www.openeur.com/blog/en/2006/12/15/threadless/
"The success of the American shirt community Threadless is one of the most exciting stories in the movement of Open Innovation. Threadless has succeeded in rallying a very creative and vital community round them, pooling almost any working steps and risks on its users. The business model is as simple as evident: there are thousands of designers on the web who are willing to distribute their creations to as many people as possible. Threadless provides the platform for a permanent competition on designs.
Designers have the possibility to publish blueprints for shirts on Threadless. The community is able to rate them over a certain period of time and the blueprints with the most positive votes are subsequently produced by the company. The rights are passed to Threadless and the designer gets 2.000 dollars in return. In order to honor the merits of designers his or her name is printed on the label on the inside of the shirt. The number of needed shirts is calculated on the basis of experiences and estimated in correlation to registered votes. Thus sales can be backed and the risk for Threadless is relatively small.
It’s the community stupid!
Threadless has managed it as well as few other services to let the own community feel to be part of the project. There are several programs encouraging communication and interaction within the community. Users who take a picture of themselves in a Threadless shirt and afterwards upload it on Threadless get credits for which they can buy shirts again. Furthermore there exists an internal affiliate-system rewarding recommendations. Thereby the user’s identification with Threadless is strengthened also increasing the demand for other products. The sales of the company having about 20 employees at the moment are estimated on 18 million dollars this year. By 6.5 million shirts sold a year and a yield on sales of approximately 35 percent there stay respectable earnings left." (http://www.openeur.com/blog/en/2006/12/15/threadless/)
2.
From Inc. magazine:
"Threadless, he explained, ran design competitions on an online social network. Members of the network submitted their ideas for T-shirts -- hundreds each week -- and then voted on which ones they liked best. Hundreds of thousands of people were using the site as a kind of community center, where they blogged, chatted about designs, socialized with their fellow enthusiasts -- and bought a ton of shirts at $15 each. Revenue was growing 500 percent a year, despite the fact that the company had never advertised, employed no professional designers, used no modeling agency or fashion photographers, had no sales force, and enjoyed no retail distribution. As result, costs were low, margins were above 30 percent, and -- because community members told them precisely which shirts to make -- every product eventually sold out. Nickell's company had never produced a flop.
Nickell is at the vanguard of a new innovation model that is quietly reshaping a host of industries. Whether it's called user innovation, crowdsourcing, or open source, it means drastically rethinking your relationship with your customers. "Threadless completely blurs that line of who is a producer and who is a consumer," says Karim Lakhani, a professor at the Harvard Business School. "The customers end up playing a critical role across all its operations: idea generation, marketing, sales forecasting. All that has been distributed." (http://www.inc.com/magazine/20080601/the-customer-is-the-company_Printer_Friendly.html)
History
"Nickell had no such vision as he put the finishing touches on a T-shirt design in late 2000. It was for the New Media Underground festival, an informal gathering of Web designers in London. He had no intention of attending the event, but he cared about it deeply. At the time, Nickell was 20 years old, living in a tiny Chicago apartment. He spent his days on the sales floor at CompUSA; at night, he was a talented if unenthusiastic part-time student at the Illinois Institute of Art. Though his girlfriend visited him each weekend, he had few close friends.
When he wasn't working or studying, Nickell was tinkering with Web design, a hobby he indulged in on Dreamless.org, an Internet forum for illustrators and programmers. He would spend hours at a time cruising the forum, talking with his online friends and engaging in a pastime called Photoshop tennis. In it, designers pass digital photographs back and forth and challenge one another to manipulate the images in the most outrageous way possible.
Nickell's design for the New Media Underground festival -- three lines of gray text that mimicked the layout of the Dreamless website -- was an entry for a contest that the festival's organizers were holding online. The design was simple and not quite pretty. But it was strikingly clever -- a physical representation of their digital community. The Dreamless members agreed. Nickell won the contest.
In concrete terms, this accomplishment meant exactly nothing: He got no money or even a copy of his winning shirt. But the experience was exhilarating. Dreamless members spent a lot of time batting ideas back and forth, but their creations rarely made it out of the digital realm. Suddenly, Nickell had an idea: What if the best designs were printed on T-shirts and sold in the real world? He suggested as much to Jacob DeHart, one of a handful of friends he had met on Dreamless. DeHart, a student at Purdue University, loved the idea, and each pitched in $500 -- enough to pay a lawyer to set up the business and print the first round of shirts.
Nickell and DeHart held their first contest in November 2000. They asked the designers on Dreamless to submit their best work and to pick their favorites. The grand prize: two free shirts and the promise that any proceeds would be reinvested in future contests. They called the competition Threadless, a play on thread -- either a clothing item or a discussion topic on an online forum. In all, they printed two dozen copies of five shirts out of slightly fewer than 100 submissions with in-joke titles like "Evil Mother F---ing Web Design" and "Dead Sexy Designer." The shirts went on sale in January 2001 for $12 each and sold out quickly. In the months that followed, Nickell and DeHart ran regular competitions using an automated rating system that allowed users to score designs on a scale from 1 to 5, but it never occurred to them that they had a real company. "It was just a hobby, a way for people to get their artwork out," Nickell says. By 2002, the hobby had surpassed $100,000 worth of T-shirts and attracted more than 10,000 community members, mostly artists in their teens and 20s. Even so, Nickell, DeHart, and Kalmikoff -- who joined the company that year -- spent much of their time doing freelance Web design to pay the bills.
Shortly after founding the company, Nickell and DeHart began awarding small cash prizes to the artists whose T-shirts were selected. Initially the prizes were $100 per winning design, but they gradually climbed to $2,500, plus reprint fees. But the appeal of Threadless to artists has never had much to do with getting paid. "It wasn't so much the money," says artist Glenn Jones, who won $150 in a contest in 2004, at age 29. "It was how cool it was to get your shirts printed." Young illustrators had few outlets in which to display their art, and within a few years of the launch, Threadless had acquired a sort of American Idol cachet. It was where unknown designers went to make their names.
This rabid engagement propelled the company through four years of phenomenal growth, beginning around 2004. The user base grew tenfold, from 70,000 members at the end of 2004 to more than 700,000 today. Sales in 2006 hit $18 million -- with profits of roughly $6 million. In 2007, growth continued at more than 200 percent, with similar margins. Though Nickell refuses to disclose the exact revenue number -- perhaps because he now counts Insight Venture Partners, a New York venture capital firm, as a minority shareholder -- it seems fair to assume that Threadless sold more than $30 million in T-shirts last year." (http://www.inc.com/magazine/20080601/the-customer-is-the-company_Printer_Friendly.html)
Discussion
Blending Community and Commerce
Karim R. Lakhani and Jill A. Panetta:
"Threadless.com, an online t-shirt company, foreshadows the commercial enter- prise of the future that is built to leverage community-based distributed innova- tion. Firms in the apparel and fashion business face two critical challenges, (1) to attract the right designer talent at the right time to create recurring fashion hits, and (2) to forecast sales so as to be better able to match production cycles with demand cycles. Threadless solves these problems by letting its international com- munity of customers take over such core functions as innovation, new product development, sales forecasting, and marketing.
Threadless was started in 2000 by friends Jake Nickell and Jacob DeHart who were active participants in a Chicago-based online community of designers called Dreamless. The experience of winning a t-shirt design competition sponsored by the Dreamless community exposed Nickell, and by association his friend DeHart, to the idea that co-creation with a community was a relatively untapped market. Both were amazed by the variety and high quality of submissions received by the Dreamles community organizers. As budding designers, they realized early on that the fashion industry was fickle and they had no monopoly on good design ideas. But a platform that solicited design ideas from anyone and provided for commu- nity-based selection of submitted designs might overcome their own limitations. Hence Threadless was formed.
Threadless.com’s business model revolves around an ongoing competition to which anyone, professional graphic designers and amateurs alike, can submit designs for new t-shirts. The community is polled on both the designs (which are rated using a scale of zero to five) and willingness to buy. Threadless uses this information to select for production six to ten new designs each week. Winning designs’ creators receive cash and prizes worth $2,500, are recognized for their accomplishment on the company’s Web site, and have their screen name printed on the t-shirt label. Community members also critique submitted designs and pro- vide feedback to help designers improve their ideas going forward. Threadless also populates its online catalog with photographs of community members wearing t- shirts bearing winning designs.
Threadless has become both a commercial and community success story. In 2006, it sold more than 1.5 million t-shirts to customers around the world, and its active community exceeds 600,000 members. Threadless receives more than 800 new design submissions per week, each of which is typically rated and assigned a demand signal indicating intent to purchase by more than 500 community mem- bers. More than half of purchasers have, at one time or another, voted on t-shirt designs. The online community is vibrant, logging in excess of 1,000 new member posts per day discussing design and art and submitting music and video inspired by designs. All of this has been accomplished with no reliance on traditional forms of advertising and customer recruitment. Such has been its success that the com- pany has on many occasions declined overtures by large-scale retailers to sell Threadless t-shirts in stores around the world." (http://www.mitpressjournals.org/doi/pdf/10.1162/itgg.2007.2.3.97)
Threadless vs. Spreadshirt
Frank Piller et al.:"
"For an alternative strategy consider Threadless, recently names the ”America’s most innovative small company“ by Inc. magazine. Threadless also includes customers deeply in the value creation process, but still sells mass products. Founded in 2000, this Chicago-based company sells a very simple product with great success: printed t-shirts. Together with just 20 employees, the company’s founders sell more than fifty thousand t-shirts and earn profits amounting to over one hundred thousand dollars per month. This is achieved by transferring all essential productive tasks to their customers who, in turn, fulfill their part with great enthusiasm. Customers design their own t-shirts and help improve the ideas of their peers. They screen and evaluate potential designs, selecting only those that should go into production. Since customers (morally) commit themselves to purchase a favored design before it goes into production, they take over market risk as well. Customers assume responsibility for advertising, supply models and photographers for catalogues, and solicit new customers.
Astonishingly, customers do not feel as though they are being exploited. In fact, they show great enthusiasm for the company that has made collaboration possible. They protect Threadless from imitators, (whose websites they tend to hack) and send innumerable ideas on how the company can become more productive and even better at what it does already. In return, the company Threadless focuses its attention on the operation and further development of their communication platform, over which interaction with and among customers takes place. Additionally, the company defines the rules of the game, honors those customer-designers whose designs were selected for production, and manages processes involved with the material delivery of goods (production and distribution). By doing so this small company was able to generate thousands of new designs with almost without any paid stuff.
While mass customization has been successfully implemented in many industrial markets and, for example, the sports good industry, we see large opportunities for health related products and services. People are becoming more health conscious and companies will find techniques to design for the individual, based on age, weight, diet, family history, lifestyle and behaviors.
Comparing the strategy of Threadless with a company offering mass customized t-shirts reveals the difference between both business models: Take Spreadshirt, the market leader in custom t-shirts. Here, users can design their individual t-shirt that is produced just for them with a digital printing machine. At Threadless the production of t-shirts is going on in the classical way of good old mass production. But Threadless is following the bright idea of turning market research expenditures into quick sales. This method, which is called Collective Customer Commitment, exploits the commitment of users to screen, evaluate and score new designs as a powerful mechanism to reduce flops of new products. The method breaks with the known practices of new product development. It utilizes the capabilities of customers and users for the innovation process." (http://www.we-magazine.net/volume-01/mass-customization-and-beyond/)
The Threadless Business Model: Crowdsourcing the design while still manufacturing the product
Massimo Menichinelli:
While Threadless cannot be strictly categorized as DIY Craft, it has a very interesting business model that can be taken as an inspiration: crowdsourcing the design and then manufacturing the products.
Threadless is a community-centered online apparel store founded by Jake Nickell and Jacob DeHart in 2000 with just $ 1,000. It is now run by skinnyCorp of Chicago. Members of the Threadless community submit t-shirt designs online; the designs are then put to a public vote. A small percentage of submitted designs are selected for printing and sold through an online store and the winners receive a prize of $ 2,000 in cash, a $ 500 gift certificate (which they may trade in for $ 200 in cash), as well as an additional $ 500 for every reprint. There are even two Threadless stores: Threadless and Threadless Kids, in Chicago. Anders Sundelin noted that producing a predetermined demand keeps costs low and margins high, and because community members tell the company which t-shirts to produce Threadless never produces unsold t-shirts: this is why it generates more than $ 17,000,000 in annual sales with a 35% profit margin with a growing community. Moreover, Threadless has a subscription revenue stream via the 12 club (a limited edition t-shirt for 12 months) and it has also a Street Team affiliate program members earn points toward future purchases by referring sales or submitting a photo of them with a Threadless t-shirt." (http://www.openp2pdesign.org/2011/open-design/business-models-for-diy-craft/)
How Crowdsourcing differs from Community
Cam Balzer, the Threadless VP of Marketing:
"Crowdsourcing is antithetical to what we're doing. That's because crowdsourcing involves random sets of people who suddenly have a say in how the business works, but that's not how Threadless operates. We've got a close-knit group of loyal customers and have worked hard to build that. The people who submit ideas to us, vote and buy our products aren't random people, and they aren't producing random work. We work closely with our consumers and give them a place on our site, the Threadless forum, where they can exchange ideas with one another--ideas that go beyond designing T-shirts. We have consumers who have voted on 150,000 designs, which means they've spent hours interacting on our site. People who do that aren't jumping into a random crowd. They're part of the community we've cultivated." (http://shareable.net/blog/two-reasons-why-the-term-crowdsourcing-bugs-me)
Threadless as a Model Strategy
'Threadless for greeting cards! The Threadless model can be applied to essentially any object that requires graphic design of any kind. You end up with a more eclectic mix of designs, a sense of the popularity of designs prior to production, and a greater connection to customers. They seem to be having some behind the scenes difficulties but some designs are available on the site for order." (http://coinnovative.com/june-co-creation-odds-and-ends/)
Status
Some Statistics
The numbers since the founding in 2000:
125: Number of submissions received by Threadless each day.
“Millions”: Dollars earned by selling T-shirts” not by hiring star designers but by asking anybody to design them.
Hundreds of thousands: Number of user voting each day.
6: Number of new T-shirt offerings per week.
1,500: Typical size of a batch of each new design.
2,000: Dollars paid to winning designers.
“Almost everything”: Number of items that sell out. (http://www.nytimes.com/2007/07/08/magazine/08wwln-consumed-t.html.)
More Information
Specialized treatment at: Threadless - Business Model
Interview (end of 2009): http://www.forbes.com/2010/01/06/threadless-t-shirt-community-crowdsourcing-cmo-network-threadless.html
Concepts:
Brabham, D. C. (2009). “Moving the Crowd at Threadless: Motivations for Participation in a Crowdsourcing Application.” SSRN eLibrary.