The Original Community Pioneer – Threadless – Part 1
I had originally come across Threadless – a community commerce pioneer – sometime around 2008-09 when I was managing operations and marketing initiatives for an electronics retail chain in India. I had excitedly shared its unique story with my CEO and CMO and suggested to them that even we could ‘crowd-source’ product/assortment wish-lists from our existing (and prospect) customers, before actually ordering them – so that we could have better take-off of new product launches and promotional inventory. Apart from this idea, we even adapted the concept by allowing our most important customers to choose what ‘Diwali Offers’ they wanted for their shopping basket – basis what electronics they already had at home or aspired to cultivate… I think these Initiatives were a fair success then and much appreciated by the Leadership… and thereby the company has been etched in my memory for a long time indeed…
After all these years, I thought about relooking at the company’s journey with an Outside In lens… reminisce a bit about their wonderful concept… identify a few insights that can be useful for a host of community initiatives in today’s ultra-digital age…and gauge takeaways for the future of community-led commerce… I am certain this is going to be an enjoyable read… possibly across 2 parts… Here goes…
Background
Established in the mid-2000s as a fashion business, Threadless did not have an elite cadre of internal designers that churned out hip, cutting-edge t-shirts. Instead, they turned the fashion business on its head by enabling anyone to submit designs for t-shirts and asking its community of more than 500,000 members (then) to help select winning designs. It encouraged community members to actively participate by critiquing submitted designs, blogging about their daily lives, posting songs and videos inspired by the designs, and, most importantly, purchasing t-shirts that have won the weekly design competitions. All printed designs typically sold out, and were then retired from the active catalog to make room for new designs. In 2007, Threadless, with 30 full time employees, was on track to sell more than 1.5 million t-shirts accounting for in excess of $23 million in revenues. Growth in the business also enabled Threadless to increase the reward to winning designers from the $100 cash prize offered in 2002 to $2000 cash and $500 in Threadless gift certificates by mid-2007. This amount is now $20K cash money, with additional 20% Royalties on net profits, payable on a Monthly basis!!
Model Insights
A) Community Mix and Referral Benefits: Threadless community is made up of a lot of different types of people who use the site for varying reasons:
Threadless was a huge word-of-mouth thing
There is the simple consumer who wants to go to their website and buy new shirts
There is the designer, perhaps a college student or someone who likes to design t-shirts in his or her free time, who uses the site to practice design skills and get feedback from fellow artists
There are also ‘the casual fans (as Outside In likes to call them)’ who likes the idea of Threadless and enjoys interacting with consumers and designers and participating in their blog
In addition to being designers, voters, and buyers, every community member belonged to Street Team, a point-based system by which credit was earned towards future Threadless purchases
Community members sent in digital pictures of themselves wearing purchased t-shirts. Those members whose pictures were featured in the product photo gallery received a $15 credit – the cost of one Threadless t-shirt. And it also incorporated a reward referral system whereby users could recommend t-shirts to people in their own social networks. Referring community members received a $1.50 Threadless credit for each t-shirt purchased through a referral link
It has over 3M users out of which more than 130,000 have submitted designs and it has over 2M followers on Twitter (2021 Number)
B) Design Focus
Each design that met the minimum submission criteria is up for voting for a seven-day period. Once a week, Threadless employees selected from as many as 100 top scoring archived designs the six to eight that had garnered the most community votes
In addition to voting for and blogging about submitted designs, community members had access to a design critique portal on the Threadless website. Rather than just submitting designs, artists were posting blogs about work in progress and getting the community's feedback. They were using the blogs as a way to get design feedback before submitting to maximize the chances of their designs scoring highly. So, they created a design critique section in the blogs – where one could post his or her design idea and people voted on whether they like it or not and left constructive comments. Artists could upload new versions of their designs so members could actually track the versioning from the initial idea to the final product
In addition to attracting a lot of talent, the contest format encouraged artists to tell their less artistic friends about the site. Designers labor mightily on their submissions; they spend weeks tinkering with their work and soliciting advice from other members. Then they would post links to their submissions on their websites, blogs, and social pages, asking their friends to click, vote, and, the artists hope, buy!
Check their Resources Layer Model here below:
C) Culture
Threadless has adopted the community feel even within the office environment. The office staff regularly interacts with other community members throughout the day, and vice versa, via its community blogging forum
Communication, transparency, hard work, and fun are key elements of the Threadless culture, both in the office and online. Employees are implicitly trusted to accomplish whatever is needed to get done, while taking the time to enjoy each other's company and develop personal friendships. As with the self-perpetuated online design and voting experience, there is built-in motivation for the staff to produce high-quality work that would ultimately benefit the entire Threadless community
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
The 25,000-square foot office is open to customers, a dozen of whom stop by every day to pick up shirts in person. They sometimes stick around for hours and hang out in a space that resembles a college dorm room constructed on an impossibly large scale. There are video game consoles, go-carts, a giant television, beanbag chairs, action figures, a singing buck trophy, a Ping-Pong table, and a full-size Airstream trailer that the company uses as a studio in which to produce podcasts
D) Business Process
Threadless' business model presumed operational excellence in both the virtual and physical worlds, with the Web as the basis for interaction between Threadless and its community
Threadless helped with this, sending the artists digital submission kits that include HTML code and graphics to help them create professional-looking advertisements for their designs
All key elements of the innovation and product development process as well as consumer shopping are enabled by the Internet. It had to deal with the reality of producing and shipping more than one million t-shirts per year to meet customer orders. Supply chain management was a non-trivial task that demanded logistics capabilities able to support the printing, warehousing, and shipping of t-shirts and handling of returns
In 2005, the average time from an order to shipment was 1 month during peak season. Today, it is one day, thanks to a system by which the warehouse is regularly reorganized based on what is selling well. Hot products are placed near the packaging area, which means that packers, who will often walk 3 miles in the course of a shift, don't have to travel as far to get shirts
Check their Controls Layer Model below:
In Conclusion
Threadless churns out dozens of new items a month -- with no advertising, no professional designers, no sales force and no retail distribution. Costs are low, margins are above 30 percent, and – because community members told them precisely which shirts to make -- every product eventually sold out! And it's never produced a flop!!
We can call it user innovation, crowd-sourcing, or open source; but it basically means drastically rethinking an organization’s relationship with its customers. Threadless completely blurs that line of who is a producer and who is a consumer. The customers end up playing a critical role across all its operations: idea generation, marketing, sales forecasting. All that has been distributed. – Karim Lakhani, Harvard Business School
References and Sources
1) HBS Case Study – Threadless – The Business of Community
2) Inc Magazine – The Customer is the Company
3) Medium Case Study: https://medium.com/@b_filizlibay/threadless-a-case-study-65a019575579
4) LinkedIn Case Study Analysis by Saloni Garg: https://www.linkedin.com/pulse/threadless-case-analysis-saloni-garg
5) LinkedIn Case Analysis by Sina Rezaei: https://www.linkedin.com/pulse/threadless-success-failure-sina-rezaei
6) Threadless Innovation Model Canvas: https://www.researchgate.net/figure/Base-Canvas-for-Threadless_fig1_226522290
7) 10 Years of Insights & Inspiration by Jay Baer: https://www.convinceandconvert.com/social-media/threadless-shares-10-years-of-insights-and-inspiration/
8) Convert your Artwork into a Product and Sell It Online: https://pickandtip.com/money/threadless-artworks-product-shop-sale/
9) Threadless Puts Everyone in Charge: https://www.fastcompany.com/1714561/company-community-threadless-puts-everyone-charge
10) Threadless in GAP Stores: http://www.jeremygibney.com/gap-threadless
11) What Happened to Threadless: https://www.racked.com/2017/11/6/16551468/threadless-t-shirts-ecommerce