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How Threadless threaded their business

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In comparison to Web 1.0 startups of the 1990s, business startups of Web 2.0 companies are very different today.  Over the past decade, there have been a number of dramatic changes in the factors that affect the starting cost of launching a web:

Hardware: Prices of hardware components continue to go down.

Software:  The rise of open source technologies (e.g. Linux, Apache, MySQL, PHP (LAMP) have significantly reduced the cost of deploying a web application. The organization can focus specifically and only spend money on the relevant features needed for the business to operate.

Infrastructure:  Large increase in capacity of data centers, hosting facilities and bandwidth bring down the operating costs of delivering web-based applications. Many providers offer affordable hosting packages today. Harnessing the power of cloud computing is one such example where they outsource their applications and data management to external vendors.

Marketing:  Web 2.0 companies now primarily employ web-based marketing strategies (blogs, social media, viral marketing, etc.) to bring their products to the fore.  Gone are the days of multi-million dollar commercials as organizations only pay for actual user clicks.

What all these means is that there is scalability to Web 2.0 organizations in terms of technologies and business models. As O’Reilly said, if the model for Web 1.0 companies was to “get big fast”, it’s now “small is the new big”. Larger software developing teams are not fundamental to the success of the company with faster ROI through reduced cost on expenses like hardware and TV commercials will see the business having a foot hold in the market as soon as possible.

Threadless.com is a market for designers (mostly hobbyist) around the world who sign up to design shirts which are sold internationally, splitting a small portion of product revenue per sale. Its integration with social networking tools ranging from blogs, rating and score systems, slogansdesign challenges ($2500 prize money!!!), clubs, gift certificates etc  provide cost-effective methods to enable scalability in its business model which makes the store renounced for high product quality and interaction with its community of users.

It also leverages the viral marketing prowess of twitter to “advertise” their shirts. Users have the chance to have top tweets emblazoned on T-shirts. Threadless is crowd-sourcing for shirt patterns by having users to nominate and vote for the Twitter messages that make it onto shirts.

“What’s interesting about this is allowing anybody with anything to say or quick wit to participate. “You don’t have to have an artistic bone in your body. We’re tapping into the commentary that’s already happened.” – Tom Ryan, CEO of Threadless

How it all began?

Everything began with only two designers (Jake Nickell and Jacob De Hart) almost a decade ago. Today, Threadless has collected tens of thousands of top designer contributions with about 80 employees since it first started. Their strategy of “the customer is the company” provides a big playing field for collaboration that is central to their business model. Their success story is also a case of competitive innovation leveraging the ‘doing more with less’ ethos.

A video introduction to Threadless

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16 responses »

  1. VERY interesting site you have reviewed here. I could have used it when I was selling band shirts. And I just might use it in the future. Nice post!!

    Reply
  2. Good blog post. Since you mentioned more than just marketing to the beginning: What are Threadless.com’s efforts and attempts to have cost-effective and scalable infrastructure and software in place?

    Reply
    • I think rather than having cost effective software in place, they actually build their website to integrate and tap into social networking sites like Twitter to sell their shirts. Being a popular social networking site, Twitter can pull even more customers for Threadless, allowing the company to reach out to a wider audience. Feels like killing two birds with one stone because it is cost saving to use twitter than spend on other viral marketing softwares or services.

      When the business first began, they took credit card payments through the phone. But the business has became a big hit over the years so the website changed from a normal website that displays shirt design to a fully functional e-commerce website with full social media integration to engage the community even better. The even have a Facebook shop with a shopping cart linked to the original website.

      Reply
  3. Threadless is a great example of how a company can utilise the power its users (free / low cost labour!) to create products that are unique in the market. So what are Threadless’ policies with regards to content that can be put on shirts? Are there any restrictions or can anyone just sign up and do it?

    Reply
    • Hi Kathleen, here are the details:

      In order to submit your work, you need to download the toolkit and follow the instructions. Otherwise, your design will never receive approval and will not appear online. The design should be 100% original (without any third-party trademarks, logo, etc.). Not even a modified design will be accepted.

      If the design is accepted, the rules are stated very clearly:

      Threadless.com may use it in any manner, “including but not limited to reproducing the Design on the Items, selling Items bearing the Design, changing or reworking the Design by making color or size changes, making derivative works of the Design, using the Design on the Threadless.com website and on promotional material for Threadless.com, and registering the Design with the US Copyright Office in the name of SkinnyCorp LLC as the Claimant, and you as the Author.”

      “If your Design is selected, you may not use the Design (or derivatives of the Design) or allow others to use the Design (or derivatives of the Design) on any Items, as described above. In addition, by submitting your Design, you may not reproduce, sell, or submit the Design to others for any commercial purpose for ninety (90) days after the date of submission while the Design is being evaluated by Threadless.com. Once the ninety (90) days have passed, if your Design is not chosen for print by Threadless.com, you are free to use the Design for any commercial or non-commercial purpose. However if your Design is used elsewhere, you must notify Threadless.com by email art@threadless.com about where and when the Design will be used, so that it can be removed from the Threadless.com website at that time”

      Link: http://www.threadless.com/termsofuse

      Reply
  4. Great example – I’ve been aware of Threadless for years now, and while I initially thought it might not last, or get lost amongst all the new emerging sites (some with similar offerings) I am pleasantly surprised to see that Threadless has come out on top! Growing by the day… I’m not sure (do you know?) if they experienced viral growth (overnight?) or was it more organically over the years?

    Thanks for the great post!

    Reply
    • I wouldn’t say the growth happened overnight as Threadless already has a large pool of followers on Twitter prior to the collaboration for crowd-sourcing of slogans for shirt designs. But it can easily trigger a sudden growth in sales during special events e.g. it saw success with a promotion over Easter that used Twitter for a real-time scavenger hunt for Threadless “bunny boxes,” which had gift certificates inside, hidden in three cities. This has sparked a huge reaction from its pool of Twitter followers and that’s where the people back in the office are singing “here comes the money” due to a surge in sales during the duration of the event.

      Reply
  5. Lightweight development and innovative revenue approaches, harnessing collective intelligence, leveraging the long tail – great example! Perhaps their early scalability was questionable (taking credit card payments over the phone) but they obviously managed to get up to speed very successfully once the business went ‘viral’.

    Reply
    • Yea, they did not have a proper e-commerce website at that point in time so some of the things were done manually like taking orders etc. Obviously its cost saving to do all the hard work by yourself and thats how they started.

      Reply
  6. Good selection of app for the respective web 2.0 core pattern mentioned in the blog post.

    How do you see business model of this application in the long run? Possible collaboration with eBay or Amazon to broaden its consumer base?

    Reply
  7. Definitely. It will be a win win situation to collaborate with eBay or Amazon, at least for the e-commerce side of things. Maybe a designer can auction his newly designed shirt on eBay and based on the designer’s reputation or previous work, buyers can choose whether to bid or not. I think their business model will serve them well in the long run. They are always communicating and building rapport with their users/customers so there could be a sense of brand loyalty and connectedness created within their niche community of t-shirts. In short, the feel good factor and loads of innovative products to choose from every time they visit the website.

    Reply
  8. 100 percent of the Win Win situation model.This is a very genius busniness plan “doing more with less”. this business model is amazing because company don’t have to pay for any design cost. I love the way that they rewards the top designer by giving a prize. However this business relies on their designer community. If the their designer communities give up. Do you have any idesa that they can expand communities?

    Reply
    • I do not think this will be an issue as they have built a strong pool of designers already and have established themselves very well.They can fall back onto the tens and thousands if designs they have collected. The niche market of shirt designs will always be there.

      Reply
  9. Very innovative thoughts, Are there any other competitors? If so, do they patent their ideas, method or process ?

    Reply

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