Threadless company

Threadless.com: Community-Sourcing in a Two-Sided Market
E-Business, Profesor Pedro Raventós

Pablo J. Duran, Christine Jáuregui, Alejandro Jiménez Malavassi, Otto Velásquez 3/12/2010 INCAE MAE-MBA 55

Threadless.com: Community-Sourcing in a Two-Sided Market
Mar. 12

History and Company Overview – What is Threadless? In 2000, with only $1,000 in seed money, 19- and 20-year-olds JacobDeHart and Jake Nickell founded Threadless in Chicago, Illinois.1 An electronic business, Threadless is a platform that brings together tshirt designers with eager customers. Design competitions, to which artists submit work for customer review and rating, are held each week on the Threadless website. Staff selects winning designs from among customer favorites for exclusive production in smallbatches. A 65-person organization built around the concept of the “the care and feeding of an online community,” company-community interaction is very important. All interactions are made online through the company’s web site, from submitting and scoring designs to ordering merchandise, to chatting with customers, designers and Threadless employees in the blog forum. To communicate frequently andinexpensively with its community, Threadless also leverages the use of social media. 1.5 million followers on Twitter, 100,000 fans on Facebook, and over 700,000 registered site users can stay in regular contact with the company and each other.2 Threadless’ rapid growth and success is reflected in its financial performance over the past ten years. By 2006, the company was selling about 60,000 shirts permonth, accumulating yearly sales around $18 million USD. By the end of 2009, sales revenue was close to $30 million.3 As many as 700 designs per week compete to be among the six to ten that get produced.4 Threadless enjoys high profit margins, with each shirt costing approximately $4 to make but selling for $15 or more.5 How is Threadless a Two-Sided Market? Threadless, as seen in Figure 1, is atwo-way platform connecting buyers and sellers of original, limitededition apparel design. The diverse relationships initiated online, the interactions between the participants in these relationships, and the outcomes of these interactions (all enabled by Threadless as a linking agent) are sources of value the company creates for designers and customers.

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Brabham, Daren C., Moving theCrowd at Threadless, University of Utah, 2009 The Customer is the Company, Max Chafkin, www.inc.com, 6/1/08; Burkitt (2010) 3 Need To Build A Community? Learn From Threadless, Laurie Burkitt, www.forbes.com, 1/7/10 4 Weingarten, Mark, ‘Project Runway’ for the t-shirt crowd, Business 2.0 Magazine, www.money.cnn.com, 6/18/07 5 Ibid.

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Threadless.com: Community-Sourcing in a Two-Sided MarketMar. 12

By uniting designers and customers through contests in which winning designs are printed for sale, Threadless generates awareness of and demand for designers, and provides customers exactly what they want to buy. Customers can express their preferences for or disinterest in potential products before anything is manufactured. Customers Customers gain several things from a Threadless“relationship.” For example, many of them feel driven to buy Threadless t-shirts because of their inexpensiveness and originality, given that designs do not follow widespread, commercial fashion trends. Along with that, production batches are so low that the probability of seeing another person with the same t-shirt is almost none. Threadless enthusiasts also cite such things as making friendships online,enjoying critiquing and scoring submitted designs, and socializing with others as other benefits of and motivations for participating in the community.6 Designers On the other side of the platform, designers also benefit from Threadless relationships. First, anyone can be a designer and test their creation’s marketability as a piece of wearable art. People don’t have to be qualified to submit...