T-Shirt Trio

Chicago’s Threadless taps into the power of online “communities” to sell T-shirts designed by their customers

BY ROD O’CONNOR

WHEN YOU step into the 25,000-square-foot headquarters of online T-shirt company Threadless on Chicago’s North Side, the graffiti-splattered walls, ping-pong table and vintage Airstream trailer call to mind the supposed playfulness of the original go-go dot-com era.

But unlike so many ’90s flameouts, this fun factory isn’t meant as a diversion from bottomed-out stock options. In the back, stacks and stacks of T-shirts are being packaged and shipped off to soon-to-be happy customers. Wacky décor like the Big Buck Hunter arcade game near the reception desk fits perfectly with a company that began as a hobby and has grown, through sharp decision-making and a healthy sense of fun, into one of the burgeoning success stories of the new New Economy.

YouTube isn’t the only visionary harnessing the power of online communities to invert traditional business models. And while streaming video of sneezing pandas is certainly hilarious, the three twentysomethings behind Threadless decided to tap into the creativity of their users to develop a product they could actually sell.

Threadless sells T-shirts (and hoodies and baby clothes)… a lot of ’em. In fact, the company sold $12 million worth in 2006, more than doubling its sales numbers from the previous year. And it’s done so without advertising and without the help of traditional distribution channels. Factor in just 30 employees and minimal overhead—it costs roughly $5 to print a shirt, and they sell for $12 and $25—and it becomes clear why these guys are having such a good time.

The T-shirt designs are sometimes wacky and often eye catching, with titles like “Funkalicious” and “Amoeba Boogie.” Pop star Avril Lavigne wears them, and Zach Braff even wore one on an episode of “Scrubs.” The shirts are hip without trying to be, which is the ultimate form of hipness. That’s because they were created by hundreds of individuals from the Threadless online community, not a few so-called tastemakers trying to stay one step ahead of fashion trends

Every week, the company churns out new shirts, thanks to an ongoing design competition at Threadless.com. Aspiring designers from all over the world submit art, which is voted on by many of Threadless’ passionate 500,000-plus registered users. Four to six are chosen from more than 600 weekly submissions; the winners receive $2,000, and Threadless gets another one-of-a-kind T-shirt to sell to its ever-growing fan base.

“I think a friend of ours said it best: It’s not like, ‘If we build it, they will come.’ It’s like, ‘If you come, we’ll build it,’” says Jeffrey Kalmikoff, 28, Threadless’ chief creative officer. “Most business models have to factor in R&D… our R&D is asking people’s opinions of something they’re creating.”

Jeff Howe from Wired magazine coined the term “crowdsourcing” to describe this open-call model, where a web-based community replaces the work done by a small group of professionals. And while Threadless certainly isn’t the only company tapping online crowds— for example, Lego offers customer-built toy ideas on its website—the T-shirt maker has used its community to forge brand loyalty any company would kill for

“You can outsource a lot of your product development to users. They’ll do it for free, and you will have a lot of options to choose from,” says professor Eric Von Hippel of the MIT Sloan School of Management. “A lot of people are pushing toward different varieties of this, using YouTube as an example… but I think it’s possibly a new business model that many companies can adopt.”

The inspiration for Threadless came when the founders, then-teenage Jacob DeHart, 25, and Jake Nickell, 26, met during a T-shirt competition on the now-defunct website Dreamless.org. The pair became friends, and after collaborating on a winning shirt, they decided to start their own site in 2000. They put out a call for designs and used $1,000 of their own money to print their first batch of tees.

For the first few years, Threadless was just a side project as the pair, and later Kalmikoff, built a successful web design firm called SkinnyCorp (still the name of their parent company). Then, in 2004, they decided to release all their clients and focus on Threadless full time.

“A lot of people start companies with the sole purpose of making money, and when they think about a company, they come up with a business plan,” Kalmikoff says. “I love to design, they love to program, and we love to work together. And that built Threadless into what it is and kept it fun, it just happened organically.”

There are two primary lessons businesses can glean from Threadless’ success: One is the importance of listening to your customers. Kalmikoff says 40% of the new features on their site were originally suggested by users. Like, when they realized designers were soliciting feedback on preliminary T-shirt ideas via their own blogs, Threadless added a critique section to their site to streamline the process.

Another lesson is to choose your partners carefully. There are plenty of brands who would love to connect with Threadless’ youthful audience, but the company works only with like-minded enterprises (and bands and movies) through a cross-promotional campaign called “Threadless (heart)s.” Designers create T-shirts inspired by that particular partner and can win specially themed prizes along with cash.

By avoiding outside corporate influences that might distract the company from its core business model, Threadless has been free to grow at its own pace. (Their new company, Naked & Angry, takes the Threadless T-shirt design contest and applies it to patterns, with the winning patterns used on everything from purses to pet collars.) That’s not to say the big companies aren’t interested. In fact, both Target and Urban Outfitters have come calling.

“With Target, when they approached us we were like, ‘Heck yeah, we’re rich,’” Nickell says with a chuckle. “But then we thought about it. And we kinda thought maybe it would do alright starting out, but eventually they’d probably drop us. But I think something like that could work given the right variables.

“There’s nothing traditional about our company, so it makes sense that we wouldn’t exist properly in a traditional business atmosphere,” Kalmikoff adds. “The one thing we explained to [Urban Outfitters] is… there are tons of companies that have really cool T-shirts, and if you put our shirts against their shirts, without the story, they’re just all cool T-shirts.”

4 THREADLESS’ COMMANDMENTS
Here are some tips that can help your business tap the power of online communities:

1 Allow users to help create your content.
Whatever the project, let your users help make it better.

2 Make sure your project is in the hands of the community.
Listen to what the members of your community have to say and make them a part of your company.

3 Let your community grow itself.
Nurture the community, and give them the tools to spread the word.

4 Reward the community that makes your project possible.
Threadless’ prize money for winning designs started at $50; now it’s $2,000.