Threadless: From Community to Marketplace
The current version of our internet is taking business back to a model we are familiar with: a marketplace. It steers all concentration back to a more user-centric development which often cannot be mass produced and in the way most businesses aren’t organized.
A marketplace aims to make e-commerce less intimidating for participants to tackle sales and business. Marketplaces help users control appearance and presentation of their store to the pricing of items.
Threadless is a T-shirt company founded by people with backgrounds in IT who needed a portfolio to show its clients. Some might say that Threadless’s business model arose by accident. The founders found themselves in a hard to scale web services business, selling websites and services.
Threadless was an online copy of an offline contest. It started out with weekly design contests open to the crowd, printing only T-shirts with the most popular designs, and selling them to the community.
From 2005 to about 2011, Threadless was repeatedly crowned the model student in the newly emergent class of online crowdsourcing businesses. Jeff Howe, who defined the concept of crowdsourcing in 2006, called it “an almost pure expression of the [crowdsourcing] model.” Threadless sold “60,000 T-shirts a month that year, ha[d] a profit margin of 35 percent and [wa]s on track to gross $18 million” while employing fewer than 20 people. — From the article
Threadless’s community was consumer and seller at the same time. Except they didn’t sell. Designers excepted prize money for an exchange of intellectual property. Designers never sold, produced, or shipped their own T-shirts.
Threadless operated as a modern platform model similar to a horizontal business model. Those models usually have a very dominant access to clients. Those models are in part applied to Alibaba and Amazon. They have millions of visitors, they are dominating the space and they have around 50% tech-employment. Don’t pin me down on the exact numbers.
Threadless never had to hire designers, since those competed for prizes and prestige. The company never had to invest into marketing, since designers contacted their friends for votes and sales. It never had to come up with pricing strategies nor did they have to predict sales, since their voting crowd indirectly announced a number of shirts they are going to order.
For the past 17 years, Threadless has been able to create and profit from the sale of T-shirts without ever designing a shirt. However, in order to “blurr” the boundaries, you have to venture into areas and dominate potential spaces which are unknown to you. You have to eradicate your competition by adding value vertical and horizontally.
Marketplaces leverage two-sided market effects where buyers and sellers influence each other. In case of Threadless, designer tools developed by designers made it easier to come up with better designs and hence buyers and seller influenced each other since buyers were also sellers. There is a potential upside to control the vertical as seen by Apple’s iTunes.
This is Amazon’s schematic model. It entails horizontal and vertical channels. The thickness of each line indicates the dependency of its company in those channels.
Amazon optimized its verticals by venturing into electronics, warehousing, logistics attempting to strengthen its two-sided market effects. There are manifold approaches to open up to new opportunities.
Threadless opened its only retail location in 2007 on the North Side of Chicago. The retailer’s web sales increased 20% to $36 million in 2012 from $30 million in 2011, according to the Top 500 Guide. It closed it again in 2014.
Threadless did a move in a direction but something did not work out for them. The reasons are not 100% clear. One might say too much real-estate for custom products wasn’t in the long-term strategy. I for one believe their move was inspired by another company’s approach.
Teespring was founded in 2011 and raised $61M in funding (crunchbase) to help build a platform where anyone can upload and sell anything.
“To that end, we have recently let some Threadless employees go that fall under the areas we are no longer supporting. However, we will continue to invest in strategic initiatives including our technology platform and digital endeavors,” source: digitalcommerce
Teespring saw the potential in a program to help artists sell their own designs without winning a contest. You can obtain a cut from all sales on your marketplace, as well as your own. It also increases your chances to open up your portfolio and sell all sorts of things which have their own creative touch. Those network effects attract more sellers who weren’t really into T-shirts but mugs, or other merchandise.
As of 2015, Threadless announced Artist Shops and rolled them out to the community in early 2016. More than 100,000 white-label Artist Shops have opened since 2015, and Threadless launched a program called Accelerator in early November that will distribute $100,000 in promotional funding to four of them.
Many businesses struggle to digitize their ‘old’ models. They aren’t able to open up a side of their business to allow two-sided markets increase demand. We are moving away from a supply- into a demand-driven world with the customer at its core. Businesses have to move from products to services. The product is one part of their revenue but the service will make customers come back.
Cars will be build but customer loyalty is shrinking every year. The big manufacturers are heavily moving into a service-driven business, such as on-demand services for people who don’t own cars. This way they will create value for people who do not want to own cars and hence don’t have to buy cars to be valuable for them.
Conclusion
Teespring has been founded in 2011 with focus on marketplaces right away. I assume a large sum has been put towards marketing. They did not grow based on a loyal community. They saw the market but did not own their customers.
Threadless which was funded in 2000 and raised a whopping $450k in 2013 turned from a curated and competition-based t-shirt community to a very valuable marketplace. You couldn’t just upload a shirt to Threadless and let people buy it — your design had to be voted on, then selected and approved by Threadless.
Their reach and audience had become huge in a short amount of time. They moved away from a very unscalable business into a more mature and stronger entity with different responsibilities.
