Threadless.com Unravels the E-Commerce Model

If you don’t know Threadless.com, you should.

Not only is it an incredibly cool place to buy T-shirts unlike any you’ll find anywhere else, it’s an amazing example of a business that’d be impossible without the Web. Looking at what makes it work can teach us a lot about what the Web’s really good for.

First, the concept. Threadless business model is a brilliant exercise in simplicity. Basically, it’s a community site for designers. Members who have T-shirt designs they’d like to produce submit them to the site. Once in the queue, they’re put up for a vote. All the other site members can then cast a ballot and add a comment or two. The shirts with the most votes are produced and sold on the site. Those that don’t pull the votes fade into the archives. Design Darwinism. The power of the networked marketplace.

From a business standpoint, it’s brilliant. Rather than take a flier on selling shirts people may or may not want, the site owners know what people want before investing a dime in production. Site members, having voted on the designs, are probably more inclined to buy them since they had an actual say in the production. The only risk to the site owners is how many shirts to produce, though they probably have a good idea based on the number of votes a particular design gets.

Another smart feature is visitors must register before they can vote. Unregistered visitors can browse the archives, read comments, and shop for shirts. Actual participation is limited to those who cough up their contact info. A regular email newsletter is sent to the list to keep members up to date on new design submissions, new produced designs, and any specials the site may be running on overstocked items.

Overall, it’s a fascinating closed loop of community and commerce where value is exchanged between members, the company hosting the site, and those who buy the merchandise. Members whose designs are produced are “compensated” with social recognition of having the coolest designs, as determined by their peers. Buyers who purchase from the store get unique designs that can’t be found anywhere else. In effect, it’s a great example of open-source design at work in the marketplace. It’s not that different from what goes on with Linux companies, such as Red Hat, that add value to the distribution of “free” software by making it easier to install, providing support, and so on.

“That’s fine for T-shirts,” you may be thinking, “but what the heck does this mean for my company?”

Plenty. Threadless shows what happens when companies take advantage of the Internet’s two-way nature to involve customers in the processes of their goods and services. There are plenty of T-shirt e-commerce sites out there. Most are little more than catalogs. The owners take all the risk and occasionally get lucky. Threadless invites users into the design process, compensates them with social recognition, and makes money on the side. It’s a perfect melding of the power of interactivity, the “stickiness” of community, and the ability to provide an easy avenue for commerce.

Too many companies use their sites as one-way vehicles to broadcast content, products, and services to their constituent audiences, providing interactivity only as a means to capture more information then use it to aggressively market to consumers. They spend untold amounts of money on often-spurious market research that doesn’t always relate to the actual behavior of their customers. Threadless, by inviting customers into the product development process, actually gets the market research it needs as a part of its model, generating products their customers have already indicated they’re ready to buy. Worth pondering next time you hold a focus group.

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