At Threadless, Customers Design the Product

Loyal customers are also loyal designers at Threadless, a fast-growing T-shirt company based in Chicago. The idea for Threadless grew out of Jake Nickell's hobby of creating digital designs for T-shirts. In 2000, after one of his designs won a contest, 20-year-old Nickell teamed up with his friend Jacob DeHart to start a new business. Their unique marketing twist was that the T-shirts they sold would feature digital designs submitted and selected by customers through online voting. Threadless became a crowd sourcing company, in which tasks usually performed by a marketer or researcher in this case, product design are outsourced to the market.

The first contest, which offered a grand prize of two free T-shirts, drew dozens of entries. The designs were placed on the Threadless website, and participants voted on the ones they preferred. Threadless printed and sold 24 copies each of the five top votegetters. Soon the company began paying $100 for each winning design, an amount it gradually raised above $2,000. By 2002, Threadless had 10,000 customers voting on designs and was selling $100,000 worth of T-shirts.

A decade after its founding, the company's annual sales have skyrocketed beyond $30 million, and customers submit 300 designs per day. Threadless has 1.8 million members registered with its site, creating a large sample size from which to solicit feedback and votes. By marketing only designs that customers approve with their votes, Threadless keeps costs down and profit margins high. Sooner or later, all of its T-shirts sell out, and customers can click to vote for reprinting sold-out designs. Winners receive $2,000 along with a $500 Threadless gift card and $500 for every time the design is printed.

Threadless not only allows aspiring artists and designers to submit and potentially sell their work, but it also acts as a forum for market research. Blogging and critiquing on the Threadless website give designers the ability to interact with one another and receive recommendations on their ideas. This interaction often follows the five-step process of marketing research. For instance, a designer defines a problem she has with her design. She then thinks about what she wants to ask and posts the problem, as well as a picture of the design, on the Threadless blog. Other members post their recommendations, enabling the designer to collect relevant data for solving the problem. She can then interpret the findings to find the best solution and redesign the T-shirt before submitting it. Such interactions are common among the Threadless online community.

After the designers submit their ideas, Threadless creates the equivalent of an online focus group consisting of members from across the world. The T-shirt submissions are posted for members to vote upon, and voters can choose from a score of 0 to 5 on whether this shirt should be printed. They also have the chance to submit their own comments. For those who fall in love with the shirt, Threadless provides a button that the voter can click on to receive an alert. If the shirt gets chosen, the voter will receive a notification that the shirt is available for purchase. Threadless T-shirts and other company apparel can be purchased through the website. By using online customer reviews to create the final product, Threadless is able to eliminate the costs of test marketing.

Threadless has been so successful that it has opened its own retail store in Chicago to feature and sell its newest collections. Other companies are also getting involved. In 2012 Threadless partnered with Gap to sell T-shirt collections through Gap's website and retail outlets. The company also partnered with the Whole Planet Foundation to create the Whole Planet Foundation T-shirt Design Challenge. Designers submitted their designs for a chance to win a trip abroad, and part of the proceeds for their designs went toward funding entrepreneurs in developing countries.

As cofounder of Threadless, Nickell cannot imagine doing business any other way. "Why wouldn't you want to make the products that people want you to make?" he asks. By paying close attention to its customers' preferences, Threadless now sells 100,000 T-shirts every month. Customers are loyal because they know that their design ideas and votes really count.

Questions for Discussion

1. How has Threadless used crowd sourcing as the foundation of its marketing research?

2. How does Threadless create the equivalent of an online focus group to provide feedback on designs?

3. How has Threadless eliminated the cost of test marketing?