via threadless.com
17 year old Jessica is out shopping with her friends. Fingering through the racks with her spare hand she holds an iced cold Mocha Frappucino in the other purchased from the local Starbucks. They exchange opinions about what’s cool and what’s not. A simple retro design in pink called “Helium Menageries” catches her eye. “I like it”, she says” because it’s cool for the Summer. It’s definitely not something you could buy at the GAP”. Molly laughs acknowledgingly.
Jessica could have easily shopped online or at the GAP but chose Threadless. Why? Because she’s part of their community and she’s even turned her hand at submitting her own design.
Threadless’ success is its relationship with the customer. Where GAP and the numerous t-shirt bucket shops out there choose to sell exactly that, t-shirts, Threadless was throwing out the book and ploughing a new furrow leaving competitors in its wake.
“Without our customers we’re nothing” says Jake, “and we realize this to our very core”. There couldn’t have been a better soundbite to summarize our interview so I hit the stop button on the video camera.
“Thanks for coming by” he said equally genuine as he was relaxed.
I had first met Jake as he shuffled quietly into the company headquarters one Monday morning. His looks belied his age. For most observers, he’d be your average student dressed down in parka jacket, jeans and Converse. To the more knowledgeable eye, he was the co-founder of “America’s most innovative small company” – Threadless – a company that sat at the centre of a highly active community with over a million members and half a million followers on twitter.
The community paid dividends. $30m in sales in 2006 with a gross margin of 30% doubling in sales on an annual basis. Started with $1000 of their own pocket money.
Well, it wasn’t always like that.
“We used to be a web design company” Jake says as his eyes light up in response to my probing about their origins. “We started to see our t-shirt business outselling our webdesigns so by 2004 we were 100% committed to t-shirts alone”.
MBAs around the world will be scratching their heads.
In reviewing their SWOT analyses of growth firms, students would have passed over Threadless and gravitated towards the high flying tech brands that promised exponential growth.
Threadless had little technological advantage and more glaringly obvious to academic, they had zero barriers to entry. All you needed to create t-shirts was a shirt and screen printing press – a business that could have been equally run out of Chennai or Chipotle as it is in Chicago.
Threadless’ success proves one thing. That people don’t drink the soda, they drink the can. That “blind taste tests” used by marketers for years to prove one product better than the others are only good if you have blind customers.
You see, what all the MBA students would have missed was that Threadless didn’t sell T-Shirts.
“If you want to put your finger on it” said CEO Tom Ryan, “we sell community.”
I had joined Tom for breakfast to dig deeper into unearthing the success factors behind this phenomenon. It quickly became apparent that while they weren’t operationally as effective as Amazon, the strength in their business relied on recognition of this fact from the owners to the casual staff. Threadless wasn’t a t-shirt company, it was a design community.
Tom had been a previous client in his EMI days. Like EMI, Threadless also considers itself in the business of managing talent. Yet, that’s where the similarities end. The contrast between working for a cutting edge youth brand and going concern in a fading industry couldn’t have been starker.
“We give people a voice” said Tom, “whether that be the designers who create the T-shirts, the curators who look after the community or the customers who buy – all have a role”.
And there lay the beauty of this humble T-Shirt outfit; everything from the t-shirts to the community to a good deal of the customer service was in fact run by the customers themselves. Where rivals had to employ numerous customer care staff, returns and complaints handlers a significant proportion of this cost was itself absorbed happily by the customers who took it upon themselves to help others out because they took ownership of the community.
Jake pulled a random shirt from the warehouse shelf. On insepction of the label he returns “‘Fly over here’ by Matt Binder”. Matt, like the masses who bought his t-shirts, was a customer to whom Threadless gave a platform to belong and to be significant.
Agencies love the Threadless story because it talks of innovation, the hackneyed expression of “thinking out of the box” and demonstrating how brands can build extensive dialogue with young customers. Yet, there is one major sticking point where you see their enthusiasm deflate and the Threadless case study is pushed to the side; they don’t advertise. Threadless spend zero dollars on their advertising – it’s all word of mouth.
The half a million followers on Twitter carry the message to the wider world. These are the 10% that inform the remaining 90%. And on hearing this, most agencies would prefer to treat this model as an anomaly as opposed to a harbinger of future trends. But it doesn’t stop there because this book is a journey into the world of next-generation youth brands that are completely tearing up the advertising script that has become so staid and ingrained into our marketing world.
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