Everyone loves to wear t-shirts. The fancier the design, the better the shirt. But in this search for the perfect design consumers often have to settle for common designs. On the other hand, the manufactures have to invest millions in designers to come up with new designs. However, this investment can not guarantee consumer satisfaction
Introducing Threadless, a crowd-sourcing based apparel and design company. It is an online community of designers and also an e-commerce platform. It works by involving consumers and designers all across the globe enabling them to contribute their own designs. These designs are then selected and the winning designs are then printed on t-shirts, which are made available for sale. The providers of winning designs get a share of the profits.
This model of co-creating value has led to a rapid growth of Threadless. They have now added sweatshirts, tank tops, sweaters as well as accessories. By using this model, Threadless gets access to high quality designers and consumers get access to fresh designs. But can this model of value co-creation be used to drive profitability?
I believe that this model is not sustainable in the long run. The costs involved in this model can be much higher than the revenue generated and without making profits, Threadless will not be able to sustain its business. Let’s look at the costs in some details.
As the size of Threadless increases, the number of people who submit their designs will increase. With increase in submissions, the cost of selection of best designs increases and Threadless needs to invest more in people at their firm. Also, with increase in size Threadless will offer more selection of t-shirts, which means that the options for buyers will increase. Increase in choice has an upside as well as a downside. Upside is that it attracts more buyers, however the downside is that to mange the supply Threadless will need to invest more money in production of smaller quantities of individual designs, storage and shipment of t-shirts.
This is a bigger problem than it seems. Garment and apparel industry is highly capital intensive. So is printing t-shirts. To effectively distribute these costs, it becomes imperative that manufacturers achieve scale in production. But in the case of Threadless, achieving that scale is a difficult task. Because of high level of customization and options, the batch size of individual t-shirt decreases, which results in higher costs.
Threadless has tried to overcome this barrier by asking consumers to pre-order goods. They only print garments if a required number of pre-orders have been achieved. This solution may provide them short term relief however in the long run, this will discourage designers. Also, consumer satisfaction can go down because if pre-ordered designs are not selected, those consumers who pre-ordered will be left with a bad taste.
To summarize, I think that Threadless has developed an excellent platform to co-create value however to be sustainable and profitable in the long run, they will have to re-think their strategy. Their focus should not only be in driving revenues but also profits.