Threadless Firm – Business Model
Threadless company gets their product designs from a group of online community members who create various designs and select the best designs by putting it out for a public vote. Once the designs are selected, they print it on the clothing and other products which is then sold worldwide through their ecommerce store and at their retail store located in Chicago.
Designers whose work is printed receive $0 cash, 20% royalties based on net profits paid on a monthly basis, and $250 in Threadless gift cards, which can be exchanged for $200 cash.
Any businesses which involves majority of their activities online will be tempted to go for e-commerce only model as it helps the companies in cutting down various types of costs involved in setting up a physical retail store.
A close analysis of treadless business revealed that online retail business contribution was just 10% and retail arm of their business contributed maximum. Hence this gives rise to the following question:
Should Threadless move into physical retail distribution? Why or why not?
- It’s an established fact that online businesses are interestingly influenced by the location as well.
- Since Webrooming is on the rise nowadays, it is wise to have a physical presence to compliment their e-business.
- Larger market share – Along with online store, if they make their merchandise available in famous outlets, it would just help them reach a wider audience and bring in new customers.
- It also will help in Increasing Brand Visibility as there will always be offline audiences who are not so much into online or digital world.
The next question that may arise in the minds of the readers is as pointed out below:
If Threadless were to move into physical retail distribution, how? Should it open its own store or sell through an existing retailer?
I happen to stumble upon this article “Threadless lays off 27% of staff, shifts strategy“. When I read it, I found that Threadless already tried to open their own store but failed to succeed in it.
The CEO of Threadless then said that
We’re good at what We do online with technology and stuff. Hence We’ve decided to focus on that more rather than trying to diversify.
I completely agree with the decision he made. In order to succeed in business, the best strategy is to focus on what is good for you rather than doing something which you aren’t.
But on the other hand, if they want to move into physical distribution and leverage their potential, then they should have tie-up with leading retailers and rent a shelf there. This will help in minimising the risk and additional costs which would have incurred, if they have opened their own store. Having a physical presence will help in increasing their brand awareness as well and this can help them positively.
Let’s consider another scenario as given below:
If Threadless were to move into physical retail distribution, what should the relationship be between its online vs. physical distribution?
- If Threadless were to move into physical retail distribution, then they should see to that their main online business is not affected because its their primary business activity.
- Then for the retail distribution, they should make only very good and unique collections which couldn’t be found online so that there can be some distinct interest in retail store business.
- For increasing their brand awareness, they could set up a kiosk where T-Shirt design could be done. These kiosks should be present in every place where they have retail presence.
- They can use these designs for retail stores and not mix or bring T-shirts which was designed online because it will add more authenticity.
- For example, let’s say that I am interested in buying a T-shirt. I happen to find their kiosk and think of designing my own and hence I submit a design. If that T-shirt is available, then definitely I’ll buy and recommend everyone too.
- Online will be for targeting a mass market but in case of retail, it’ll cover only the area it is present. The people residing in that area may not like the designs made online and might be interested in custom made t-shirts which they like.
Bottomline: Threadless should first set up a kiosk and ask the customers if they’re interested in designing their own t-shirt. Based on the responses, we can get to know whether it will work out or not in that particular location. If the response is good, then they can try to cater them with only the locally made designs and not online. For online, let them carry out whatever they’re currently doing. In this way, the retail format should only compliment online business and not go for only one format.