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Threadless
Marketing in a Digital World
by Prof. Aric Rindfleisch
Front page of Threadless, image
captured in
[Link]
authorized by Threadless.
Purpose:
founded it has sold its products almost exclusively via
The purpose of this case study is to examine the
its website (which is the same site in which designs are
relationship between online vs. in-store retailing and to
solicited and voted on). Through this approach, it has
better understand how the retail landscape is changing.
experienced phenomenal growth. In recent years,
Threadless has received substantial interest from several
Background:
large retailers such as Target and is also considering the
Threadless is an innovative clothing manufacturer
possibility of opening its own retail stores.
located in Chicago. Specifically, this company
specializes in making and selling unique t-shirts. The
Core Issue:
company was founded in 2000 by Jake Nickell and uses
During its first decade of operation, Threadless has
customer co-creation to design their shirts. It uses a
been very successful selling its shirts online. The core
submission approach similar to what Local Motors uses.
issue is if and how should Threadless expand its
The difference here is that in addition to using this
distribution capacity.
process to solicit designs, it also uses it to help select
which of these submitted designs to produce. This is a
very selective process; only 1% of all submitted designs
are selected for printing. These shirts are made in the
USA and usually sell for $25 each. Since Threadless was
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Case Study
Questions:
1. Should Threadless move into physical retail
distribution?
2. 2. If so, how? Should it open its own store or
sell through an existing retailer?
3. 3. What should be the relationship between its
online vs. physical distribution?
Typical Student Reaction:
When I teach this case, most students react very
negatively about the idea of Threadless partnering with
365-2011-026: Threadless Visit posted by Jason Gessner, under
Creative Commons license, retrieved from [Link]
an existing retailer. This negative reaction is based on
their belief that this type of partnership would hurt the
interest is establishing a physical retail presence is also a
Threadless brand by diluting its image and reducing
testament to the power of physical retail stores.
their control. In addition, they dont believe that
Although big box retail stores are declining in influence,
Threadless has the capability to launch their own retail
most retail shopping is still done in physical stores.
operation. A few students suggest that Threadless do a
These traditional stores are especially important for
limited physical distribution through a retail partner
products like clothing in which consumers like to touch
that would allow them to carefully control their brand.
or try out an item before making a purchase decision.
Thus, the majority of students feel that Threadless
Thus, physical stores account for over 80% of clothing
should stick with their current online distribution and
sales in the US. In these types of categories, retail sites
believe that this selective distribution strategy is a
are more likely to be used for information rather than
strength rather than a weakness.
for purchase. Threadless appears to have recognized this
fact and is trying to appeal to the needs and preferences
Concept Application:
of this broader market.
This case is an excellent example of the changing nature
Recent Developments:
of retail and the challenges involved in trying to adopt a
Threadless continues to sell the vast majority of its
multi-channel strategy. What is most interesting about
products online via its website. In recent years, it has
this case is that Threadless is an online distributor
formed a partnership with the Gap, a large clothing
interested in moving into physical distribution.
store chain that focuses on causal clothes for younger
Usually, multi-channel strategies are in the other
people. In addition to stocking its t-shirts in Gap stores,
directionfrom physical to online. Threadless
it also conducts special online design challenges for tshirts that will be specifically sold in Gap stores.
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Case study
Thus, it is nicely blending its online and offline
Lesson Learned:
distribution strategies. It has also formed similar
1. Placement decisions are closely related to the other
partnerships with a number of other well-known
elements of a firms marketing mix. For example, in
brands and retailers, including Dell, Thermos, and
Threadless case, a key factor in its physical
Redbox. In 2007, Threadless opened its own retail
distribution strategy was its unique brand image as
store in Chicago. This store looked very similar to an
this authentic, hip, co-created t-shirt firm in which
Apple store, with a very open feel and limited product
the designs of its products came from outside of the
displays. In the words of Jake Nickell, Instead of
firm. It initially had a hard time trying to align this
setting up the everyday shop, we essentially re-created
brand image with the more mass-marketed image of
our digital experience in-store. Threadless had hopes
traditional big-box retailers. This is one of the
of opening more of these types of stores in other
reasons why it initially rejected Targets offer.
locations. However, sales were disappointing and this
store ended up closing in January 2014. At this time,
2. Many online retailers seek (and often need) physical
Threadless also laid of 25% of its workforce.
retail distribution. In addition to Threadless, we
Reflecting on this experience, Threadless CEO Jake
have seen this happen to other online companies
Nickell (2014) said, While a tough decision, we felt it
such as Birchbox, Quirky, Warby Paker. Even
time to shut some doors (literally) and open others.
Amazon has floated the idea of opening a brick and
Namely, partnership and licensing opportunities,
mortar store. For specialized retailers, online
which is basically another pathway into bricks-and-
distribution still has limited growth opportunities, as
mortar without building the physical space yourself.
the majority of shopping in many product categories
Thus, at this point in time, Threadless is looking to
is sill via physical retailers. For example, when is the
rely more heavily on partnerships with established
last time that you bought a candy bar or a toothbrush
retailers to grow its business and has recently launched
online?
a new smartphone app that allows anyone to design
their own t-shirt.
3. Physical distribution presents a lot of challenges
compared to online retailing, such as a large capital
investment, geographical limitations, and limited
shelf space. Thus, digital retailers are likely to have
trouble in terms of making the shift to a physical
presence (and vice-versa). For example, Threadless
found that its storefront was much too costly in
Case Study
comparison to its online store. These added costs
mutually beneficial in terms of both reducing costs
suggest that online retailing will continue to increase
and taking advantage of potential synergies. A great
in the near future.
example of this is Threadless partnership with the
Gap which provides the Gap with access to new
4. You dont have to go it alone. Partnerships present a
designs and provides Threadless with low cost
possible means of gaining the benefits of physical (or
distribution to a customer segment that would
digital) distribution. These partnerships can be
probably not purchase its products online.
Resources:
How Jake Nickell Built his Threadless Empire ([Link]
Jake Nickell--Threadless ([Link]
[Link]
Reference:
Nickell, J. (July 21, 2014). What one web retailer learned from operating a bricks-and-mortar shop. Retrieved from
[Link]