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Jake Nickell and Jacob DeHart, a pair of college dropouts from Chicago, had been running Threadless for six years before someone coined a term to describe the company's business model in 2006—crowdsourcing. Part apparel maker and part social network, Threadless has a website where artists can submit designs for T-shirts and have them voted on by a community of followers. The ones that garner the most votes are printed and sold for between $18 and $24 apiece. Artists receive a $2,000 payment and a $500 credit for purchases at the site. Since it churns out only those products that it knows customers want, Threadless has been profitable from its inception.
Now the company is out to prove its moneymaking strategy works on more than just tees. In July computer maker Dell (DELL) unveiled 12 new designs that can be etched onto the exteriors of its notebook PCs for an additional cost of $85. The images, which range from a scene in London to a deer with cherry blossoms growing out of its antlers, were all vetted by Threadless devotees. The designs have caught on quickly, according to Dell, which won't give specific sales figures. "We wanted to bring the voice of the consumer in, so teaming with Threadless was an obvious fit," says Rachna Bhasin, general manager of strategic partnerships at Dell. "This is art that resonates with Dell customers."
Earlier this year, Havaianas, the now ubiquitous brand of rubber flip-flops made by Brazil's Alpargatas, partnered with Threadless on a special line of sandals. For its first foray into the accessories arena, Threadless received more than 600 design submissions from contestants around the world. Sandals bearing the six winning motifs went on sale on Havaianas' website in July. Neither company will comment on how revenue is shared, but Jim Anstey, Havaianas' U.S. marketing director, says the Threadless line is now its No. 2 best-selling category online. "We were looking for a way to engage our target audience," says Anstey. "Conventional advertising doesn't work anymore."
More established companies also have experimented with crowdsourcing. In 2002, Mars ran a global contest to choose a new color for its M&M's candy, with more than 10 million chocolate lovers taking part (purple triumphed). And in 2003 more than 360,000 ice-cream aficionados voted to add Primary Berry Graham to Ben & Jerry's lineup of flavors.
Threadless, however, is more than a one-off marketing stunt. "We're not telling people to make a design about theme X or Y," says Tom Ryan, the chief executive officer of Threadless parent company skinnyCorp. "We're letting them submit art and talk about what they find interesting."
The Threadless formula relies on designers to spread the word about the site's products. Jess Fink, an artist from upstate New York who has five winning entries to her name, campaigns for votes by posting links on her blog, Twitter, and personal website, all of which helps drive traffic to Threadless' site. Says Fink: "Threadless draws in people who know how to create real, quality work—who are not just trying to make a quick buck."
Ryan won't say how much revenue the company has derived from partnerships, nor will he reveal overall sales. He does say annual revenues are growing at double-digit rates. Overhead costs are minimal: The company employs just 51 workers full-time in Chicago, largely limits its advertising to social networks such as Facebook, Digg, and Twitter, and recruits customers and employees to model the T-shirts on its site.
Threadless' edge: the community that it has nurtured. The site has logged 2.5 million unique visitors in August, a 50 percent increase over the same month last year, according to Ryan. "Threadless is an archetypal crowdsourcing company," says Jeff Howe, author of Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business. "They really redefined customer service and marketing as a much deeper, richer process, as opposed to a simple and straightforward means."
In addition to Dell and Havaianas, Threadless designs have appeared as Blik wall decals since 2007 and Griffin iPhone accessories since late last year. With two stand-alone retail stores in Chicago already up and running, Threadless is working on plans to expand into brick-and-mortar retail chains and looking into more collaborations. "We're going to push the limits of what we do," Ryan says. "If we can find products that our artists are excited to design for and consumers are excited about, then we're sure revenue will follow."
The bottom line: PC maker Dell and flip-flop maker Havaianas have teamed up with Threadless because it knows how to use customer designs.