Threadless: From Clicks to Bricks

The T-shirt e-tailer thinks its snarky style will work offline, too

On a busy strip of commerce on Chicago's North Side, the new Threadless T-shirt store is crowded with sporty young women in yoga pants and flip-flops, laughing as they take in the snarky slogans. The most popular shirt right now is a clever number in brown cotton that reads: "Haikus are easy/But sometimes they don't make sense/Refrigerator."

The 1,700-square-foot store, which opened in September, is the first from the folks behind, one of the hottest T-shirt Web sites. If it succeeds, the 35-employee company will join the likes of clothing startups and in moving from online to bricks and mortar. If it fails? Oh well. "We really had no good reason to open a store," says co-founder and CEO Jake Nickell. "It just seemed like a fun thing to do."

The story of Chicago's Threadless begins, appropriately, with a T-shirt contest. In 2000, Nickell, then a 20-year-old studying multimedia and design at Illinois Institute of Art, and Jacob De Hart, 19, an engineering student at Purdue University, met when they entered an online T-shirt design competition. Nickell won, and the pair began exchanging e-mails. In 2001, after working together online on a couple of projects, the duo decided to start their own T-shirt contest and company. They scraped together $1,000 and launched Skinny Corp., parent of The concept was simple: People would submit T-shirt designs online, visitors would vote for their favorite, and the winner would be printed in limited-edition runs. But the duo kept their day jobs in advertising. Says Nickell: "We had no idea what it would become."

To build buzz about the site, the two deployed "street armies" to talk up the T-shirts. "Soldiers" earned store credit for spreading the word about Threadless. Upload a photo of yourself wearing a Threadless shirt, and you would get a credit of $1.50. Refer a friend who buys a T-shirt, and you'd earn $3. The top soldier ended up with $33,384 in credit.

A year later, De Hart and Nickell quit their ad jobs and started hiring employees. Sales went from $600,000 in 2003 to $1.5 million in 2004. In 2006 they sold a minority stake to Insight Venture Partners in Chicago and this year added five employees to work in the new store. Threadless plans to open outlets in Boulder, Colo., and San Francisco. A store called Threadless Kids will follow in Chicago. The pair expects to hit $15 million by the end of 2007.

It all sounds great, but the shift from e-tail to retail is a risky one, notes Jim Okamura, a Chicago-based senior partner at retail consulting firm J.C. Williams Group. Web retailers are often unprepared for the costs of running a store, including rent, payroll, and utilities. And companies used to displaying their products online have to figure out the best way to showcase them in 3D. Also, the retail experience has to be appealing enough to prompt people to travel to a store rather than buy with a mouse click.

If the crew at Threadless is worried, they're not showing it. Jeffrey Kalmikoff, the company's creative director, says most people coming to the store aren't familiar with the Web site, so they have no particular expectations. "This is just a fantastic opportunity for people to learn about the brand," says Kalmikoff. As for giving others a reason to buy offline, new designer T-shirts will be released in the store three days before they appear on the Web. And although Kalmikoff concedes running stores costs more than shipping T-shirts from the Threadless warehouse/headquarters, he laughs it off: "We're planning on selling T-shirts to cover those costs."

By Maggie Gilmour

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