SXSW 2006 Panel: “Zero-Advertising” Brands / Threadless

Monday, March 13, 2006

SXSW Page about this panel

[Came in late a few minutes late, but this turned into an excellent presentation. These guys are worth looking at.]

Jake Nickell: It all started off in my apartment and we were there for two years before we quit our jobs and started doing it full time. Right now we’re about 8,000 square feet in Chicago.

Maggie Mason: All a similar model: Users create it and vote on it.

Jeffrey Kalmikoff: Naked and Angry is the only thing that has its own packaging. And it’s the only thing that’s not community-driven. We did a lot of research into the best way to have the packaging for the ties.

Jake Nickell: Started about eight months ago. Take pattern submissions and make things out of them. Ties right now. Soon, wallpaper.

Jeffrey Kalmikoff: People ask if we’re going to expand Threadless to other things. Probably not because we like to keep it simple. So Naked and Angry was a way to do other things.

Jacob DeHart: 15 Megs of Fame uses the same model. More for the unsigned band. They get 15MB of space and different prizes and voting. In the future we’d like to get better prizes and maybe record deals for the bands.

Jeffrey Kalmikoff: It’s one of the projects we’ve had that’s evolved the most from the original idea of making a Hot Or Not for music. A unifying theme is “it would be cool if.” It went from something really simple to something really evolved. The biggest challenge was deciding what not to do with it.

Maggie Mason: So then, Extra-Tasty.

Jacob DeHart: Launched a couple of months ago. Users submit drink recipes. People can enter what they have in their house and it’ll tell you what they can make. And it’s tag-based.

Jeffrey Kalmikoff: What’s fun about it, too. We used to be an agency. [Missed something.] When you have client work, if you are asked to do something just beyond your abilities, you either farm it or learn it. But with Extra Tasty we expanded our skillset. You’ll be able to use it with your cellphone.

Jake Nickell: All of the recipes are generic.

Jeffrey Kalmikoff: Our database tells what the equivalent to a brand-name is. But we could go to a company and pitch including their name.

Jacob DeHart: It’s going to stay ad-free.

Maggie Mason: You have a community site called yay-hoooray. You seem to use it as a test-kitchen. How do they interlink?

Jeffrey Kalmikoff: Yay isn’t a test-kitchen. It’s just a community board. But we learned a lot from it.

Jacob DeHart: Marketing. We didn’t do any ads. All word-of-mouth. No other choice, but it’s really working out for us.

Jeffrey Kalmikoff: There’s a business model defined, but there wasn’t really any planning ahead as to how to do it. Most of it has really just been common sense. Or what made sense to us. So that’s how Threadless has grown. We try to think of things that the community would thing was really cool. Having fun in mind.

Jake Nickell: 90% of people on the site aren’t on there for a t-shirt. They’re submitting designs, talking on forums, voting, etc. If they’re proud of their design, they want to share it.

Maggie Mason: You guys get 20,000 designs per year?

Jeffrey Kalmikoff: We’ve had 80,000 so far — about 150 per day right now. We actually have an easy submission process. And we approve them. But we don’t ever really not put something up for content. Only for copyright problems or hugely offensive, too big, too many colors, and such. Most everything goes up.

Maggie Mason: You mentioned not having many problems with community management.

Jake Nickell: We don’t delete posts or anything like that. But you’re right, most communities turn bad or something like that.

Jacob DeHart: And I think our users are really loyal, too. They would stick up for us.

Maggie Mason: Have you been surprised with the quality of what people submit and choose?

Jeffrey Kalmikoff: As the business grows, we definitely give more back to the designers. We’re paying out close to $30,000/month to do it. At first you would get three shirts and $50. Because that made sense. But we’re just three people in a 300,000 person community. And there are only twenty people in SkinnyCorp. I’ve never won the competition, by the way. Now, our community would murder us if we printed something without them wanting it.

Maggie Mason: Ever done anything to make the community rise up?

Jeffrey Kalmikoff: The what-kind-of-t-shirt thing is a huge hot-button issue. You can’t bring up switching t-shirt manufacturers. We brought it up and it was, like, a 1500-post fight. But that’s because people feel ownership.

Maggie Mason: your average user is a 16-30-yr-old guy.

Jacob DeHart: We’ve started taking more stats on that. Average age is 22. Used to be more male, but it’s balancing out.

Maggie Mason: You mail out 60,000 shirts per month.

Jake Nickell: Yeah, we handle our own fulfillment. We started by shipping during our lunch breaks. We built out entire fulfillment system from scratch.

Maggie Mason: How many members are on your team.

Jake Nickell: We have 20 employees. 5-6 on the front doing websites and stuff. Everyone else does fulfillment.

Maggie Mason: Any special challenges?

Jeffrey Kalmikoff: When we try to do something new, we don’t know what we’re doing. None of us went to business school. You just figure out the best way to get it accomplished.

Jake Nickell: A lot of our challenge has to do with our growth. We have to move every year.

Jeffrey Kalmikoff: We’ve been settled for just over a year and we’re moving already in to a 25,000sqft place.

Jacob DeHart: We redesigned and reprogrammed Threadless every three months or so to add features and such. And as we worked on the site our skillset evolved and we were able to scale. At first we had to dedicate a server to sales, but we did these $10 sales and that would kill the server. Now we’re working on a system of about fifteen servers to host our twenty sites.

Jake Nickell: We kind of had a problem with FedEx. [Explain.]

Maggie Mason: How do you decide what’s not a good idea?

Jeffrey Kalmikoff: I used to think there were no bad ideas, only those that aren’t applicable. We have four themes that we apply projects to so that our sites share a spirit without being identical.

* Allow content to be created by the community.

* Put projects in the hands of the community.

* Let your community grow itself. (This has to do with our zero-advertising thing. If people won’t talk about it, it’s not good enough to do.)

* Reward the community that makes your project possible. (How do you have a company controlled by the community without their participation. Our community could kill Threadless if they wanted to. That’s just the way it goes.)

Maggie Mason: Do you worry about the backlash problems?

Jacob DeHart: We heard that Threadless would get too big. That was three years ago and now we’re four times larger.

Jeffrey Kalmikoff: We’ve turned down companies that’ve wanted to carry us. Like Target. But you’ll be in Target for six months and then nobody will want you because you’ve sold out. What makes the project special is the community. Throw it in Urban Outfitters and we’re just another t-shirt in a wall of t-shirts. Everything special about it has been taken away. It’s just cloth and ink. And that’s not why we do it. We want to have fun with it.

?: Where’s the I Heart Threadless t-shirt?

Jeffrey Kalmikoff: We printed those as a test to test out a new kind of t-shirt.

Jake Nickell: But I don’t think we’ll sell them.

Jeffrey Kalmikoff: We’ve sold a couple that have included the world Threadless in it, but those were voted up normally.

?: Zero-advertising. Really for-real? No stickers?

Jeffrey Kalmikoff: We put stickers on the orders. We’re just preaching to the choir and giving them tools to get more members. But these things were us sitting in a conference room thinking of how to make more money. We’re like, “we should give them stickers because stickers are awesome.”

?: Where do things stand on the t-shirt wars between Fruit of the Loom and American Apparel.

Jake Nickell: We’re thinking of making our own brand. We’ve wanted to go back to American Apparel. It’s made in the US, but their quality is crappy. Lots of returns. Which we’d have to hire more people to deal with. But we’re working it out. But it won’t stay a split forever. By the end of summer we’ll probably have a new t-shirt. We’re going to send out some free shirts to our top buyers so we’ll make sure it’s the right decision.

Jeffrey Kalmikoff: It’d be easier four years ago. But with 100,000s of people…

Maggie Mason: How would you even get a new t-shirt made?

Jake Nickell: We’re working with a couple of companies. It can be done.

Jacob DeHart: Our printer’s been helping us out.

Jeffrey Kalmikoff: The bigger t-shirt companies will made special changes for you if you go in ordering, say, 1,000,000 shirts.

?: Kid sizes?

Jake Nickell: I’d love to. Maybe.

?: If you cede control of your business to a community, don’t you put your employees at risk?

Jeffrey Kalmikoff: Yes, but that’s the way we choose to do business. We would care if it failed, but I don’t honestly think that the community would kill itself for no reason. And if it did, it would deserve to die.

[…]

Jeffrey Kalmikoff: there’s little moderation and we all say dumb crap. but that’s kind of the fun of it. To the people on the site, it doesn’t feel like a business. It doesn’t feel like being in this brand-world’s walls.

?: You seem to use Threadless to fund these other projects. What other projects do you see also having that potential?

Jeffrey Kalmikoff: We have some pretty ridiculous projects like “iparklikeanidiot.com.” We don’t really kill projects ever. So threadless is like our own VC. […] I see 15 Megs being the next thing that works out. We took on some partners for 15 Megs and the new site will be launching by the end of the year and bands will be able to get signed and get exposure and stuff.

?: Would you have taken money to grow Threadless?

Jeffrey Kalmikoff: We’ve never taken on VC money. Our 15 Megs partners aren’t VC, they’re business partners.

Jake Nickell: We’ll just use the resources of the other company.

Jacob DeHart: We wouldn’t have wanted it because we wouldn’t have known what to do with it.

Jeffrey Kalmikoff: We don’t want our company to feel huge.

?: Do you find cross-pollination between your products?

Jacob DeHart: We don’t really cross-promote much. But we did include Extra Tasty in a newsletter.

Maggie Mason: Do you have a lot of user overlap?

Jake Nickell: OMG Clothing, Threadless, and [something] all use the same user database.

[…]

?: What’s your typical work-day?

Jacob DeHart: Our lunch breaks go on for way too long. But we get all of our work done.

Jeffrey Kalmikoff: It’s definitely not a 9-5 job. It’s an every second thing. But not in a bad way. You really want to finish what you’re working on. But there is no typical work day.

[…]

Jake Nickell: We made five coupon codes that would make the t-shirts $10. And gave them to five websites. Coolhunting won. But it didn’t work as well as we thought it would.

Jacob DeHart: It was just an experiment.

Jake Nickell: It was Coolhunting, BoingBoing, Flickr, and something. But BoingBoing didn’t post it.

Jeffrey Kalmikoff: There’s really no process to designing our ideas. We sometimes brainstorm, but usually someone just has an idea in the shower on the way. We’re really excited about stuff and we have to come back after a week and look at how to make it work. We work really well together. We work at our own paces and then come together to figure out how to make it all work.

?: How important is it that you’re like your community?

Jeffrey Kalmikoff: It’s integral. If you don’t know your community, that’s a problem. We were at MIT and a guy was selling a product and he was freaking out. But he had no idea who the people were and he hated the product. If you’re not anything like your community, then you probably either won’t like it or you’ll be missing the mark.

Jake Nickell: It’s important for me to do my job well to actually enjoy what I’m doing.

Maggie Mason: And you tend to produce things that you think are cool, that you’d like to use.

Jeffrey Kalmikoff: Right now we’re in the dead-center of our demographic. What do I want to use?

?: Had any trouble with copyright infringement?

Jake Nickell: Yes. Both ways. People ripping off our material and people submitting copyrighted materials. We work with those companies when there’s a problem. And we’re not harsh when other companies rip us off, but usually there’s nothing we can do.

Jeffrey Kalmikoff: Copyrights are in our name and in the designer’s name. Internationally, there’s not too much we can do. There’s the flattery thing, but it doesn’t really impact our business. And the community doesn’t really let it fly. If someone rips us off, they’ll get a lot of e-mail.

Maggie Mason: Thanks!