Threadless: Inventing new business models inadvertantly since 2000

Threadless isn't in Kansas anymore. They're become successful enough to warrant an Inc. Magazine cover story. Actually, it's more like a success story. Here's an excerpt describing a speaking engagement founder Jake Nickell took part in at MIT:

Nickell started talking about his company. Threadless, he explained, ran design competitions on an online social network. Members of the network submitted their ideas for T-shirts -- hundreds each week -- and then voted on which ones they liked best. Hundreds of thousands of people were using the site as a kind of community center, where they blogged, chatted about designs, socialized with their fellow enthusiasts -- and bought a ton of shirts at $15 each. Revenue was growing 500 percent a year, despite the fact that the company had never advertised, employed no professional designers, used no modeling agency or fashion photographers, had no sales force, and enjoyed no retail distribution. As result, costs were low, margins were above 30 percent, and -- because community members told them precisely which shirts to make -- every product eventually sold out. Nickell's company had never produced a flop.

The audience members listened, rapt. For years they had suspected that this kind of business model was possible -- even inevitable. They had seen the beginnings of it in the open-source-software movement, and they had been trying to make it happen in small ways within their own companies. But somehow, this T-shirt guy had gone whole hog. He had built an entire business around the idea that an online community could drive innovation.