Today we are going to looking at the Teespring business model. Teespring is a US company founded in 2011 that has received $55 million in Funding from Andreessen Horowitz and Khosla Ventures. It has sold custom T-shirts to more than 1 in 75 Americans and made some of its T-short sellers very rich. How has it done this? Read on to get a detailed understanding of the Teespring business model.
Teespring’s value proposition is fairly straightforward. They make custom T-shirts on demand. So the value to you is that you can have a cool, unique T-shirt for an affordable price. What sets them apart from other players such as Cafe Press is that the T-shirts are often cheaper and better quality due to the way everything comes together. The innovation is not in the value proposition. It’s in how it is delivered
Again the customer segment for Teespring is very similar to other T-shirt customisers such as Cafe Press and Threadless. It is for people who use clothing to explicitly state their identity. Whilst the T-shirts aren’t unique the print runs are limited – some of the largest reach a few thousand and the minimum number is five – it’s still sufficiently small to allow consumers to brand themselves distinctly and uniquely.
What’s interesting is how Teespring has been effective in moving into the cause market – whether Marathons or MS or teams – to allow unique T-shirts to be created for a community group. This was the origin of Teespring – it was slow and expensive to get a causal T-shirt designed and printed quickly in response to a bar being closed down by the Police. One of the core segments is a community group who needs a T-shirt of similar for an event. With a design the T-shirt can be ordered without fuss in minutes – or used to raise money for the cause or charity.
Like most electronic platforms the way that Teespring interacts with customers is highly structured. It’s an impersonal storefront with a totally automated checkout and payment system resulting in a package arriving a few days later. However taking a leaf from Amazon’s dedication to customer service Teespring offers a no quibbles refund policy if anything goes wrong. The philosophy is that the cost of recovery is far less than the cost of acquiring a new customer and it’s likely to mean that the customer stays around a lot longer. Loyalty in a word.
The channels are interesting. Whilst Teespring now does a lot of sophisticated marketing, including some quite cool uses of the Google product API, from the information publicly available, much of it’s marketing is paid by other people.
That’s right. And this is the real innovation at the heart of Teespring’s business model. Instead of designing their own T-shirt they crowdsource designs. Anyone can go onto Teespring and in a few minutes design their own T-shirt and post it for sale. Some people designing and selling T-shirts have been making $500,000 a year doing this. Given the money available the designers want to maximise their sales and so they buy Facebook adverts (and many other channels) to get people to buy their products.
Yes all these click throughs go to the product page but a lot then are sticky to the platform itself. Teespring’s early revenues (despite initial traction) were flat for the first few months as there was very little virality in the marketing and people had to be educated. Educated that it was possible to quickly and easily get customised T-shirts. The designers seeing the possibility of $500 or $1,000 pocket money profit each month absorbed that education cost and pushed Teespring to a mass audience.
The downside of this of course is that Teespring has to split the revenue with the T-shirt designers. Teespring apparently takes a flat fee for every T-shirt sold. Given that a basic T-shirt is about $10 and many clothing retailers take 45%+ margin this is likley to be at least $5. Looking at the details of what they offer there are a limited number of SKUs – T-shirts – sourced from large apparel manufacturers. Using standard items means that firstly they are able to take advantage of GAP and American Apparels economies of scale. Secondly they piggyback on the supply chain assurance – no Kazakhstan cotton for example. Finally, that they have no custom unsold stock that has to be heavily discounted or disposed of.
More complex designs increase the cost and it is likley that there is some variable and some fixed cost component to these, plus there are additional upsell and cross sell opportunities that increase revenue.
Teespring’s key resources are the design and the selling process. In a quick trial I was able to produce and launch a T-shirt in under 5 minutes. You can support Business Model Guru by buying one. If we sell 20 the $133 in profit will be used to improve the blog SEO and research more cool business models.
Sales pitch aside. The process for people to design and sell their T-shirts is super simple and fast. It removes a huge amount of friction. If you you have an idea within minutes it can be launched. That is a huge competitive advantage for Teespring.
The other is the invisible side of the logistics chain. I haven’t seen the warehouse, so the following is an opinionated guess. What happens next is that the order stream is fed into some ERP system that queues and sequences all the orders. If it’s super automated the warehouse will be filled with hoppers full of different sized and coloured t-shirts. These will be picked up by robot and taken to the printing machine; printed and then packed and dispatched automatically.
Given the reported headcount of 300+ it seems that there is a much lower level of automation than this
So the key activities at Teespring are very much focusing on building the platform and focusing on the ability of buyers to get great designs up. and improving the conversion rate optimisation at all levels of the sales process. Whilst the printing and operational side is important this is not the engine that drives the business. T-shirts are launched on campaigns of just a few days to a few weeks – which means that any consumer gratification is delayed. It also has the pleasant effect of reducing variability which is wonderful for the operational manager. The platform though is everything.
The key partners are the designers and the manufacturers. The t-shirts are not the selling point. The designs are. So it is not a core competency of Teespring to manufacture it’s own T-shirts. That can be done by someone else and in the $200 billion textile industry Teespring is small. So there is a huge cost saving, and more importantly operational and logistical savings to be made by outsourcing that.
Even more important is the decision to outsource the designers. It’s almost a truism that fashion moves fast. As it fragments even faster with the splintering of the media it is super hard for any company to keep up with fashion. Inditex (Zara) is able to respond to fashion changes in weeks, compared to the traditional months for more traditional retailers. Teespring by having a base stock of T-shirts which are then ‘fashioned’ on demand becomes even faster than that.
So the designers are a core part of the business model and as such they take on the risk of whether a design works or not. Teespring does not because it won’t accept the sales until the sale is large enough to make it a profit. Sweet
There are four main components to the cost structure.
- Designer Fees
The inventory is all the standard t-shirts that are kept in stock ready to be printed. If done correctly much of the inventory should be funded by the supplier with Teespring only paying as it uses the T-shirts for a live job.
The printing – this requires a factory (centrally located in the midwest) with attendant printing and logistics systems to ensure efficient throughput.
Salaries includes all the developer costs whilst the design fees are the fees paid to the designers.
The Teespring Business Model Canvas
Sources for the Teespring Business Model