A VC in Vacationland

Well, I already have posts on supply chain innovators, so why not marketing and sales innovators as well? 

Are prosumers the next big trend in marketing and supply chain business model?  Prosumers are not exactly a new concept, with origins of the term stretching back to Horace Mann and his speech On Education and the National Welfare (I am indebted to Fred Wilson for this citation). Alvin Toffler created the term prosumer in his excellent book, The Third Wave, where he speaks about the merger between the concepts of a consumer and a producer.  Toffler foresaw an emerging world where consumers became an integral part of producing goods and services. And we now have new companies emerging in the prosumer space.  Their business models provide interesting insights into how the convergence of consumers and producers can produce new efficiencies in traditional supply chains.

Threadless t-shirts uses what a number of commentators have called a "crowd-sourced" , or prosumer business model, whereby customers vote on proposed t-shirt designs and the company produces the most popular ones. Four to six designs are chosen per week from 600+ submissions to be printed and sold, with the winning designers getting $2,000 in cash and prizes.

The project was started in January 2000 by two Chicago designers, Jake Nickell and Jacob DeHart. Since then, over 450 winning designs have been chosen from over 60,000 submissions.  The threadless community has over 300,000 users with more than 3,000 signing up each week.

Why is this so important?  Any marketing or supply chain strategy guy can tell you about the difficulty in deciding which products to produce and how many of them to manufacture.  threadless t-shirts solves these problems by letting its customers do the analysis, both in product design and in production. Not only do the customers tell the company what they want but threadless also has a good idea of the number of t-shirts to manufacture.  Of course, in this day of instant manufacturing, threadless really does not need to make the shirt until the order comes in from the customers. The model also gives the company pricing power as they are producing unique goods in the right quantities, avoiding markdowns on unpopular products.

Can the prosumer model work for other products and services?  Books, music and fashion products come quickly to mind.  Consumer could vote on new books, music CD’s and fashion apparel, then a company could produce the most popular ones, avoiding manufacturing unwanted products, inventories and styles.

Have you seen other examples of prosumer business models?  Feel free to share them with me at dave@supplychainventure.com .