Is Mass Customization the Future of Retail? Letting your customer into the design process can boost engagement – and profits.
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Last November, 32-year old outdoor gear retailer Wild Things introduced a service on its website that let customers design their own jackets by picking everything from the liner fabric, to the color of the zipper, to the location of the pockets. "If you're left-handed, you don't want your chest pocket on the left side, you want it on the right," says Edward Schmults, chief executive officer of Wild Things, which is based in Newport, R.I. "If you're a woman, you may not want a chest pocket. So then you don't click that button. I firmly believe this is the future of selling product to customers."
Schmults is far from alone. Customization is a huge trend in retail, not only among established brands like Wild Things, but also among startups that are encouraging customers to go online and order up that one fantasy product they always wished they could buy but could never find. These days consumers can mix up their own cereal (www.mixmyown.com), design their own shoes (www.shoesofprey.com), and even find the perfect artwork to fit the exact space they're decorating (www.at60inches.com).
The idea of mass customization has been around for a long time—Levi Strauss offered custom jeans for 10 years starting in 1993, for example—but it never caught on. In recent years, technology advances have made it easier for retailers to offer online design tools that any consumer can understand, and to fulfill orders for customized goods in a timely, efficient manner. Furthermore, retailers are motivated by the ability to charge premiums for customized products, and to engage each customer with advanced 3D computer graphics that make, say, that jacket you just designed on screen look about as close to real life as you can get.
"Mass customization allows companies to profit from the heterogeneity of the market," says Frank Piller, professor of management at RWTH Aachen University in Germany and co-director of the Massachusetts Institute of Technology Smart Customization Group in Cambridge, Mass.
Piller warns, however, that every company that gets into the mass-customization game runs the risk of sliding rapidly from phenomenon to fad. He advises entrepreneurs to stay away from categories that are already crowded with mass customizers. "Don't do men's shirts," he says. "Do your research and find some unmet areas."
Emily Worden, founder and president of Boston-based eThreads, which offers customizable handbags, advises other entrepreneurs in the customization game to resist the temptation to generate short-term sales growth. Her company tried offering deep discounts on Groupon two years ago, bringing in a short spurt of first-time customers, but that strategy turned out to be a mistake, Worden says. "It was so labor intensive that I lost money on all those sales," she says. After moving away from discounting and concentrating instead on making the online experience addictive for would-be bag designers, eThreads began attracting customers who have not only come back to design more bags, but who have also recommend the site to their friends, Worden says.
Today's crop of custom retailers are finding creative methods of publicizing their products. Elizabeth Chabner Thompson, who co-founded BFFL Co. in Scarsdale, N.Y. to market customizable goodie bags for patients recovering from surgery, says about 20 percent of her business comes from hospitals—a customer base she's trying hard to expand. "If we have hospitals delivering bags to people rather than friends sending them to friends, obviously we'd be reaching more people," Thompson says.
Brands that are deep into customization also rely heavily on social media. Annemarie Iverson, vice president of creative brand development for Prescriptives—the skincare brand owned by Estee Lauder that moved out of stores and online in 2010—uses online feedback to understand what fans want from the cosmetics brand, which is most famous for its Custom Blend foundation recipes that are made-to-order based on each customer's skin tone. Interacting with customers on Facebook and other online forums is "hugely important for a brand that's online only," Iverson says.
Wild Things' Schmults says his customers can send their designs to their friends on Facebook, Twitter and Pinterest, to get feedback before they order. Customization has been good for business: Web sales during the first full month after the custom lines were introduced rose 230 percent over the same period the year before, Schmults says, and the company has brought the cost of manufacturing custom clothing to a level that's "competitive" with non-customized manufacturing, he says. Next up: backpacks that customers can design themselves, and kiosks in boutique bricks-and-mortar stores, which will allow buyers to see and touch products before they customize them. "There are a whole bunch of ways to take this," says Schmults of customization. "It opens up tremendous market opportunities."