Personalization

The dog food bowl embossed with Sparky`s name, the sweatshirt with a grandchild`s name stamped in front: catalogers have been offering personalized products for decades. And it was only 10 years ago that an experiment in custom product--customized jeans--opened (and closed) in Levis Strauss retail stores.

Both efforts speak to the consumer`s tremendous desire for items that are unique in a mass-market world. Retailers` challenge in tapping into that demand has been largely logistical, as they struggle with order entry issues and manufacturing lead times and economies of scale that don`t easily accommodate the production of merchandise in lots of one. But now a new factor in the marketplace is changing that: the Internet.

Nowhere but the web

From giant Lands` End, which pioneered custom apparel online five years ago, to much more diminutively-sized retail operations, merchants and brands are finding that the Internet can transform consumers` interest in something unique into a profitable business.

If retailers can broaden the market reach--and manufacturers can cost-effectively, quickly and accurately automate the capture of order specifications--they can deliver a product for which consumers will pay a premium.

One of the latest online retailers to get into the custom product business with the launch of personalized cookie tins on its site in October is 4-year-old ChipnDough.com. The company spent 18 months developing a web application that lets customers design their own cookie tin lid online, then delivers the product overnight if needed. On average, its margin on the custom tin product is about 15% higher than on the same number of cookies in a generic container. "This model would not work anywhere but on the Internet," says vice president Mike Snyder.

The web medium tackles several challenges that until now have constrained retailers and brands eyeing the custom and personalized product market. Archetype Solutions, the California-based software developer and service organization that`s behind Lands` End Custom as well as more recently-launched custom apparel on Target.com and JCPenney.com, traces its roots to the Levi Strauss store experiment through its CEO Robert Holloway, a former Levi Strauss executive.

While Holloway says consumer response to the offer of custom jeans was enthusiastic, distribution was a limiting factor. To order jeans, customers had to go into a Levis store equipped with the technology needed to capture the customer`s measurements, but Levis had very few stores. "There were only about a dozen of them across the U.S., so it could never gain the momentum it needed," Holloway says. "So the challenge was, could you do it in a way that didn`t require consumers to go into a store and go through the fitting process, and make it really easy for them?"

New customers

If Lands` End Custom is any indication, the answer is yes. The company has reported that in some categories in which it now offers custom apparel, custom fit accounts for as much as 40% of sales. And it`s introducing new customers to the brand. Lands` End has disclosed that 25% of the buyers of custom pants and jeans on LandsEnd.com are new to the company.

Taking the capture of measurements and style preferences out of the store and putting it online solves the distribution problem. Consumers can order up a pair of custom pants as easily form Nome, Alaska, as from downtown Chicago. The web reaches more customers than stores can and it saves customers the inconvenience of in-store fittings. And with the customer filling in fit and style preference information in online templates developed for Lands` End by Archetype, it also does a better job of getting that data to manufacturing facilities.

Archetype gathers the customer data from its retail partners electronically, runs it through its software to generate a unique pattern, and digitally transmits the pattern to factory partners worldwide that the retailer already uses to manufacture its standard-sized apparel. Archetype installs at those plants the technology needed to receive, output and cut the custom patterns. It ships the finished garment directly to the consumer on the retailer`s behalf on a two- to three-week turnaround.

Lands` End Custom functionality is contained on LandsEnd.com; Archetype hosts on its own servers the custom clothing features on Target.com and JCPenney.com. The hosted feature appears to the consumer to be part of the retailer`s site. The process passes the shopper back to the retail site after the fit and style information is filled in.

The hosted option simplifies system integration and facilitates software upgrades, and makes the offer of custom product more cost effective for retailers, Holloway says, though he would not disclose pricing. "As we have become more experienced in what we are doing we have been able to reduce the cost of entry to retailers, and as we do more volume, there are efficiencies to be gained," he says." In a move that brings the concept full circle, Archetype expects to launch custom apparel with a new retail partner in-store as well as online in January.

DIY graphics

Archetype scales its custom services to bigger retailers and brands, but with the right application, the Internet makes it feasible for smaller retailers to offer one-offs as well.

ChipnDough.com, with its own warehouse and 24/7 baking capacity, had refined order taking and fulfillment in its cookie business to the point of overnight delivery, using standard tins, baskets, and containers. An early experiment in providing personalized cookie tins in volume to corporate customers floundered on the use of e-mail to communicate customers` design specs.

To create customized tin lids bearing corporate graphics or logos, "We had to have an artist do the graphics, then send a jpeg back to the customer for any changes, wait to hear form them and maybe even send a sample tin. We didn`t want to get stuck doing onesies and twosies by e-mail because it was a nightmare," says Snyder.

ChipnDough solved the problem with an internally-developed application that lets customers do the design work on tin lids themselves. After customers select the cookie assortment they want, they enter the online feature, pick a background, pick graphics from clip art available on the site, or upload their own photos and graphics digitally. Once uploaded, the photos and graphics can be scaled and placed on the tin by the consumer according to his or her preference. Text can be added to the design, with the choice of more than 150 type fonts in 40 ink colors. Then the design and artwork can be saved on the site in a "My library" account for future use.

Snyder adds that two trends--increasing broadband penetration and digital camera use--are helping ChipNDough tap consumers` built-in desire for customized goods. "I`ve talked to some customers who are not very technically-minded, and they are having no trouble with the application," he says. The company aims to extend its reach by partnering with other retail sites.

The Internet--and consumers` interest in custom product--have put Personal Creations Inc. back into the wholesale business. Though supplying other retailers with personalized products it manufactures at its Chicago-area facility constitutes only about 5% of revenues versus 60% for its consumer web site and 35% for its catalog, wholesale is now the fastest-growing part of its operation, says president of e-commerce and new business development Geoff Smith.

Guide to E-Commerce Technology

Back to the future

It isn`t Personal Creations` first experience with supplying other retailers. Under a previous model it dropped in 1998, it sold products that could be personalized to catalogers. Personal Creations accepted order information from the catalogers, manufactured and personalized the items, and drop shipped them directly to the consumers.

What made that business so problematic that Personal Creations abandoned it shows why the Internet makes it work now. "Some of the catalogers were not capturing the personalization information correctly, so they`d pass us a bad order. There was a lot of human intervention, with a company taking orders, faxing them to us, and our people re-keying them in our system so we could manufacture the goods," Smith says. "It was an inefficient business, so we decided to get out of it and focus on the consumer direct business."

The Internet changed all of that. "We realized we could get back into it using the web. We could communicate directly from company to company through the web, XML or some other electronic means," Smith says. The customization information is never re-entered after the customers enter it themselves. The order is passed into Personal Creations` system electronically and flows to its manufacturing system electronically. Return rates due to personalization errors are less than 0.5%. "We`ve eliminated room for human error and labor cost," Smith says.

Letting others in on the act

Personal Creations offers an end-to-end personalized product service to other retailers on a free, hosted basis as a way to move its own products. With about 3,000 products that can be personalized by more than a dozen methods ranging from photo transfer to engraving, and a system that integrates into order management systems, Personal Creations offers a way into the personalized products business for retailers who don`t want to build infrastructure themselves. Online shoppers pass from a retailer`s site to the Personal Creations interface to enter custom product information and then back to the retailer`s site without realizing they`ve ever left the retail site.

Smith says many of his wholesale customers are dealing in commodity items and looking for a way to distinguish themselves by providing something unique to their customers. "For some, it`s providing a whole new category of business," says Smith.

One such company is ToysRUs.com. While it initially carried nearly every personalized product offered by Personal Creations, its partnership now is increasingly supporting efforts to focus on mothers` needs relative to their children. Personalizing kid and baby gear "extends the existing assortment and makes it more unique," says Ghalia Bhappy, director of products and product management at ToysRUs.com.

That`s especially true of exclusives on which it also can command a higher margin. Under an exclusive agreement with manufacturer Fisher-Price, for example, it works with Personal Creations to offer a personalized Talking Elmo, the Sesame Street character. The toy is programmed at Personal Creations to speak and sing using a child`s name and a selected greeting. It`s one of its fastest-moving personalized items and one of a relative few that Personal Creations doesn`t actually manufacture itself.

But for the most part when it comes to personalized items, "We are looking into the needs of moms. A lot of moms have children in daycare now, for example," says Bhappy. That fact helps make personalized pacifiers a brisk seller on the site, given that parents don`t want to ink a baby`s name to identify a pacifier any more than they want to place another baby`s pacifier in their child`s mouth. For similar reasons, ToyRUs.com taps Personal Creations for personalized sleeping bags, used for nap time by toddlers in daycare.

Keep the kids separate

Bhappy disclosed no figures on the sale of personalized products vs. identical items that aren`t personalized, noting that sales also are affected by factors such as pricing, distribution, site traffic, and more. However, "If all of that were common and not variable, I would say that some of the personalized products do fly faster in areas where there is a definite advantage in personalizing it," she says. "One example is Leap Pad carrying cases. When all the kids have it, and all the kids get together, whose case is whose? So we put their names on them."

While granting that the web has opened up the possibilities for personalized products, Bhappy offers two caveats for retailers looking to get into the realm of personalization. One is that what works online doesn`t necessarily work in stores.

"We thought of putting personalized products in our stores, but as of now, they`re offered only on our web site," she says. "These are the type of products you can`t really carry in a store without a lot of infrastructure supporting them, to make sure the quality stays consistent."

Her second warning is about the critical importance of capturing personalization information accurately. Even when customers enter that information themselves on a web site, checks and balances still are needed to ensure it`s been entered correctly, she says. "Once we`ve personalized an item, we`re not going to take it back unless there is a defect that is our error. So the challenge is to design something that captures the most information with the least number of templates, making it efficient on the back end, while still making it very easy for the customer to understand."

The Dell lesson

Tell consumers that they can get a custom garment produced to their specifications with a minimum of fuss and at a reasonable price, and most will jump at it, according to Archetype`s Holloway. Take the time to add personalized art or photos to the cookie tin a consumer sends a spouse on Valentine`s Day, and it communicates an extra degree of thoughtfulness, says ChipNDough`s Snyder. Get the baby`s name onto the pacifier, says Bhappy, and you`ve solved a problem for Mom.

Uniqueness, the need to feel special, the ability to keep one`s own possessions from getting lost in the crowd--these are attributes that consumers see in personalized and custom products, and it`s value for which they are willing to pay. Those desires on consumers` part are nothing new, but the web`s power to help retailers fill them is. And as the cost of the enabling technology drops and consumers` comfort level with online shopping keeps rising, "custom" could become standard, perhaps in the way that Holloway envisions

"Dell redefined the way people buy computers," he says. "We want to do the same thing with apparel."