3/01/13

Just for you

Selling customized products online requires wariness about how much choice and inventory is too much. And good customer service doesn't hurt, either.

Thad Rueter , Senior Editor

Chad Hartvigson, the founder and CEO of Prep Sportswear, has learned much during his 10 years running the e-retailer, which sells customized shirts, hats, shorts and other apparel to scholastic sports fans and proud alumni.

He knows that profit comes from the desire of modern consumers to put personal stamps—colors, team logos, numbers—on all sorts of products. He knows that building his site, on-demand production and operations technology in-house not only serves Prep Sportswear's needs better than would vendor software, but helps to prevent rivals from replicating the retailer's 40% annualized sales growth over the past four years. He knows that even with personalized or custom products, consumers expect quick deliveries, which is why he aims to deliver every order within five days of receiving it.

Hartvigson also knows the importance of saying "no."

While Prep Sportswear regularly adds items—for example, September brought the debut of customized tackle twill sweatshirts—the company also rejects product lines that might prove risky. That was the case when a running shoe brand tried to sell Prep Sportswear on the idea of carrying its specialized apparel, including shirts and shorts made of fabric designed especially for runners. That would have required the e-retailer to invest in inventory more malleable to the winds of fashion than other more proven stock.

Prep Sportswear stands as an example of an e-commerce irony: The rise of web retailing has trained consumers to expect seemingly limitless choices, but customized e-retail depends on limits. Those limits can be informed by such factors as not wanting to carry too much inventory or an understanding of how much work shoppers will put into designing products. "Not too many people out there are creative," Hartvigson says, "so we try to make it simple."

Market limits

That raises questions about how far customized e-retailing can go.

"Investors are always wary about startups that require a change in user behavior; customizing products online is a lot different from, say, ordering books online," says Josh Goldman, an e-commerce entrepreneur turned venture capitalist. Goldman is now general partner at Norwest Venture Partners. "That makes a lot of investors worry the market will be limited."

Whatever the limits, the potential for mass customization is made possible by the Internet. While a tailor traditionally would make made-to-order suits only for the wealthy people in his locale, the Internet enables a retailer to take orders from consumers located around the world, avoid the face-to-face measuring and alterations, and have low-cost labor make the suits in Thailand or other such locales.

Before going any further, though, some words about the meaning and scope of customization. The box on page 34 provides more detail, but many retailers, including Prep Sportswear and girls' apparel e-retailer FashionPlaytes Inc., practice what is often called mass customization—enabling consumers to put designs onto pre-sized items.

A level up from there—one that requires more work from the shopper—is what some experts call "true" or "pure" customization. This is where an e-retailer manufactures a custom product for a consumer to his specifications. Consumers ordering shirts from Suitly.com, for example, send their body measurements to the e-retailer and Suitly makes the shirt to fit.

Mass customization is often called personalization, and many online retailers offer some version of it, such as giving consumers the chance to engrave their names on flasks or wallets. According the 2012 edition of the Internet Retailer Top 500 Guide, 31.6% of listed retailers offer product customization, as do 15.4% in the Second 500 Guide, which ranks North American retailers Nos. 501-1000 in online sales. "It's a niche for now," Sucharita Mulpuru, vice president and principal analyst for e-business at Forrester Research Inc., says. "We've historically since the Industrial Revolution not done one-to-one product creation—it's mass assembly line creation. And one-to-one has been quite expensive in comparison, so the market hasn't responded all that strongly."

Still, earnings from some of the leading customization merchants show how this area of e-retail is growing. CafePress.com, No. 112 in the Top 500 Guide, had Internet Retailer-estimated sales of $175.4 million in 2011, up 37% from 2010. And 2011 sales for Spreadshirt Inc., No. 450, increased 105% year over year, to $19.9 million.

10 colors

Among the Top 500 retailers offering mass customization is outdoor apparel retailer Moosejaw Mountaineering. Last year it began offering web shoppers—and to in-store shoppers via clerks' iPads—a "product configurator" from manufacturer and apparel retailer Wild Things LLC that enables shoppers to build customized jackets. "We see it as the wave of the future," says Eoin Comerford, Moosejaw's president and CEO. He wouldn't share details about the tool's impact on sales, but said that among the surprises has been seeing groups—a ski team, for instance—using the configurator to design multiple customized items.

The tool, built by Fluid Inc., displays product images that can be rotated 360 degrees. The presentation resembles a typical product page, with buttons on the right to select attributes. Consumers start with a base style, then pick a fabric, color, zipper, threading, hood and pockets, and can add requests for monograms or other personalized features. They also pick the placement of each option, such as different colors on side and front panels or a pocket on the upper left versus a pair of hand-warmer pockets near the waist.

Each option includes information to help shoppers choose styles that suit their needs, such as describing the ideal jacket fabric for particular weather conditions. The configurator updates a product's price with each selection and, when the shopper is finished customizing a product, shows how much each option adds to the final price.

Shoppers can also take "snapshots" of their designs at any point and share them with friends by e-mail, text message or on a social network. That stands as one of the most important features of the tool because customers lacking confidence in their customization skills can ask friends about the product before buying, Wild Things CEO Ed Schmults says.

Schmults says the 31-year-old company plans to eventually sell only custom products, eliminating excess inventory and meeting the exact demands from consumers and other retailers. "It takes a lot of the risk out," he says. "I'm not holding thousands of colors in my warehouse." Nor are retailers holding excess stock of Wild Things inventory in their stores and warehouses, he adds. But that bright future brings about thoughts on limits. If Wild Things overwhelms consumers with too many choices, shoppers might not make any.

While the number of available colors depends on the product and the fabric selection, several jackets offer shoppers 10 color options; Schmults says he worries about overwhelming consumers with too many choices, though he's not ready to say how many is too many. Then there are the costs—the on-demand tool costs about $100,000 annually for Fluid to host and update because each product addition requires significant development work, Neil Patil, chief product officer at Fluid, says. Retailers also come up against the borders of proper sizing: Wild Things is working to add inseams and sleeve lengths to the tool, which could better help tall, skinny, or shorter-than-normal customers to find the best fit. Those groups account for some 10% of the company's customer base, Schmults says.

14 measurements

Suitly.com, an approximately 7-month-old retailer of men's suits, dress shirts, jackets and pants, is betting that the value it brings to consumers will balance out the time required to shop for and receive its products. It is in effect allowing consumers to order clothing made exactly to their specifications, just as they would if they bought bespoke suits or shirts from a high-end tailor.

"Consumers are so empowered to find better deals and prices online, so you have to create value for them," Matthew Krizsan, CEO of Suitly Apparel Inc., says. "But the biggest challenge for us is you have to convince them to jump across the chasm and spend time and effort."

Among the main challenges is having the shopper use his own measuring tape and then enlist the help of a friend to spend the 10 minutes needed to take about 14 body measurements required to build a custom shirt. That data, when combined with the shopper's height and weight, enables Suitly.com's algorithm to produce the fit. A video on the site educates shoppers about how to take the measurements; shoppers can save their information after creating profiles. Shoppers also select among various options for their clothes, such as the types of sleeves, collars and cuffs.

Suitly created its site and customization tool from scratch, Krizsan says, with help from what he calls a "boutique firm." He won't disclose the costs, but says he could have found a cheaper way. "I was a little nervous at the outset so I decided to just take it the easy way and hire a firm, which was not necessarily easier," he says. "I like to be in the loop and control of things, so I would urge anyone who has knowledge to create their own team. It will end up being more cost effective, and you'll have more control."

Once a consumer places an order on Suitly.com—about one to 10 per day, depending on season—the order is sent to a factory in Thailand, with garments made from the raw material found in local markets. A Suitly employee based there supervises production. In all, Krizsan says, he needed a year's worth of testing and international travel "to make myself comfortable with the process and vendors" involved in the production process.

Suitly offers a $75 reimbursement for local tailoring should the apparel not fit. And it will remake the item should alterations not work, or offer a refund. Krizsan says the alteration rate is about 8%, with no remakes yet requested, as of early 2013.

Even so, he says that online apparel customization still has a way to go for the truly perfect fit. "We are limited by the amount of measurements we can take," he says. "I'd like to change that in the future. The things we are looking at, for instance, are 3-D imaging and body-imaging solutions."

Suitly.com isn't the only retailer trying to expand the limits of customized e-retail by making shoppers more confident in their relatively expensive purchases. So is Gemvara.com, a web-only e-retailer of customized jewelry that launched in 2010 and has an average ticket of $1,000, according to the 2012 edition of the Internet Retailer Second 500 Guide.

24/7 service

Consumers on Gemvara.com can design their own jewelry, choosing the type of metal and the gemstones. Merchandising tools built by the e-retailer enable customers to see instant renderings of designs, while a recommendation tool suggests similar designs.

In fact, a big part of the appeal of the Gemvara customization process is the fine detail in the product images and the relative ease of creating a piece of jewelry, Norwest's Goldman says. His company in June led a $25 million Series D funding round in Gemvara.com, the capital won in part because the site seems easy for shoppers to use. The key for e-retail sites selling customized products is the user interface, he says. "You have to make [shoppers] feel comfortable. If the interface is complex, consumers don't feel capable."

Part of that comfort level also comes from the ready availability of customer service. Gemvara.com prominently displays its toll-free number and encourages shoppers to call, live chat or e-mail with customer service agents about their design. The e-retailer introduced 24/7 customer care last year, and extended its returns window from 30 days to 101 days. "There wasn't a ton of science behind the 101 days," CEO Matt Lauzon says. "We just wanted to make it clear we stood behind the product." He declines to share details about the impact of the changes, but says he expects the changes will help create loyalty among his customers, including the 80% of his customer base that had never bought jewelry online before coming to Gemvara.

Looking toward the future, Lauzon says that consumers' expectations are changing in a way that will encourage more customized e-retailing. "More and more consumers are coming in with expectations that not only do they want to custom-make products, but with expectation that it will happen," he says.

Goldman, meanwhile, comes across as more skeptical than Lauzon, as befits an investor. But he projects that made-to-order furniture could represent the next frontier for customized e-commerce. "It's been done for 30 or 40 years in higher end bricks-and-mortar stores," he says.

Whatever the future holds, it seems likely that the best customized e-retailers will understand how much choice to give their consumers and when to pull back, and how to bring confidence to the process of create-your-own retailing.

thad@verticalwebmedia.com

@ThadRueterIR

The different flavors of customized e-retail

Mass customization: Taking mostly pre-sized apparel—for instance, blank T-shirts—and adding designs, colors and lettering selected by individual consumers. Examples include FashionPlaytes.com, where young shoppers can use the Design Studio to design girl's clothing, create and share apparel collections, and purchase their own designs.

'True' or 'pure' customization: This brings e-commerce about as close as it can be to a tailor who makes, say, a custom men's suit to order. Shirtsmyway.com, for instance, enables consumers to select the details of a dress shirt, from the fabric weight down to the color of thread used on the self-selected buttons, and also provide their body or shirt measurements to the e-retailer.

Topics:

Chad Hartvigson, customer service, customized e-commerce, customized products, Ed Schmults, FashionPlaytes, Fluid, Gemvara.com, Josh Goldma, Matt Lauzon, Matthew Krizsan, Moosejaw Mountaineering, Neil Patil, Norwest Venture Partners, online apparel sales, online jewelry sales, Prep Sportswear, product images, Suitly.com, Top 500, Wild Things

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