Revenue increased 11.9% in Q1 of 2015, to $17.26 billion compared with $15.42 billion in the year-ago period.
Selling customized products online requires wariness about how much choice and inventory is too much. And good customer service doesn't hurt, either.
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."
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.
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.