Personalization tools round-up

Customization is a $1 Trillion market

Personalization, in the context of ecommerce and mass customization, can be defined as providing consumers with a web-based toolkit to input custom text and images on to the surface of a product.  Most often personalization applies to printable commodity products like t-shirts, mugs, tote bags and stickers.  Anything that can be printed can be personalized.

How big is the personalization market? 

According to the CafePress SEC filing, “Based on 2009 U.S. Census Bureau data, we estimate the U.S. market for customizable retail goods is approximately $1.0 trillion.”

What is personalization?

A personalized mug

Personalization can also be classified as cosmetic customization, as per Joe Pine’s definition:  “Cosmetic customization, where a standard product is presented differently to different customers. The cosmetic approach is appropriate when customers use a product the same way and differ only in how they want it presented. Rather than being customized or customisable, the standard offering is packaged specially for each customer. For example, the product may be displayed differently; its attributes and benefits advertised in different ways, or the customer’s name may be placed on each item.”

As outlined in a previous post, personalization services are built with online design tools, which is a separate kind of toolset from Treehouse Logic’s unique hosted product configurator solution.  These design tools are essentially hosted editing tools – like a lite Photoshop in the cloud.  And, much like desktop editing tools, these design tools often include desktop-like navigation features like drag-and-drop.

Here’s a snapshot of a few sub-segments of the personalization market.

Print shops

Dozens of online printers offer personalization.   Examples include Custom Ink, Uber Prints, and Funky T Shack.   (Yes, seriously).   These consumer-facing printing companies offer design-it-yourself web tools that include text overlay and image upload.  Once an order is taken, printing and shipping are handled at the company’s manufacturing facility.

Personalization marketplaces

Additionally, print shops like Zazzle, CafePress, and Spreadshirt invite the community of quasi-designers to post their designs on their site and sell it to the public.  Like an eBay or Etsy marketplace, buyers and sellers converge in an ever growing network of virtual goods.  Designs are crowd-sourced by micro-entrepreneurs, and the network makes money by charging a commission on every sale.

This consumer/designer model differs from other crowd-sourced print companies like Threadless that require that designers submit more professionally designed image files (in Photoshop or Illustrator format) rather than using standards-based, consumer-facing browser based design tools.

Embedded design tools

Threadless drives customization innovation

Some software companies make their front-end design tools available to back-end printing businesses.  Spreadshirt offers an API that enables anyone to embed and skin their design tool, but printing itself must be processed via the Spreadshirt supply chain.  Inksoft offers printers a front-end design tool template that they can used to process print orders, but the template is not very flexible.

The worlds of customization and personalization toolkits are colliding and evolving quickly.   Although many of these t-shirt designers brought innovation to the market by publishing design tools on the Internet, the market is demanding more flexible toolkits that allow brands to build their own branded personalization experiences.  We’ll see a lot of disruption in the personalization space in the next few years, especially now that social commerce is taking a leading role in ecommerce innovation.

So you want to sell custom products? (Part 2)

Here at Treehouse Logic we talk to a lot of start-ups about launching new, design-your-own business models.   This post is second in a series of tips for new entrepreneurs entering the mass customization space.   Here is the first post.

Remember the product configurator is a sales tool

Limit the amount of control your configurator offers.  Your customers wouldn’t want to walk into your retail store and be handed scissors and raw material, would they? Yes, they want to be involved in the design process, so give them control, but insist that options and combinations they select have been pre-approved by you.   Customers depend on your expertise to design, build, and deliver the product.

Don’t ask your customers to make difficult design decisions.    The backlash of control is frustration.  Customers who ask for power will in fact abandon the process if they feel like they are asked to do too much work or make tough style decisions.

Keep in mind that the risk is not necessarily in a long purchasing process, but in creating a difficult purchasing process.  The same customer who abandons your website after trying to design a custom dress shirt for 40 minutes will happily spend 4 hours pinning images on Pinterest.   Why? Pinterest is easy, intuitive, social, fun, visual, and low risk.   Configuring a dress shirt is loaded with risk.

Self-measurement

Many new build-your-own companies get distracted by new web technology and sexy visualization gimmicks.   Customers don’t need a space-age hologram of your product; they just need an accurate, elegant picture of the customized product to help increase their confidence.    Remember, you’re not in the technology business, you’re in the customer satisfaction business.   Simplicity is key to sales.

Avoid self-measurement

Online apparel retailers have the highest return rate in eCommerce. On average, 1-in-4 garments bought online are returned to the retailers. The return rate is higher – over 40% – for fitted and more expensive fashions. Most of the returns are due to bad fit.”

Anytime you are asking customers to step away from the computer to find a measuring tape and measure themselves you are losing a big chunk of your audience.    There is too much risk of error.

No one has cracked “the fit problem,” but many are struggling with the measure-yourself-at-home approach.

Custom by design

Many companies fail at custom products because it contradicts their core culture.    Company’s like Levi’s could not simply bolt-on customization to their mass production business.  Build your culture and business model around customization from the ground up.     Just like many new business models are re-defining themselves as “social by design,” (like Spotify for music, or the Washington Post for newspapers) build up your company to be “custom by design” at it’s very core.

So you want to sell custom products? (Part 1)

Albert Wenger of Union Ventures

Here at Treehouse Logic we talk to a lot of start-ups that are betting on the design-your-own business model.   We’re seeing some major shifts in shopping behavior, most of which are discussed in this blog.

Albert Wenger of Union Square Ventures probably explains this phenomenon of mass customization the best: “We’re pretty convinced that mass-market consumer products are now so cheap and widely available that they’ve lost a lot of their appeal. We think people are looking for something unique and customizable. We’re interested in the social fabric — bringing people together that design things, and people who want to buy them.  Mass produced goods are dominated by a few large brands. But everywhere you look there are movements seeking to bypass those brands, whether it’s the locavore movement in food, or something such as NikeID, which has seen double-digit growth year over year.”

So how can new entrants to the customization market build businesses that focus on providing something unique and customizable, as well as tap into the power of the social fabric of designers and buyers?   Here are a few tips for up-and-coming custom product vendors:

Don’t repeat the mistakes of past customization businesses

Dell's product configurator

About 10-12 years ago we started seeing the first consumer-facing visual configurators.  Nike ID, Dell.com, and Timbuk2 were pioneers of the design-your-own movement.  What worked for them?  What didn’t work?   Why did Levi’s drop their customization program?   Why did Dell give up on customization?  A lot has changed in both shopping behavior and web technology in the last decade, so be sure to learn from others mistakes, and don’t replicate them.   Do your homework and focus on creating a NEW spin on customization that is innovative, simple, and core to your business model.

Build the brand first

Your value proposition has to be much more than “have it your way.”  You need a brand story that resonates with your customer.  Instead of customization itself, focus on what your core product values are, for example; product quality, locally made, sustainable, fashionable, built-to-order within a week, etc.   Yes, design-it-yourself is a selling point, but your customers don’t buy from you because your products are custom, they buy from you because your products are what they want.

Consider avoiding the ‘custom’ term altogether.  The term ‘custom’ can imply difficult-to-make and expensive.    Eventually, all products will include some level of mass customization.

Focus on product quality

Custom Burberry trenchcoat

Users are taking a big leap of faith by buying your products online.  Don’t let customizability get in the way of product quality.  Highlight your product with high res photos.   If you’re going to differentiate from commodity products you need to stand out in quality and design.    Luxury brands like Burberry use customization as an engagement tool that helps build their luxury brand.    “Honestly it makes no difference at all” how many custom coats Burberry sells, Ms. Ahrendts says. “It’s customer engagement. You want them to engage with the brand.”

Launching a customization program is a lot more involved then just bolting a build-your-own feature onto a website that features mostly “standard” products.      How do you plan to stand out?

Look for more best practices in future posts…

Mass customization is trending so hard right now

Emachineshop: democrotizing manufacturing

Recently an entrepreneur made a comment to us that made an impression: “Mass customization is trending so hard right now.”    Indeed, we’re seeing customization on the forefront of a paradigm shift in retailing.   So what, exactly is trending?

1) Manufacturing 

We’re seeing a shift towards small, agile manufacturing facilities that don’t carry any inventory.    The process of “user manufacturing” is becoming more prevalent as new companies like eMachinshop.com strive to “democratize manufacturing.”

Manufacturing is coming back to the US in a big way, and it’s cropping up in the form of micro-factories.  According to DIY blogger TJ McCue of Forbes Magazine “There are approximately 315,000 manufacturers in the USA. Over 30% of them are 1-4 person shops.”

Curation

2) Marketing

In terms of marketing, we’re seeing a shift toward highly visual, interactive, “curate your own” shopping experiences, rather than conventional search and browse shopping experiences.   This means we are seeing dramatic changes in the way people interact and shop for products.    More specifically, “pre-shopping” is driving shopping itself because it taps into the power of social interaction, ie social brand engagement.

Curation itself is a merchandising theme.   Some sites like Fab.com are in the business of curating good design for their users, and other sites like Pinterest are in the business of providing easy to use, one-click curation experiences so that each user can play the role of curator.   Pinterest taps into Facebook actions which extends it’s utility to a truly social experience.

Mark Zuckerberg of Facebook has said that any app is an order of magnitude more valuable when it’s social.  Curation and design-your-own are marketing themes that are primed for democracy and crowd-sourcing because they are “social by design.”

Jess Lee of Polyvore

3) Democritization

“Democrotization” is a fantastic made-up term which gets investors excited because it speaks to the rich potential of crowd-sourcing.  Many industries like fashion are being disrupted by web-based services that give individuals the power to design, influence, and sell their own products.  “Democrotizing fashion”.

Polyvore is a good example because they were one of the first companies to focus on enabling creativity among fashionistas.  “Polyvore’s mission is to democratize fashion, “To empower people on the street to think about their sense of style and share it with the world.” says Jess Lee, Polyvore’s vice president of product management.

The site bucks the age old trend of fashion driving the market. In Polyvore’s world, the market is driving fashion. In the past, Vogue has famously been considered a voice on high that says, “Here’s what we think fashion is.” But Polyvore’s user-generated content model is changing the status quo, abandoning the industry’s long-time queenly paradigm.”

 

How big is the Mass Customization industry?

Mass customization market size

How many millions of dollars in sales does the mass customization industry generate every year?    Can I get that data by region?  Can we slice the data by customer segment; like urban hipster youth versus affluent soccer moms?   Who are the incumbent companies in the mass customization market?   Who are the up and comer start-ups and what market share are they gaining?

Well, the first problem to answering these questions is that the mass customization industry does not exist as a stand-alone industry.   Even Frank Piller would agree that the ‘mass customization’ term is an oxymoron and doesn’t accurately describe one specific market.   The term is really a generic description of manufacturing process.

Here’s a break down of some sub-markets that leverage customization:

Personalization

The personalization industry is really it’s own animal.   Usually personalization incudes these two key elements:

1)    Image upload (upload a picture of your cat and drag it over this t-shirt!)

2)    Text overlay (write a message over the image of your adorable cat!)

Personalization manifests itself as a sub-section of the printing industry.   Shutterly enables personalized photos, Vista Print offers custom business cards and stationary, and Zazzle and CafePress offer custom printed hard goods like skateboards, caps, and sweatshirts.

The personalization industry is giant and growing, no doubt.  Zazzle alone has 1,000 employees.    Companies like CaféPress, Threadless, and Spreadshirt are growing and in some cases eyeing IPOs.

User-generated products

The design-it-yourself market is gaining steam as shown by a flurry of VC funding and NikeID generating $100M in 2010 from custom products alone.   Most of the customization vendors featured in recent “The customization 500” study are small, with a few exceptions like Nike, Converse, and Adidas.

One thing is for sure, we are in a mass customization 2.0, ie “me-commerce” era beyond just offering basic customizability.  “Where Mass Customization 1.0 offered a single experience for a built-to-order process, Me-Commerce digs deeper to tailor the customization experience to the goals, desires, and motives of the consumer, leveraging these idiosyncrasies to assist the customer in developing the best possible product and with the best possible experience.”

What’s important to realize is that customization will permeate ALL reaches of the larger retail market.   Large volume commodity apparel manufacturers like Gap and Old Navy will integrate more interactive visualization tools into their online shopping experience.    Mass producers will over a level of customization, ie designability, into the purchasing flow.

“Standard” products like cameras and mobile phones will expand their choice navigation tools to product configurator toolsets.   The key ingredient is fun.  Shopping is getting more fun and inherently more shareable.   And shareable content is the key to any successful social media campaign.

Consumers are suffering from “search fatigue.”   Engaging customization experiences add value to mainstream shopping sites because they

  • Offer a new level of creative interaction.   Consumers want to have more fun while shopping.
  • Offer a more intuitive way to navigate the ‘paradox of choice.”    New businesses like Fab.com and Trunk Club have shown that users will spend money on services that offer the service of product curation.
  • Generates a more social shopping experience.   Customization is really just a sub-set of the social commerce market, ie design/shop and share products ala Facebook, Pinterest or Polyvore.   Engagement is just as important, if not more important, than sales conversion.

So, how large is the mass customization market?  Well, how large is the retail market?  The online shopping market?  The manufacturing industry?  I guess it depends how you slice it, but there’s a lot of missing data out there.

(Side note:  It’s too early to tell where 3D printing will take hold in the consumer and manufacturing markets, but one vendor, Markerbot, claims to have sold 10,000 3D printers in 2011.)

This post was inspired by Carmen’s article on the topic of revenue opportunity in mass customization.

Ecommerce innovation focuses on people

Etsy sales

2011 was a big year for a new wave of sexy ecommerce business models.   Consumers have shown an interest in (and been throwing disposable income at) new online buying experiences that offer more than just large catalog of products.  Here’s a quick summary of some new spins on the online shopping business model:

Specialized portals

Etsy specializes in hand-made goods by enabling very-very small businesses to sell their goods online.    Etsy “brings heart” to ecommerce and has created a strong community around hand crafted goods and sustainable manufacturing.  Some juicy Etsy stats:

  • For 2011, sales increased over 80% from 2010 (compared to a 10-30% industry average)
  • Etsy had more than 15 million visits Etsy between Black Friday and Cyber Monday
  • Etsy’s mobile traffic grew 350% from 2010 to 2011.

Why has Etsy seen such success?  Instead of a we-sell-anything approach, Etsy focuses on the collectibles community.   Many sellers have grown tired of eBay’s old school interface and lack of focus on sellers.  Additionally, Etsy has created a sense of product quality and prioritizes technical innovation and the user experience.

Happy Toy Machine

Design it yourself

In 2011, more newcomers popped up in the design-it-yourself (ie mass customization) space.   These sites enable the quasi-designer or fashion blogosphere  to control product design.  Happy Toy Machine, Define my Style, Ocozy, and Style Rocks all launched in 2011, just to name a few.   Design-it-yourself is a great fit for product categories that include both functional and style variability.  Popular categories include fashion, jewelry, food, toys, and furniture.

What is the size of the design-it-yourself market?  Many indicators show growth trends, including a recent Forrester report that finds that “interest in customizable products is mounting. More than 35% of U.S. online consumers are already interested in customizing product features or in purchasing build-to-order products that use their specifications.”

Social commerce

2011 was the year that social commerce went mainstream, mostly as a result of online retailers integrating Facebook share and like functionality into their pages.

Copious, a new San Francisco based start-up, focuses on solving an age-old problem in ecommerce:  trust.   Shoppers want to feel confident that they are getting what they expect, and from reputable (or known) sellers.  Copious taps into your Facebook network to make you feel more at ease by showing your “six degrees of separation” from the buyer.

Curated designs / fashion

Fab.com is focused on good design

Fab.com takes the daily deal concept to the next level by focusing not just on great deals, but on great design.    Fab’s recent business model pivot and growth success can be attributed to the need to focus on a well-defined, but broad shopping category; great design.  Indeed, curation of content is a refreshing approach to many customers that are fatigued from the noise of product search and daily deal emails.

Another ecommerce model that leverages the power of curation is subscription commerce.  Subscription commerce provides a shopping solution for customers that don’t want to go to the mall (ie suffer from mall fatigue).   Examples include Trunk Club and Manpacks.

What do all these new ecommerce models have in common?  Focus on people.  These companies are not technology companies or supply chain companies; they are service companies.   They are servicing a market that large shopping marketplaces have neglected.

  • Focus on community:  Specialized shopping portals like Etsy focus on cultivating the needs of a specific customer segment
  • Encourage creativity:  Design-it-yourself sites focus on inviting the customer to participate as a designer
  • Build trust:  Social commerce sites like Copious focus on raising consumer confidence by validating the trustworthiness of sellers
  • Editorialize content:  Curated daily deal sites focus on providing style advice along with great deals.

What’s are some next generation trends in ecommerce?  Aspirational shopping for one.  Pinterest has created a rapidly growing community focused on the cross-section of self-expression and online shopping.

How important is guidance?

In our recent study on consumer preferences, respondents made it clear that guidance is critical in guiding them to make good decisions.

Simplicity vs complexity

Interestingly, age does differentiate users in terms of their tolerance for complexity.  But, “The customization paradox” applies to users of all ages.   Users are fickle.  They want complete control, but when you give them too much power, they get frustrated.   The key to mitigating “customization fatigue” is guidance.  Use templates with defaults, filter options, reduce steps, and show recommended combinations.    Make your design tool “customer proof.”   The trick is to give them power and to protect them from themselves at the same time.

Why do young users want more complexity? 

Most likely because younger generations are accustomed to digital control, and are therefore more inclined to control hard products as well.

Per Frank Piller, consumers are finally ready for customization:  “I believe it took 10 years of consumer education on the net so that MANY of them feel confident to not just shop standard products from a catalog, but also co-create. Also, today’s 25-35’s – a core group of people buying custom goods – are trained by the interactive solutions of social networking, but also co-creation in computer games. This generation is the natural shopper for custom goods – and getting old enough now to have the discretionary income to buy custom goods online.

Millenials

Design constraints

The reality is that customers are customizing YOUR brand.  They are empowered to customize within the constraints that you define.  Customers are great editors, but are they talented designers / creators?   Most customers don’t want a blank canvas, they want to start with recommended (virtual) products and make adjustments to match their tastes.  This is guidance at its core.   It really depends who your customization customers are, but guidance is appreciated by advanced and novice product designers.   Creativity loves constraint.

Co-creation

Users want to see suggested designs, what other customers are designing, the last 5 products built, product of the week, etc.   Inspire them with creative suggestions rather than asking them to be creative in a vacuum.

From our research, here are a few verbatim suggestions on how product configurators can improve:

  • “More suggestions or creations by others.”
  • “Better to provide a big pool of ‘good designs’ as showcase and customers could use those or work from there.”
  • “I think it can be improved by providing pre-customized products with option to modify the product.”