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.

[video] Personalization is about people: customink

Great video from describing the value of personalized products.

Personalization adds a level of value beyond the surface it is printed on.  Personalization delivers emotion, fun, captured memories, and brand relationships.  T-shirts unite!

Research notes: The pillars of customization

Here are a few key points from our recent study on consumer preferences:

Visualization is critical

Many customizers don’t show a ‘WYSIWYG” representation of the final product, which is a mistake.   Visualization boosts consumer confidence and increases sales conversions.   Users expect accurate visualizations of their creations.  That said, they don’t necessarily expect tricky visual animations, just accurate ones.   Visualization help builds trust.

Pillars of customization

The fit problem

“The fit problem” is the primary barrier to adoption to buying custom apparel.     This is not just a customization problem; it’s an online retailing problem.   Asking customers to self-measure is very risky.  “…online retailing is being hit by crippling returns, up to 30% of goods are sent back: very often simply because they don’t fit.” – WSJ

User experience

Don’t expect your customers to be tolerant of awkward software design just because you offer customization.  What is good user experience?  Is it just a polished website design?  The answer isn’t that clear.  Designing a great customization experience is something we all agree is critical, but there is no universal answer to how UX design is done well.

Price premium

The majority of customers are price sensitive., Amazon and eBay are all about price savings, for example.   Groupon is the fastest growing company in history, and their core value is offering 50% off valuable products and services.   Per a recent Deloitte study: “discounted prices become an anticipated part of the consumer products shopping experience.”

Customization is not just for luxury products, it will be part of almost every shopping experience in the form of select, adjust design, add accessories, personalize, etc.   Brands that compete on price can also differentiate by offering customization.

BUT, luxury brands continue to thrive and can command premium prices for customization.   Burburry just launched a customizer that sells $7,000 fur trench coats.   BMW reports that customers that use their configurator spend 20% more than those that go to the car dealer.

The key here is to realize that for many brands, visual customization is expected. It is a requirement.  Price is still king.   But certainly, customization continues to be a differentiator that helps command a premium price.   At MCPC 2011, someone commented that personalization is the process of changing an object into something with a high emotional value attached.

(More on guidance in an upcoming post…)

Treehouse Logic to present at the Mass Customization, Personalization, and co-creation conference

Treehouse Logic is scheduled to present at the upcoming 2011 World Conference on Mass Customization, Personalization, and Co-Creation.

A new generation of shopping tools is driving innovation on the web. Shopping online is becoming increasingly more interactive, social, and fun. Treehouse Logic launched a research study to learn more about consumers’ evolving tastes and preferences in the context of shopping for soft goods, specifically in the context of the design-your-own experience. We set out to shed light on topics like: What do shoppers want and expect from a customization experience? Which top customization features are most important? Visualization? Speed? Intuitive design? Social interaction? Community suggestions? Expert guidance? When customizing, do users want infinite possibilities or simplicity?

Additionally, will shoppers still pay a premium price for customized products?   The answers may surprise you.

The study is a follow-up of the same study that was published in 2010.  This year’s report will highlight some major changes in consumers’ responses from last year.

Details for the talk:

  • Session 4-6: Consumer Behavior and Managing Choice in Mass Customization Co-Design Toolkits
  • Session Chair: Kate Herd, Middlesex University, Great Britain
  • Friday, 18 November 2011, 4:30 – 6:00, Salon Marina del Rey, San Francisco Airport Marriott Waterfront.  San Francisco, CA USA.

See you there!

Chocomize business case: mass customization vs. mass production

Inc Magazine recently published an article describing a strategic dilemma faced by custom chocolatier, Chocomize.     Chocomize launched a custom chocolate business after seeing the success of competitor Chocri in Europe.   When the Chocomize founders heard that Chocri already had plans to expand to the US, Chocomize set out to serve the large American market on their own, essentially mimicking Chocri in every way, from the core Belgian chocolate itself to toppings selections to packaging.  It seems that Chocomize intended to compete not on product quality or customization experience, but on regional marketing and PR reach.

 Volume vs. profit margin

Soon after launching, the founders of Chocomize were confronted with the classic business question of volume vs. profit margin.  Should they take a large corporate order at cost?   Or, should they strictly maintain their large profit margin and grow sales slowly but surely?  If they took the large order, they could get a lot of buzz in the market.

Every small customization company faces this dilemma.  Large corporate sales are attractive because of their volumes and their reach.  But ironically, they go against the very value proposition of a customization brand – to provide each individual with a self-designed product.

Marketing costs and brand building

Still, sampling is a very successful marketing technique, especially in the candy market.   Chocomize could eat the margin of the sale and hope that the flood of 10,000 chocolate bars out in the market would lead to future sales.  And more press coverage.

The question comes down to this; is Chocomize a custom chocolate company or is it a novelty gift company?   Custom products typically command a premium price because the customer is paying for both the product and the experience.  Personalized chocolate bars are unique, include only ingredients you specify, and are built-to-order.  Personalized packaging adds another layer of specialization compared to off-the-shelf bars.   And these custom orders require a long lead-time.

Marketing strategy and cost structure 

Although this identity crisis is difficult, small customization companies don’t have to choose one or the other.   If their supply chain can occasionally support large corporate orders (perhaps by sub-contracting out the work), they can extend their customization brand to a specialty chocolate bar brand.     Assuming, of course, that they can maintain quality and deliver on time, a risk that Chocomize admitted they could not overcome.

What would Willy Wonka do?

Can Chocomize differentiate by reaching larger corporate markets?   Even if they decided that a mass production batch of specialty bars were worth their weight in word-of-mouth marketing, their small operation was never set up for “mass” customization in the first place.  There is a fine line between mass customization and customization, but the main difference is efficiency and the ability to scale production with variable demand.

Taking the large order was never an option for Chocomize.  Ideally they could have taken the order and gained some exposure, but the reality is that their operation and their business model were never set up to support that level of production.   Luckily, they waited it out and found some seasonal growth during the holiday season, which is a much better fit for their primary brand message; “Chocolate exactly the way you want it.”

Customization defines next generation ecommerce

Hot new online retailers that feature product customization are currently in the spotlight.  Recently, Indochino, FashionPlaytes and Gemvara all recently announced investment rounds to fuel their efforts to disrupt shopping categories like men’s suits, apparel for tweens, and jewelry.   What do these vendors have in common?  Customization.

How big is the emerging user-generated product market?   “We were inspired by (Gemvara CEO) Matt Lauzon’s far-reaching vision of future e-commerce, and his team’s deliberate execution to date,” said Mark Evans, Partner at Balderton Capital. “We believe that Gemvara can become the world’s first billion-dollar user-generated product company.”

Also part of the next-generation of online retailers are Bonobos with an $18.5 million dollar round, and BetaBrand with a $1.3 million dollar round.   These new brands are focusing on changing the online shopping landscape by reinventing how consumers interact with their brand online.

From the TechCrunch write-up on BetaBrand: “So what’s Chris Lindland’s take on a VC firm investing in what is essentially a clothing company?  ‘E-Commerce is such an exploding area, and there aren’t really companies failing at it. There will be a ton of online clothing brands that pop up over the next year. The next Quicksilver or the next Patagonia is going to start on the Internet.’”

So why is there so much opportunity in the new wave of online shopping?

Ecommerce is mature

First-generation ecommerce has matured to the point where the majority of Internet users are comfortable submitting their credit card to online vendors.  Additionally, Paypal boosts trust by adding another layer of confidence.

The past 10 years have seen ecommerce giants like Amazon, eBay, Zappos, and establish themselves as trusted ecommerce leaders.  According to Comscore, Ecommerce is growing at about 12% and generates over $100B in sales in the US annually.

Ecommerce 1.0’s biggest challenge was trust-building.  Consumers needed to believe that they were getting what they saw on their screen, to know that their payment was secure, and that their shipment would arrive on time.   Next-generation ecommerce vendors are building on that trust and reaching new customers.   Matt Lauzon of Gemvara tweeted that 45% of Gemvara’s customers “trusted us with their first online jewelry purchase they ever made.”

Demand for digital customization

We can all learn from the successes of these ecommerce 1.0 juggernauts: Customer service, free shipping both ways, and a seamless discovery are paramount to the shopping experience.   Now that the ecommerce framework is mature, users are demanding interactive, social, shopping experiences that tap into their creativity.

Due to increasing adoption of customizable digital experiences like Pandora, Netflix, and Facebook, users expect equally personalized, visual experiences when they shop online.   Forrester cited customer demand as a primary catalyst in their market report on the topic; “Mass Customization is (Finally) the future of products.”

Customers expect a “curated” presentation of products based on their product selections on the site.   Retailers need to integrate targeted suggestions as users navigate their product line.  The goal is to present personalized, curated product suggestions by guiding the user to a sales conversion.

Evolving social marketing strategies

According to a post by Internet Retailing “(Customization) is as much about a way of social marketing as it is about what is being sold.”  Brands often implement a visual product configurator to encourage design contests, brand engagement, and social sharing of creative product designs.    The configurator is not just a sales tool, but also an engagement tool that is critical component in a broader community engagement strategy.

To this end, customization has grown beyond just a niche market focused on delivering highly specialized products to a small group of customers.    Customization fuels mainstream social commerce and defines next-generation shopping experiences.

Custom Week 2011

Today marks the christening of the first annual CustomWeek, featuring over 40 participating customization companies.   Custom Week is a week-long promotion of the online product customization market.  Visitors to the CustomWeek site can enter the sweepstakes for a grand prize worth $2,500, as well as take advantage of exclusive promotions from participating vendors.

Why Custom Week?

Custom Week celebrates a renaissance in craftsmanship, bespoke businesses, and made-to-order business models.   But, build-to-order businesses have always existed.  What’s new and exciting is the ability for these businesses to allow their customers to visually interact with their product via the Internet.  A new generation of customization companies are launching online shops with visually rich product configurators that allow customers to design, build, and share their own personal masterpieces.

Customer demand for custom and personalized products has surged, and the cost of technologies that enable visual product configuration has rapidly declined.   In economic terms, demand is increasing as price decreases, opening up a much broader audience of customers who can enjoy the benefits of custom products.

Why custom?

Custom has historically meant special, difficult to manufacture, and premium.  No longer.  Shoppers expect to visit online shops that includes tools that allow them to choose any size, fit, and color combination.  By building each order on-demand, customization is, effect, the future of both manufacturing and online shopping.  Shopping custom, essentially, is the process of selecting, designing, and personalizing products so that they match the specific demands of each customer.

A myriad of product categories

Here is a list of participating vendors.  It’s amazing how diverse product customization has become.

  • Zyrra – Women’s bras
  • Zazzle – Personalization marketplace
  • YouBar – Nutrition Bars
  • Vastrm – Polo shirts
  • Thread Tradition – Dress Shirts
  • Snaptotes – Photo Bags
  • Slantshack Jerky – Beef Jerky
  • Shoes of Prey – Shoes
  • ShelfWire – Shelving
  • Riveli bookshelves – Bookshelves
  • Origaudio – Personalized speakers
  • MyMixedNuts         – Trailmixes
  • Munich My Way – Shoes
  • Modify Watches – watches
  • Mel Boteri – handbags
  • Made Tailor Custom – Men’s Dress Shirts
  • Logosportswear – Logo shirts
  • LaudiVidni – Handbags
  • indiDenim – Jeans
  • GhostNest – Personalized cabinet knobs
  • Gemvara – Jewelry
  • Gemkitty – Jewelry
  • Frecklebox – Kid’s toys and books
  • Fashion Playtes – Teen Fashion
  • Evlove – Lingerie
  • Elemental Threads – Handbags
  • Element Bars – Nutrition bars
  • ECreamery- Ice cream
  • Design A Tea – Tea
  • Delusha – Fashion accessories
  • – Custom products portal
  • Create-A-Mattress – Mattresses
  • Coco Myles – Dresses
  • Chocri         – Chocolate
  • Charmed by Ingrid Anne – Charm necklaces
  • Caseable – Laptop Cases
  • Canvas Lifestyle – Print canvas images
  • Bluewardrobe – Men’s Dress Shirts
  • Blank Label – Men’s Dress Shirts
  • 121 time – Watches
  • [Me] & Goji – Cereal