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Offering On-Demand Customization Doesn’t Have to Sacrifice Your Margins

For brands and manufacturers exploring what customized apparel and footwear can do for them, discerning the tipping point for healthy margins can be tricky.

Whether it’s personalizing an item with someone’s name or allowing consumers to completely design their own shirts, the customization recipe for one company won’t always bake well for another.

For one thing, although custom goods are known to command higher prices, the value of the item before it’s personalized plays a lot into how much more a consumer will pay, said Cynthia Istook, Ph.D., a professor of textile and apparel design at Wilson College of Textiles at North Carolina State University. Consumers aren’t likely to pay twice as much for a $10 T-shirt that’s embroidered or has screen printing, she said, whereas they might for a towel with their initials embroidered on it.

“The people who are willing to pay that are the ones who are going to buy the more expensive towels in the beginning,” she noted. “You’re not going to put it on a $2 towel because it’s going to cost more than that to have the embroidery added.”

Jessica Graves, founder and chief product scientist at Sefleuria, a firm that uses algorithms to help fashion businesses scale, said custom-fit items likely carry the greatest perceived value, but she noted there is accompanying manufacturing complexity for brands that aren’t designed for such a lift.

“The question is whether customers are more intrigued by buying into the brand name or by having power over customization,” she said.

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For Black Lapel, a digitally native custom men’s suit brand, increasing the number of customizations hasn’t impacted its cost of goods sold in a meaningful way outside of one-time R&D costs, said co-founder Derek Tian, but it does impact its top and bottom lines in other ways.

“We find that customers love designing a custom suit or shirt—to a certain extent,” he said. “But at a certain point in time, when the experience has taken a certain amount of steps, time or level of attention to detail needed, any incremental decision making becomes a negative and causes decision paralysis and fatigue.”

Beyond the “wow” factor of offering an exclusive product, the benefits of customization extend into reduced return rates, thanks to higher fit satisfaction. Vibram is exploring customization for its infamous five-fingered running shoe, said the company’s technical product developer, Alyssa Newton.

“Being able to create a shoe that fits everywhere can lead to increased margins as far as return rates and leaving people more satisfied,” she said.

Bespoke products are also harder to resell, a benefit to retailers that are now having to compete with a growing resale market.

“Customization could also reduce transferability,” Graves added. “A personalized pair [of sneakers] would probably have little resale value unless there was celebrity value attached to the person who ordered it initially. So the shopper might approach these items differently than when they expect stable resale value from limited edition items. The same aspects make customization popular for gifted items.”

Lift control

Given all of these benefits, why aren’t more companies entering customization, and what’s the lift to make it worth it? A significant determination comes down to the amount of control a company has over its supply chain.

“It’s all a question of scale and price point. Large-scale brands would need to take a serious look at their control over [their] supply chain,” said Graves. “Owned factories can be much more responsive and streamlined—you would definitely want to be able to localize where custom items were produced and shipped.”

She added, “I can imagine Zara doing this well since they’ve optimized for producing small batches of items, testing in-store and then triggering full production runs to meet expected demand. Many brands are not currently set up for this kind of responsiveness, so I would recommend finding lean partners outside of their existing supply chain who are set up for customization.”

It’s also easier for men’s wear companies to implement a customization model than women’s wear, said Istook. Menswear doesn’t react as often to changing trends, and accurate sizing in women’s wear is more problematic overall.

Making inroads

Companies that are interested in customization can have success by starting with low-hanging fruit, Istook advised, such as offering embellishments or providing a finite number of choices that consumers can pick and choose from. When done properly, this latter strategy can end up being more of a marketing tactic than a significant change in production.

Keeping it simple and testing the waters are key, said Graves. Not only should companies price test, but they should measure just how many users even attempt to place a customized order.

“I’ve seen mass customization startups close up when they realize how few people want to buy a custom item from a brand they don’t recognize, or drop off if it’s too complex to specify what they want, or find the price too high, or want the ability to return, or can’t imagine the finished product,” Graves said. “Scaled brands or simple items are easier to imagine for the average shopper.”

Tian said Black Lapel’s status as a DTC brand means it has a “treasure trove” of consumer data that shows how shoppers interact with the site and where they drop off.

“With that info, we’re constantly tweaking and adjusting our offerings to better meet our customer’s expectations,” he said. “We find that this customer-centric approach of thinking about customizations leads to greater consumer satisfaction and ultimately, better conversion rates, average order values, and long-term customer retention.”

Thanks to the acceleration of 3D body-scanning technology, Istook believes we’re nearing a time in which consumers upload their body scans to Amazon and receive recommendations for custom-fit clothes based on their avatars.

Likewise, Graves said that emerging machine learning technology and algorithms have the potential to help consumers understand their preferences for bespoke products.

Regardless of the technology brands employ, accurate sizing is crucial for success—and not just custom. Out of all the options Black Lapel offers, Tian said customers place a greater priority on fit.

Meanwhile, all brands weighing bespoke design should ensure they’re offering accurate sizing in their non-custom products first, said Graves. “It’s hard to make a case for customized fit when so few brands optimize their standard size availability in the first place.”

This piece originally appeared in Paradigm Shift, the 2019 On-Demand report. Click to read how brands and retailers are augmenting their assortments with mass customized looks and made-to-measure offerings, and learn how to determine the level of collaboration and outsourcing that’s right for your business.