This is welcome news for shoppers who spend hours in mall changing rooms, hunting for the elusive fit. Christine Hobbs, a 33-year-old database marketing manager in Costa Mesa, Calif., has always had a hard time finding pants to fit her 5-ft.-11-in. frame. It got worse after she turned 30. "As you get older, your body turns into shapes you never predicted," says Hobbs. So she was happy to pay $54 for a pair of brown chinos--$19 more than the off-the-rack equivalent. Lands' End has to charge more to cover the higher cost of making customized clothing. But the company is hoping that as the custom operation picks up steam, higher-capacity manufacturing processes will lower the cost per unit, boosting profit on the premium line.
For shoppers, buying tailor-made clothing online requires a little work and an honest look in the mirror. Hobbs typed in her measurements and had to answer a series of questions about the shape of her body. Yet all this effort works to the advantage of the e-merchant. Once shoppers have laboriously created profiles at one e-merchant, they are far more likely to revisit the same site than to repeat the process with a competitor.
This is leading more apparel retailers to hurry into the market. Bob's Stores, based in Meriden, Conn., is experimenting with Web kiosks in a couple of its casual-wear stores in the Northeast. Casual Male Big & Tall in Canton, Mass., also plans an online system by next year. "We think we can attract new customers who can't fit into our traditional sizes," ranging from a 44-inch waist up to 80 inches, says CEO David Levin.
Financial services are naturals for customization, too. Credit-card and mortgage companies already traffic in digital information, so they can whip up loans to fit a wide range of specific risk profiles--and charge personalized prices as well. Handling costs at IndyMac Bancorp Inc., which processes 75% of its $20 billion in annual mortgage business through the Web, are less than 1% of the average mortgage, below the industry average.
The advantages go beyond time and cost savings. Using the Web for the entire process provides lenders with a mother lode of data. That lets companies venture into iffy markets with their eyes wide open. Top credit-card issuer Capital One Financial Corp. (COF ) took the plunge into subprime lending in late 2001 and saw its delinquencies rise. Reading the data provided by customers who gave detailed info online to get credit cards, Capital One grasped the source of the problem and could customize higher rates and fees for riskier clients. "There's a risk-based price for almost any loan," says Richard H. Wohl, president of IndyMac's mortgage-banking group.
While digital products zip through the Web, physical goods can't. But industrial companies that build products based on formulas that can be digitized are off and running. General Electric Plastics in Pittsfield, Mass., is using that advantage to reach more clients and cut costs. In 2000, the company started putting design tools on its Web site that would allow client companies to configure plastics for thousands of products. Now, about 210,000 employees at 70,000 companies use the service.
David Krevor, principal engineer at aviation electronics manufacturer Rockwell Collins, turned to the GE Plastics Web site to help him with the most demanding contract he had ever faced. Last year, Rockwell redesigned a visor for the helmet of fighter pilots. The military wanted the visor to contain the targeting system that used to be located on an aircraft's windshield. The product had to be light, but sturdy enough to withstand the stresses of atmospheric pressure. If the environmental stress skewed the visor readings, a pilot could send a missile in the wrong direction.
In the old days, Krevor would have started by thumbing through phone-book-thick plastics catalogs and consulting with GE techies. This time, he found the plastics he needed in an hour, rather than weeks. And he used GE's virtual lab to check how the plastic flowed before he built an expensive mold that might not have worked. "It came much closer to the initial design, because we had the time to look for the best material available," Krevor says.
The upshot: Rockwell Collins cut its development time in half. GE Plastics avoids much of the back-and-forth between its technical team and customers, allowing it to reduce payroll or shift engineers to other work. It also can reach more customers faster. The company says it expects a third of the 5,000 new customer leads it picked up from the Web site this year to become steady clients.
In industry and retail sales alike, victory in the mass market of one demands flexibility--and knowing when to turn away from the Web. Nike's Nikeid.com, which lets shoppers design their own athletic shoes, has concluded that consumers want to try on sneakers similar to the ones they are ordering. So early next year, Nike will roll out Web kiosks in Niketown stores and encourage shoppers to become designers. "Size needs to be exact," says Jay Wilkins, general manager for Nikeid.com. "Not being able to try it on is a challenge for Web retailers."
Both cosmetics maker Reflect and Nike have had to overhaul production lines to spit out custom goods. Three-year-old Reflect created its own patented production process. It includes modular vats that can be swapped for different lotion or shampoo recipes. Nike's eight factories that make customized shoes have each gone through about a six-month rehaul.
The payoff, though, can stretch beyond sales. Masterfoods USA has picked up marketing ideas and is now testing NFL team colors in some retail markets. "It's an important part of the business," says Masterfoods' Simmons. For Christmas, along with the famous "M" on its candies, it will print messages such as "HO HO HO." Want to see your name on a batch of aqua-green M&M's? It could happen.
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