Breaking the Mold
Only a few years ago, the idea of mass-producing custom products was far-fetched, if not impossible, for small companies to envision. No longer. Many entrepreneurs are now launching companies, or expanding existing ones, by offering personalized products. "When you customize, you separate yourself from the pack," says Joseph Pine, author of Mass Customization: The New Frontier in Business Competition. "Consumers are seeing some companies offering it, so they think, 'Why put up with the standard when I can get something done just for me?'"
The Internet, of course, has made receiving and fabricating custom orders easier and cheaper than ever, though finding the right Web team to take advantage of those capabilities can be a challenge. The best tactic is to spend a lot of time surfing, noting sites that both look good and work well, and then follow up with the Web design shops that built them. You'll also need to make certain you're hiring someone not just with good design skills but with serious Web development chops. And clever entrepreneurs that don't do much business online can still manage to benefit from mass customization, something shown by by Houston-based American Art Resources, which commissions and installs artworks for large health-care facilities.
The financial calculations involved in customizing your products or services can be a bit tricky. Customers are often willing to pay more—about 20% more—to know that a purchase is exclusively theirs. But getting a build-to-order system up and running can cost hundreds of thousands of dollars. Off-the-shelf software and production machinery are nearly impossible to find, so you'll probably need to recruit programmers and engineers yourself and do a lot of work in-house. But for small businesses with the right products, such as the five companies profiled here, customizing can be the perfect fit.
AMERICAN ART RESOURCES
In the late 1990s, Kathy Hathorn saw a new place for custom artwork. Hospitals and medical centers were starting to recognize the therapeutic value of art for their patients, as well as the ability of unique art to spiff up a brand in an increasingly competitive industry. Hathorn started American Art Resources in 1998 to commission and install artwork, from huge sculptures to photographs of historic buildings, for health-care facilities. "It's not about decorating the space," says Hathorn. "It's about the impact of the art on the patient and caregiver experience. The art becomes part of the message a hospital sends out."
Hathorn commissions pieces from her network of about 1,900 artists working in practically every possible medium, including painting, photography, fiber, ceramics, and drawing. Many of those artists owe 15% to 20% of their annual sales to American Art Resources, so they are motivated to complete projects on time and on budget.
American Art Resources, now a profitable 31-employee company, sells about 1,000 pieces each year, with revenues of about $5 million. Hathorn's staff handles every aspect of the job, including framing and installation, which she says keeps costs low and avoids third-party liability.
Hathorn sends some direct-mail pieces to potential clients, but most of her marketing is word-of-mouth. Many of her company's works generate plenty of buzz, such as a recent commission for the University of Texas M.D. Anderson Cancer Center in Houston, which wanted something never done before. Hathorn commissioned a sculptor in upstate New York to design and build a "tree of life," and a year later, a 30-foot, 6 1/2-ton painted steel tree was installed in the hospital's atrium.
Tracy Snyder, the owner of Chip-N-Dough Cookie Co. in Santa Ana, Calif., had been selling cookies for about a decade when corporate customers began asking if they could put their logos on the cookie tins they bought from her. It took two years and a big dose of frustration, but Snyder developed a process that allows customers to put whatever words or images they want on tins of the company's all-natural cookies. "I wanted people to have exactly what they wanted," Snyder says. The response has been great: Last year, 30% of the company's $1 million in revenues came from the custom tins.
At first, Snyder outsourced custom orders to another company. But that company took more than three weeks to deliver the personalized tins, so she decided to explore the homegrown route. Snyder went through five programmers and $50,000 just to develop the software needed for customers to place online orders. That was only the beginning. She soon discovered that a machine to screen the designs on the tins wasn't available, leaving Snyder and her father to design the machines themselves. Next up were the chemicals and dyes, which they customized to create proprietary colors. "There were a lot of times where I thought I bit off more than I could chew," Snyder recalls. All told, she spent about $300,000 on the changes.
Now customers can order between one and 1 million tins online. To date, the largest order has been for 15,000 tins—about 360,000 cookies. Customers can either upload images to the site and design the tins themselves or e-mail the images and leave the rest to Snyder's staff. Tins can be made in as little as one hour—less than the time it takes to whip up a batch of chocolate chip cookies.
With a hunch that women would pay a premium for bras that really fit, Christi Andersen and her business partner, Derek Ohly, plunged $40,000 of their savings into Zyrra, a Cambridge (Mass.)-based custom-bra maker. As a woman with a small frame and a large chest, Andersen certainly knew how difficult it can be to find the right bra. "The bras available in the stores look like something my grandmother would wear," she says.
The partners, who both have technology backgrounds, started Zyrra in 2004 by tweaking off-the-shelf costume design software and creating 25 prototypes. "Mass-customization manufacturing is making it possible for us to have clothing that fits the way we are actually shaped," Andersen says.
In September, Zyrra began selling bras through home parties, in which one of the company's three salespeople takes 12 different measurements for each customer. Customers then choose colors and trim. Andersen and Ohly work with a local factory to create the bras and are looking for additional manufacturers that have the machinery to make underwire bras and can do so quickly.
So far the company is using its Web site for marketing as well as to ask potential customers for their ideas. Andersen and Ohly plan to upgrade the site, allowing existing customers to reorder bras online. They expect costs to be low because the sales force, which now consists of three women, will only receive commissions. And customers will pay in advance for the bras, which start at a pricey $70. "Some women don't question the price," says Andersen. "But some are used to spending little on a bra that doesn't fit." So far, Andersen is encouraged by her hunch. In its first three parties, Zyrra sold a total of 20 bras.
Matt Cohen figured that the millions of people who love T-shirts might love them even more if they sported personalized designs. His company, Pennsauken (N.J.)-based ChoiceShirts, makes custom shirts using a fully automated process that keeps costs low and volume high.
Cohen was no stranger to the T-shirt business when he started his company with about $500,000 in personal savings in 2001. His family had been in the business for about 30 years, selling everything from T-shirt designs to heat presses. Cohen had learned about selling online during a previous job at an e-commerce company. He sold stock designs at first, but quickly realized that offering custom designs could set him apart.
Cohen upgraded the software on his Web site, working closely with an online development company in which he has an ownership stake. The process took about four months and cost several hundred thousand dollars, most of which went to developing interfaces that connect to back-end administrative and production systems. In 2002, he launched Mother's and Father's Day shirts that customers could personalize with their own or their parents' names.
Today, customers can download any photo and place it in one of 600 templates. About 65% of ChoiceShirts' $3 million in revenues in 2005 came from the custom shirts. More recently, he has launched a system to allow customers to create designs from scratch. He says an added benefit is that offering personalized products breeds loyal customers. "There's a greater impact on the customers, and they are more likely to come back again," he says. About 20% to 30% of ChoiceShirts' business comes from repeat customers.
In 2004, cheryl dorrell started casting around for a way to expand Name Maker, the Atlanta clothing label company her father founded in the mid-1950s. Sales at the 20-employee company were steady, but Dorrell expected business to fall off gradually as many of the mom-and-pop fabric stores the company sold to were closing. After a customer called looking for personalized gift wrap, Dorrell knew she'd found her new line.
Three years later, Name Maker was finally able to start selling high-end gift wrap printed with custom slogans, from personalized Happy Birthday greetings to the nearly X-rated. "It makes our products unique and different," Dorrell explains. "Anybody can walk into any store or go to a Web site and buy a roll of gift wrap that has a generic saying on it. But we print anything."
Dorrell's first move was to research her competition. She wasn't impressed, finding that most companies used poor-quality paper as well as a machine called a plotter (similar to an inkjet printer), with results that were neither durable nor water-resistant. "As a mom, I thought about how many times I had to run in the rain to a birthday party," Dorrell says. With Tom Fitzgerald, an engineer who had been with Name Maker for 30 years, Dorrell designed a printer and hired a machinist to build a prototype. After four or five months of modifications, the $250,000 machine was ready. "We tested it, and it worked, and we high-fived each other," Dorell says. They now have five of the machines, and their workings are a closely held secret.
Customers place their orders online, but the words are set by hand, part of a nine-step process that takes two weeks. Name Maker's made-to-order gift wrap runs from $24.95 to $32.95 a 12-foot roll. About 15% of Name Maker's $2 million in sales came from customized paper in 2005, and Dorrell expects the product to bring in as much as 65% of sales this year. Not bad for a new "niche."
By Eve Tahmincioglu