What if — at the click of a mouse — you could get that dress from your favorite designer’s runway collection in a different color, in a different length, with a different neckline?
Up until recently having a design tailor-made told the world that you were special enough and rich enough to have something created just for you. And you were likely to pay through the nose for it — if you could get it at all.
Times have changed. Advances in technology are ushering in an age of mass customization and big retailers — like Nike and even appliance makers like GE — are capitalizing on that trend, as are start-ups selling everything from furniture to designer clothing.
$2 Billion A Year, Just In Shoes
Customers are clamoring for personalization: a survey by management consulting firm Bain [PDF] of more than 1,000 online shoppers found that while fewer than 10% have tried customization options, 25% to 30% are interested in doing so. Bain says it is hard to gauge the overall potential of customization but if 25% of online sales of footwear alone were customized that would equate to a market of $2 billion per year.
The Bain survey, conducted in 2013, found that those customers who had customized a product online visited the company’s website more frequently, stayed on the page longer and were more loyal to the brand.
Among start-ups hopping on the personalization bandwagon are Hem, an online furniture store launched four months ago by Fab co-founder Jason Goldberg, and Tinker Tailor, a new site selling women’s clothing that brings advances in customization from mass-market retailing to the luxury fashion world. Both founders are speaking at DLD 2015 in Munich.
“The inspiration comes from NikeiD” says Goldberg. “Allowing people to design their own shoes has been very successful for Nike. When it comes to bookshelves, cabinets and tables, people want to have a little stamp of their own personality; they want to be sure it fits their space or that it has a certain color or finish. Our technology allows our website to be connected directly to our factories — everything is electronic so that the order goes directly from the consumer to the CNC [computer numerical control] milling machine.”
Out Of Fab Came Hem
The idea for Hem (Swedish for home) came from strong sales of furniture at Fab, an online retailer that raised $300 million in venture funding and at one point had a $1 billion valuation. Fab began as a gay social network, then pivoted to become a flash sales business of designer goods and then floundered, leading to the layoff of 300 of its 700 employees and the exodus of key members of its senior staff.
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Fab’s data showed that furniture was the most interesting part of the business, says Goldberg. He convinced the board to allow him to spin off the furniture division into Hem and headquarter it out of Berlin.
Goldberg says it would be wrong to categorize the move as another pivot. “It is not a pivot at all,” he says. “One of our investors described it as a sharp tilt to the best part of our business.”
Furniture is one of the last giant industries to come on-line, says Goldberg. Today only 4% of furniture sales are done via the Web, but customers want to make more online purchases.
Hem offers its own mass-produced designer furniture collection at savings of 30% to 40% by going directly to manufacturers and producers and cutting out the middleman. Delivery takes two weeks.
Teams In Poland, Germany, Sweden And Finland
Customized furniture, which take six to eight weeks to deliver, is sold at discounts of up to 25%. Although Fab itself still sells furniture it will stop once the current stock is depleted, Goldberg says.
While Fab hit it big in the U.S. and then expanded aggressively internationally, Hem is taking the opposite approach. The headquarters is in Berlin and sales of customized furniture are first targeting Europe, in part because Fab’s furniture business was built from two European companies it acquired: Germany’s Massivkonzept and One Nordic Furniture, which has roots in Sweden and Finland.
“When we acquired Massivkonzept in 2013 it had a custom furniture business and a 20-person team in Warsaw which was the glue and connection to the factories,” says Goldberg. “Having a design team in New York and manufacturing in Warsaw was too much distance for an early-stage company.”
With the acquisition of One Nordic Furniture Fab gained a design team in Stockholm and a woodworking shop in Finland and decided to run e-commerce out of Berlin and continue manufacturing in Warsaw. “Now we are within a one-hour flight of each other,” he says.
Over one-third of Hem’s sales are in Germany, says Goldberg. The company has opened a showroom in Hamburg and plans to open a large retail space on the ground floor of its Berlin headquarters. “It is a first test for us to see if, like Apple, we can successfully sell direct both online and in physical stores,” he says.
Tinker Tailor And The Future Of Fashion
Like Hem, New York City-based Tinker Tailor, which caters to women who want to find things that are special and unique and don’t mind paying full price for luxury fashion, is experimenting with both online and off-line sales. It has tested pop-up stores in the Middle East, says Iceland native Aslaug Magnúsdóttir, the Harvard MBA and serial entrepreneur behind Tinker Tailor. “It is still very nice to have physical locations where people can come in and feel the fabric,” she says.
Tinker Tailor allows women to browse the latest styles from some of their favorite designers online and then adjust the cut to suit their own figures, tastes and cultures. Designers that work with Tinker Tailor — which include Marchesa and Giambattista Valli — have agreed to provide up to 10 variations of styles from their runway collections, but dictate which elements can be customized.
Prices range from $1,600 for a designer top to as much as $12,000 or more for dresses. If a designer only has patterns and fabrics for the customizable options Tinker Tailor can provide customers with 3D digital renderings of what the item of clothing would look like. Clients have to wait weeks — or sometimes months — for customized garments to be manufactured.
But Magnúsdóttir says she expects lead times to become shorter. The site now also offers customized jewelry, handbags and shoes, helping women who can’t afford haute couture but can spring for a little luxury, a taste of what the rich have enjoyed for years.