Why Small Players Are Beating Packaged Goods Titans In Customization Game
Big players took a big interest in mass customization shortly after the web emerged, particularly Procter & Gamble Co. with its 1999 launch of Reflect.com beauty products. But while Reflect and other efforts by major marketers never got much traction, smaller players are showing signs that the concept can work on a more modest scale.
One is eSalon, five years into a mass-customized hair colorant business that has 140,000 subscribers for 110,000 unique color combinations. Now the company is launching The Match-Up -- aimed at the $10 billion market for shampoo, conditioner and styling products. This time it's taking a more measured approach that includes 30 stock-keeping-units. It's also using an online question-and-answer configurator that feeds a proprietary algorithm to match people's hair-care needs with products and delivery schedules so they never run out.
Dollar Shave Club is taking a similar approach for its Boogie's men's hair styling products, launched earlier this year with an online configurator to help men bypass the tangle of often confusingly labeled and merchandised products in stores.
"Personal care could ultimately be one of the biggest categories, but in general mass customization hasn't taken off," said Frank Piller, who literally wrote the book on the concept in 1997, is part of MIT's Smart Customization Group and teaches management at RWTH Aachen University in Germany. "Often it does not provide enough value. There's a lot of customization out there on the web that doesn't solve any customer's problem."
Configurator-Database.com lists nearly 1,000 mass-customization configurators, but most are "very nichey," Mr. Piller said. He does see promise in some, such as recent startups that create custom-fitted earbuds or Sols.com, with custom-made orthotic inserts. And Simpress, a large custom printer acquired earlier this year by Samsung, shows the concept can work in the business-to-business category.
But the opportunities mainly have been too small to capture lasting interest or investment from top players, such as P&G, which pulled the plug on Reflect after six years, General Mills gave up far faster on MyCereal.com, though Germany's MyMuesli.com has built a smaller business using a mix of custom nutrition-based formulations and high-end retailer-specific products.
Francisco Gimenez, CEO of eSalon, believes the overall business can hit $100 million in sales in the foreseeable future – certainly good for his company, but well below the levels a P&G or other big consumer packaged goods companies want to reach with brands.
"Now that we have loyal clients trusting us in hair color, we think we can definitely make a push with hair-care," Mr. Gimenez said. After all, failures in hair color have more lasting repercussions, whereas any issues with shampoo or styling aids rinse away easily.
Price of the new service is $30 per shipment of three full-size hair-care products, which will last most people a month or more, well below the cost of many salon-quality products at retail. That compares to $24.95 per batch of eSalon custom-formulated hair color, which lasts customers four to 12 weeks.
Mr. Piller believes the custom-matching process used by eSalon or Dollar Shave Club makes mass customization more practical across a wider array of categories and companies long term than more expensive custom formulation.
"In the end, it doesn't matter if this is produced just for me or just matched out of an existing assortment," he said. "I believe match-to-order is really the larger opportunity."
But he believes some marketers, such as Mars with My M&M's, have leveraged the flexible manufacturing developed for direct-to-consumer sales to build more seasonal and retailer-specific products that create larger opportunities in their conventional markets.