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Mass customization drives online-offline hybrid business models November 12, 2007

Posted by jeremyliew in business models, Ecommerce, media, offline, start-up, startups, user generated content.
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I’ve noted in the past that some online and offline distinctions are starting to blur. Some companies are finding that the easiest way to monetize their content is to turn bits into atoms and sell the atoms – people are willing to pay for things in the real world that they would never pay for offline.

There seem to be three major approaches to combining online and offline:

1. Single order custom manufacture

Over the last ten years manufacturing processes and technology have improved to the level where it is now possible to make single items on a custom basis. This has spawned a lot of the convergence in online and offline business models.

There has been the most activity in the market for photo books, including Apple, Shutterfly, Picaboo, LuLu, Blurb, Mypublisher and many others.

Zazzle, Cafepress and Spreadshirt take a similar approach to selling custom printed T-shirts, coffee mugs, mousepads and more.

A more collaborative example is Tribbit. Tribbit mirrors offline behavior by allowing multiple users to build and “sign” a group online card, which can then get printed out and presented to the recipient – in effect a group contributed photobook.

All of these examples are focused on user generated content. But rather than using user content, Tastebook, backed by Conde Nast, lets you choose from an extensive collection of recipes to create a customized cookbook. Techcrunch says:

TasteBook is a service that lets users take their favorite recipes from partner sites (starting with Epicurious) and create printed cookbooks that are delivered to them and/or friends. Users can add their own recipes as well, and customize the book with their name and other information.

2. Small order custom manufacture

Occasionally, one of the problems that can occur with single item custom manufacture is that the processes used for single items can result in lower quality. This is definitely true of T-shirts – many of the custom T-shirt sellers mentioned above have an “iron on” quality to them. The only way to make a high quality T-shirt with a silk screened print at a reasonable cost is make a batch.

Threadless takes this approach to it’s T-shirts. They have done a great job of building a community online, soliciting T-shirt designs, winnowing out the best designs for production through community input, and making batches of these shirts. This way they keep quality up, keep costs under control, and minimize inventory risk by selecting only to make T-shirts that are likely to sell out.

JPG Magazine takes a similar approach to the issues of its magazine. JPG is a physical magazine focused on photography. It solicits all its photos and articles online and its online community helps determine what gets printed. In a world where a new magazine launch can cost $40m before breaking even, JPG got to profitability at vastly smaller scale. A sister magazine focused on travel, Everywhere, has its first publication on Nov 27th.

3. Tying an online experience to an offline purchase

Whereas many of these companies start with an online experience and drive to an offline transaction, Webkinz starts with the offline transaction, and drives to an online experience. They have been able to draw synergies from their online casual immersive world and their physical plush toys and have sold millions of their toys to date. Barbie has had similar success with it’s online casual immersive world Barbie Girls which hit 3 million users in the first 60 days.

Another example is Hidden City, which was recently funded for a a horse themed trading card game aimed at little girls; each card unlocks a digital horse avatar online that girls can play with. The founder was behind the megahit trading card games Pokemon and Magic: The Gathering; he is clearly evolving with the industry as casual gaming moves online.

Conclusion

I expect more innovation in this area of combining online and offline business models. I am actively interested in meeting companies taking this approach. Let me know if you know of more!

Comments»

1. vjgoel07 - November 12, 2007

Jeremy,
Terrific article and I think you’re onto a very interesting trend. This seems a logical extension of the early 1990’s ecommerce companies who aggregated and organized SKUs, giving the user what appeared to be mass choices for that era– and that’s increasingly fragmenting to being able to customize within a selected unit, creating many more variations within the SKU.

Within people, the dating sites, especially e-harmony took very interesting approaches at logging preferences and “delivering” people who matched those sought after characteristics (if they weren’t stretching the truth) and provided a similarly expanded set of choices with long-tail characteristics (I met my wife this way).

I’d be curious to hear your thoughts on my startup’s approach, which matches people to healthcare/wellness providers in a long-tail fashion, helping individuals determine and find a good ______ in the health services and customize how those services are delivered. I’ve got a little more on our approach in my blog: http://mckinseytomainst.blogspot.com/2007/10/introduction.html

2. David Lewis - November 12, 2007

We very much agree with you! http://www.photoalbum.com is catering to the digital scrapbooking community by providing a true freestyle layout tool in a browser. This Flash based tool has virtually everything needed to create a user inspired design. It accepts any kind of uploaded artwork including raster formats like TIFF, JPEG, PNG(with transparency), and vector formats like EPS or PDF. Full freestyle positioning, cropping, scaling, roation, and support for a wide variety of fonts and style. Users can build multi-page PhotoAlbums and then order printed Photo books with custom designed covers.

3. Kareem Sultan - November 12, 2007

Allow me to suggest a fourth approach as the inverse of the third. Our current products offerings fit approach three, but we will also use offline experiences to make an online purchase.

Our company, RaceDV Inc. produces a turnkey system backed by our service to produce in-car videos with a graphical data overlay for performance driving and motorsport enthusiasts.
Drivers receive a full quality, full length DVD of their personal driving experience delivered to their door. We then take a portion of their video and host it online at http://www.racedv.com for them to share with friends.
This is just the start. Many features on the website are in the works to make the online experience a very integral part of their offline(at the track) experience, as well as the other way around.
We hope to use racedv.com to help generate more business for us offline.
It’s an interesting relationship you can have with your customers when they are using your products and services both online and off. We can provide products and features that will be incredibly beneficial to our customers because of this.

Thanks for the write up. It’s a topic that’s been a big focus for us at RaceDV.

4. Justin - November 12, 2007

At Postful, we allow users to produce individual printed letters and documents with a single e-mail (or API call). It’s no accident that many of the examples you mentioned for single order custom manufacturing are in print. It’s perhaps the easiest light manufacturing task to automate in this way and is thus useful as an example for other areas (and as a place to build the technologies which will be needed when tools are ready in those areas).

We’ve recently written about the concept of manufacturing as a service which is the overall direction I think this is going.
http://blog.postful.com/2007/10/29/manufacturing-as-a-service-maas/

If you’re interested in talking further, feel free to get in touch.

5. Steve - November 14, 2007

Great article. This is a really interesting space, with a lot of potential. I think Bella Sara (the Hidden City game) looks fantastic. At Wegos, we’re working on developing an online/offline experience that’s fully integrated. The two components continue to interact throughout the consumer’s use of both. I’d love to discuss it with you.

Best,

Steve

6. Norm Johnson - November 14, 2007

I believe there is a new service that enables you to create your own magazine from online content, have it printed and sent to you. Sorry I don’t have the URL / name. Just saw it in passing the other day. Could be fun and a good example of this online / offline idea. Interesting to us because we focus on helping online publishers protect their rights, extend their reach and monetize their content.

7. Andrew Laffoon - November 15, 2007

Jeremy,

I think Mixbook (http://www.mixbook.com) is right up your alley. Mixbook is a collaborative platform for creating and sharing photobooks online. Users can embed their “Mixbooks” as widgets (see example at http://www.andrewlaffoon.com/blog/2007/11/14/the-mixbook-player-10/), comment on and rate them (http://www.mixbook.com/books?bid=1999) or have them professionally printed and shipped to their door (http://www.mixbook.com/main/book_pricing). I’d love to hear your feedback on our product.

Andrew Laffoon, Mixbook

8. Linda Kong - November 26, 2007

Jeremy, you’re so right about the convergence of the Offline and Online worlds. Despite the popularity of Social Networking Sites, humans still need to see each other offline in order to develop any sort of trust, attraction or friendship with one another. In fact, doing any business in countries such as China still requires face-to-face contact to close any kind of deal. Online is a great lead generator for singles, recruiters and salespeople. However, an offline meeting still closes the deal.

ORIENTED.COM is one such professional networking site that grew its “elite” professional membership base by organizing worldwide happy hour events that organically grew to 30,000 members (good people know good people). Now, it’s looking to expand its online features in order to provide more value for its members to keep in touch and share information with one another. In other words, it focused on its offline activities first and then online features second. The result is a richer membership database of highly educated, highly traveled, well connected international professionals interested in China businesses and partnerships. Our members are highly sought after by recruiters, high-end retailers, airline companies, community organizations…etc.

The ORIENTED.COM website is customizable at a local, regional and global level – which helps many multinational companies and organizations get their message/ads out to the right groups at the right time and at the right locations.

9. Isabel - March 30, 2008

Hi Jeremy-

I am looking into a non profit, web-based approach to promoting kids fitness. There will be several opportunities for online/offline interaction.

Any chance I could speak with you directly to run some thoughts by you?

10. Derek Elley - November 10, 2008

By now you may have heard of http://www.ponoko.com – the new way to design, make and distribute new goods worldwide.

11. The Secrets of Online Customization: 101 Tips and resources | CustomizedGirl Blog - September 8, 2010

[…] Online-Offline: A helpful article about how online customization businesses can strengthen themselves by developing offline business partners. […]


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